Govenment reduces GST on work contract for affordable homes

The Government has reduced GST Rate on work contracts for affordable housing to 12% to 8% fixed earlier. But it unlikely to have any impact on prices of affordable housing for buyers, industry experts said as GST Rate for buyers to purchase a finished house remains @ 12%.

In a notification issued on Tuesday, the government said GST on composite supply of work contracts for affordable housing up to carpet area of 60sq metre in a project approved by a competent authority will be 12%, including the state GST.

Credai president Jaxay Shah said the new rate is only for work contractors. If a developer involves a work contractor for his project, his cost will be reduced by 6%. But in the affordable segment, developers construct projects themselves to be cost efficient. Therefore, the cost for developers will remain the same.

And on top of that, buyers will continue to pay GST @ 12% on affordable housing. Of course, he will get the credit for taxes paid on inputs.

In GST Regime, when a developer sells a house to an end user, GST will be calculated at 18% on the two third value of the house. The net rate would be 12% of the total price of the house. The abatement of one third of the value of the house is given to adjust the land price, which neither comes under goods or nor services category.