A senior government official is quoted in a leading business dailies as saying, "Two options are on the table: The first option is levying 5 per cent without input tax credit (ITC) provided the builder establishes that he has purchased at least 80 per cent of material from a GST-registered supplier. The second option is 12 per cent with ITC". So, both the central and state governments are making an attempt to reduce GST rate on under-construction flat but with some riders.
Proposal for under-construction property
The effective rate of tax for under-construction property will come down to 8%, if GST is lower to 12% due to abatement in respect of the land cost. The decision in this regard will be first vetted by the Fitment Committee as well as the Law Committee before being put before the next GST Council meet scheduled next month.
In the case of real estate, currently the rate of GST is 18%. Nonetheless, the effective rate comes down to 12% in case of commercial or under-construction projects where the transaction involves transfer of property in undivided share of land or land with full input tax credit (ITC). So, in short it implies that GST @ 18% is payable on 2/3rd value of the property.
No GST applies in case of completed or ready to move in property projects.