The group of ministers (GoM) appointed by the Goods and Services Tax Council is considering raising the affordable housing threshold from INR 45 lakh to INR 55 lakh. If approved, this change could significantly benefit the affordable housing sector, currently taxed at a 1% GST rate, while other housing projects incur a 5% tax without input tax credit (ITC). Led by Goa's Chief Minister Pramod Samant, the GoM may also suggest increasing taxes on luxury homes priced above INR 15 crore, but is unlikely to provide relief on GST for joint development agreements (JDAs). The GoM will submit its report ahead of the GST Council meeting in the second week of November, where final decisions will be made. The existing affordable housing criteria, established in February 2019, define affordability based on price and carpet area.
The group of ministers (GoM) appointed by the Goods and Services Tax Council to review the application of GST in real estate is considering extending the definition of affordable housing from INR 45 lakh to INR 55 lakh, according to informed sources. If the GST Council approves this change, it could provide a substantial boost to the affordable housing sector. Currently, affordable housing is subject to a GST rate of 1%, while other housing projects incur a 5% tax. Notably, the input tax credit (ITC) facility is not available for either category.
According to an article published by Economic Times, the seven-member GoM, led by Goa's Chief Minister Pramod Samant, may also propose increasing the tax on luxury housing priced above INR 15 crore and is unlikely to offer any relief regarding the application of GST on joint development agreements (JDAs). A person familiar with the discussions noted that there was a general consensus on enhancing the definition of affordable housing for GST purposes; however, the majority of members opposed imposing GST on JDAs.
The GoM convened last week in Goa and is expected to submit its report ahead of the next GST Council meeting, which is anticipated in the second week of November. The final decision on these recommendations will be made by the GoM. Other members of the GoM include Samrat Choudhary, Deputy Chief Minister of Bihar; Suresh Kumar Khanna, Finance Minister of Uttar Pradesh; KN Balagopal, Finance Minister of Kerala; Aditi Tatkare, Women and Child Development Minister and GST Council representative for Maharashtra; and Harpal Singh Cheema, Finance Minister of Punjab, along with Gujarat Finance Minister Kanubhai Mohanlal Desai.
The definition of affordable housing was established during the 33rd GST Council meeting in February 2019, specifying that for flats, the criteria include a carpet area of up to 90 square metres in non-metropolitan cities and towns, and 60 square metres in metropolitan cities, with a value not exceeding INR 45 lakh.
In conclusion, the proposed changes by the GoM could significantly impact the affordable housing sector and luxury market. As the GST Council prepares to meet, stakeholders will be keenly awaiting the final recommendations to understand their implications on the real estate landscape.
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