The central government has decided to reduce GST rate on work contracts. This has made the dream of affordable home a reality for many as the move has set the tax rate at 12%. The previous tax rate on the house had been 18%. However, the industry experts are not too hopeful about the affordable home promise. They said that the rate is unlikely to affect the cost of houses.
On Tuesday, the Government has said that on composite supply that deals with a work contract for the housing up to 60 sq meter would be charged with 12% GST. Jaxay Shah, the president of CREDAI, said in a meeting that the new GST rate would be charged from work contractors only. The developers who would include work contractors in the housing projects would be charged 6% reduced tax from their project.
In this segment, the developers devise projects that are cost effective. Due to this, the developing cost might remain the same for the developer. Additionally, the home buyers would pay 12% GST on a purchase of affordable housing. The buyers would get credit for the paid tax on input.
According to the GST bill, when the developers sell a house to the end-users, GST would get calculated at the rate of 18%. This would be charged on the two-third value of the housing. The GST rate would be 12% of the cost of the house. This reduction in value of the housing project has been offered to balance the price of the land. This does not fall under goods or services.