For under-construction residential properties, the GST Council allowed the builders an option to choose between old tax rates and the new ones. This step has been undertaken to help the builders resolve Input Tax Credit (ITC) issues and continue paying tax at old rates (effective rate of 8 per cent or 12 per cent with ITC) on on-going projects.
Apprehensions as well as potential disputes on various computational and transitional issues such as the loss of ITC and pricing that are bound to arise on account of the change will be addressed with this move. The GST Council has given consent to the transition plan for the new rate structure for real estate residential projects from 1st April. Builders will have to choose from either of the options for which time will be provided to them.
It has also been clarified by the council that the projects with up to 15 per cent space will be treated as a residential property thereby resolving the issues faced in cases where buildings have commercial amenities including clubs, restaurants and residential-cum-commercial projects.
Mr. Pradeep Aggarwal, Founder and Chairman, Signature Global says, “The government and the GST Council have been considerate towards the real estate sector since the last few years and have been bringing out new policies for the betterment of the market. The move by the GST Council for the builders to choose between old tax rates and new ones will prove to be a boon for the developers and develop the condition of the market.”