Post elections, GST Council may consider revising definition of affordable housing

Shishir Sinha New Delhi | Updated on March 20, 2019

From April 1, affordable houses will attract GST at the rate of 1 per cent but without input tax credit   -  Ashoke Chakrabarty

Some States seek changes in definition, freedom to fix ceiling for levying taxes

The GST Council is likely to consider changing the definition of ‘affordable housing’ for the purpose of levying indirect tax. A full-fledged meeting of the Council will take place after the formation of the new Government at the Centre and in some States after the elections.

A senior government official said States such as Maharashtra, Gujarat and Delhi sought changes in the definition of affordable houses. The issue was raised during the GST Council meeting on Tuesday but could not be considered due to the Model Code of Conduct in place. “The Council could take up this matter in its meeting post election,” he said while adding that the States could be allowed to fix the ceiling for taxability.

The GST Council, in its meeting on February 24, redefined affordable house as a house/flat of carpet area up to 90 sq metres (sq m) in non-metropolitan cities/towns, and 60 sq m in metropolitan cities having value up to ₹45 lakh (for both). Metropolitan cities include Bengaluru, Chennai, Delhi-NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurugram and Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region). Both the conditions need to be fulfilled for the affordable home tag. From April 1, such a home would attract GST at the rate of one per cent but without input tax credit.

The Maharashtra Government wants the ceiling to be ₹60-70 lakh or even ₹75 lakh as it believes this is the ‘realistic’ price level, especially in and around Mumbai. Gujarat also supported the suggestion. Similarly, some States favoured freedom to fix the ceiling rather than having a uniform ceiling as the cost varies from State to State. The official said all the options will be considered in the next meeting of the GST Council.

Multiple definitions

As of now, there are multiple definitions of affordable housing. In July 2014, the RBI defined affordable housing loans as eligible under priority sector lending, as also housing loans to individuals up to ₹50 lakh for houses of values up to ₹65 lakh located in the six metropolitan centres (Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad) and ₹40 lakh for houses of values up to ₹50 lakh in other centres for purchase/construction of dwelling unit per family.

Similarly, the Ministry of Housing and Urban Affairs defines affordable housing on the basis of carpet area which could be between 30 sq m and 200 sq m. These dwelling units can be part of schemes such as the Jawaharlal Nehru National Urban Renewal Mission, Rajiv Awas Yojana, Pradhan Mantri Awas Yojana or any other housing scheme of a State government or even by a project developed by private developers. Till March 31, such units will attract GST at the effective rate of 8 per cent with input tax credit.

Published on March 20, 2019

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