Govt reduces GST on work deals for affordable homes

The government has brought down the GST rate on work contracts for affordable housing from 18% fixed earlier to 12%. From buyers’ perspective, this is not going to have any effect on the price of affordable housing as GST rate for buyers purchasing a finished house remains at 12%.


As per a notification issued by the government on Tuesday, GST on composite supply of work contracts for affordable housing up to carpet area of 60 sq metre in a project approved by a competent authority will be 12%, including the state GST.


CREDAI president Jaxay Shah said the new rate is only for work contractors. If a developer involves a work contractor for his project, his cost will be reduced by 6%. However, in the affordable segment developers execute projects themselves to be cost-efficient and, therefore, the cost for developers will remain the same in this segment.


And on top of that, buyers will continue to pay GST at 12% on affordable housings. Of course, they will get the credit for taxes paid on inputs.


In GST regime, upon sale of a house to end user by the developer, GST to be paid is calculated at 18% of the two- third value of the house. The net rate would be 12% of total price of the house. The abatement of one-third of the value of the house is given to adjust the land price, which neither comes under goods or nor services category.

Written by The Realty Paper

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