New Delhi: The GST Council is likely to consider lowering GST on under-construction flats and houses to 5 per cent in its meeting next month, an official said.
Currently, the Goods and Services Tax (GST) is levied at 12 per cent on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale.
However, GST is not levied on buyers of real estate properties for which completion certificate has been issued at the time of sale.
An official said that this 12 per cent GST rate ideally would have been partially offset by way of taxes paid on inputs by builders and hence the actual incidence of GST on under-construction home buyers would have been around 5-6 per cent. However, builders are not passing on the input tax credit (ITC) benefit to consumers.
"One of the proposals before the Council is to lower the GST rate to 5 per cent for builders who purchase 80 per cent of inputs from registered dealers," an official said.
The official said that currently builders are paying for the inputs for construction in cash and are not passing on benefits to consumers and hence, there is a need to bring them to the formal channel.
Major construction material, capital goods and input services used for construction of flats and houses attract 18 per cent GST, while cement attracts 28 per cent tax.
Prior to GST rollout, under-construction housing projects attracted 4.5 per cent service tax and a value added tax (VAT) of 1-5 per cent depending on the state.