Govt New boost to affordable homes, GST down to 8% from 12%

Affordable housing projects got one more boost from the government as the goods and services tax (GST) Council in its meeting on January 18 had recommended the effective GST rate of eight per cent for houses under the Pradhan Mantri Awas Yojana (PMAY) that provides credit linked subsidy scheme (CLSS).goods and services tax (GST) Currently Government taking   GST at the rate of 18 per cent on under construction affordable projects . But with the provision of deducting one-third of the house price towards the cost of land, the effective rate comes down to 12 per cent. This will be now down by 400 basis points to eight per cent for affordable homes. “One of the important recommendations is to extend the concessional rate of the GST of 12 per cent (effective rate of eight per cent after deducting one-third of the amount charged for the house, flat, etc. towards the cost of land or undivided share of land, as the case may be) in the housing sector to construction of houses constructed/acquired under the credit linked subsidy scheme,” said a statement from the Central Board of Excise and Customs.

HOME TRUTHS For under-construction homes
  • 18% Current GST rate
  • 12% Current effective GST rate
Proposed for affordable homes
  • 12% GST rate
  • 12% Effective GST rate
  • Effective rate is calculated after deducting one-third of the house cost towards cost of land
  The  Pradhan Mantri Awas Yojana, first launched in June 2015 by Honorable Prime Minster of India Narendra Modi  , provided an interest subvention of 6.5 per cent for a loan up to Rs 600,000 for the economically weaker section (EWS) and lower income group (LIG) till 2022.The carpet area of houses constructed under this component of the mission would be up to 30 sq m for EWSA, 60 sq m for LIG, 120 sq m for MIG Iand, and 150 sq m for MIG II. The maximum annual income limit for the beneficiaries is up to Rs 1.8 million. This scheme give huge boost to real estate sector in the segment of affordable houses projects.

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