India government on Sunday reduced the Goods and Service Tax(GST) on sales of residential properties under construction.The new move was ahead of the general elections and to increase the consumption levels.
The Goods and Services Tax Council, comprising state and federal finance ministers, announced that the new rate will be 5 percent, down from 12 percent, on all new housing projects except those that are classified as affordable housing, according to a statement from the finance ministry.
“This will give boost to housing for all,” Finance Ministr Arun Jaitley said in a Twitter post.
The tax reduction comes in a contest of low farm incomes and weak jobs growth have undermined the BJP led NDA’s standing with voters.
This was the another tax cut move of Modi government after the excemption of tax for small businesses, last month.
The GST council, the statement said, specified that builders, who utilize the lower rate will not be able to get a refund of input tax. The new rates will be applicable from April 1.
Home buyers had complained that builders were not passing on the benefits from the refunds of input tax credit to them.
The council also redefined the affordable housing in India,giving separate clause for buildings in metro cities and non-metro cities.In non-metro cities, any home built on an area of 90 square meters and below would be categorised as affordable, up from the current 60-square-meters cap, according to the finance ministry. The 60-square-meters ceiling remains for homes in metro cities.
The property also has to be 4.5 million rupees ($63,360) or below to qualify as affordable.The new list only shows Delhi,Mumbai,Kolkata,Chennai,Hyderabad and Bengaluru as metro cities.