CREDAI Recommendations on GST
CREDAI Recommendations on GST
1. Affordable Housing
| Subject | Present Provisions | Issues | Suggestions for Amendment | Rationale for Amendment |
| Affordable Housing Definition | A dual threshold of sale value of INR 45 lakhs and carpet area of up to 90 sqm (in nonmetropolitan cities/towns) or 60 sqm (in metropolitan cities) has been prescribed for the lower GST rate of 1% to apply on affordable housing units | Section 80 IBA of IT Act, GST Act, DEA Notification dated 14.11.2017, Ministry of Housing and Urban Affairs in respect of CLSS and RBI adopt varying definitions of affordable housing. A uniform definition of ‘affordable housing’ would provide clarity, certainty and direction to the different agencies for extending the benefits of Government policies on affordable housing to eligible projects. | The following definition of “Affordable Housing” may be adopted in all schemes
The limit on value of the unit be raised to INR 75 lakh (for non metro cities)/ INR 1.50 Crore (for metro cities) and unit with carpet area as defined under RERA may be redefined as ‘that does not exceed 90 sqm in the metros and 120 sqm elsewhere.’ |
HOUSING FOR ALL is one of the flagship schemes of the government with utmost importance. To achieve this, a right alignment of the affordable housing scheme is desirable inorder to push the scale of this project. |
2. Works Contract
| Subject | Present Provisions | Issues | Suggestions for Amendment | Rationale for Amendment |
| GST on Works Contract | Notification No. 20/2017- Central Tax (Rate) dated 22nd Aug, 17 has reduced the GST rate on composite supply of works contract for low cost housing scheme qualified for affordable housing under any of the defined scheme to 12%. | At the time of the reduction, the primary GST rate of real estate was 12% (Regular Housing) and 8% (affordable housing). Since then the government has reduced the effective GST rate on residential real estate project to 5% and 1% whereas the GST rate for composite supply of works contract remains the same. In the absence of ITC, this GST becomes a cost for the residential unit. . | The GST rate on composite supply of works contract for residential real estate should be reduced to 5% with Input Tax Credit benefit | Higher input costs in the form of GST on works contracts operates against the stated policy of the government i.e. housing for all by 2022. In the absence of ITC, 12% GST on works contracts is quite prohibitive and takes the cost of a residential unit beyond the reach of a common citizen. |
3. GST on Inputs for Housing
| Subject | Present Provisions | Issues | Suggestions for Amendment | Rationale for Amendment |
| Reduction of GST on Inputs charged at non-merit slabs | Present GST rates:
➢ Cement 28% ➢ RMC, steel, flooring, doors and windows 18% ➢ Electrical, plumbing, sanitary items 18%, Labour charges/ Services 18% |
At present, affordable housing is subjected to GST at 1% and other housing is subjected to GST at 5%. However, unlike all other goods and services the benefit of input tax credit is denied to the sector. It is in this context that GST rates on the procurement side becomes relevant for this sector.
Specifically, cement constitutes a major component of construction cost (almost 10- 15%) for any real estate project. Similarly, rate of labour and contract services is currently 18%. |
Higher GST rates on these inputs for residential real estate is quite prohibitive. Accordingly, either GST rate on these goods may be reduced to 12% or residential real estate projects may be allowed refund of ITC in the form of ‘inverted duty structure’ together with refund of input services as well | These inputs are a major part of the cost of construction and there is no ITC at present. Such exorbitant rates operates against the stated policy of the government i.e. housing for all by 2022. In the absence of ITC, 12% GST on works contracts is quite prohibitive and takes the cost of a residential unit beyond the reach of a common citizen
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