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Yes, Your Dream Home May Become Cheaper from next month 

Currently, 12 per cent GST is levied on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale

Your dream home may become more affordable from next month as Goods and Services Tax (GST) council is considering to lower GST on houses. In a new year bonanza for home buyers, GST council may reduce the GST on under-construction flats and houses to 5 per cent in its meeting next month.

Currently, 12 per cent GST is levied on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale. However, GST is not levied on buyers of real estate properties for which completion certificate has been issued at the time of sale. 

GST council, in its 31st meeting last week, had announced GST rate cut on 23 items including TV, cinema tickets, video games etc. At the time of announcement, GST Council chairman, Finance Minster Arun Jaitley, had said that the GST Fitment Committee is looking into the matter of GST rate on real estate and the discussion on reduction of tax rate can be made in the next meeting slated next month in January.

"The homebuyers feel they are not getting benefited under GST. Certain proposals have come before the Council and the law and fitment committee will look into the matter and the matter will come up in the next council meeting. There was a total consensus that something needs to be done," Jaitley had said.

Government feels that builders and property developers are not passing on the input tax credit (ITC) benefit to consumers as the current 12 per cent GST rate gets reduced to around 5-6 per cent if ITC is computed on the amount.

According to Finance Ministry officials, currently builders are making payments for the input items for construction in cash and are not passing on benefits to consumers and hence, government feels that there is a need to bring them to the formal channel.

Major input construction material, capital goods and input services used for construction of flats and houses attract 18 per cent GST, while cement attracts 28 per cent tax.

Prior to GST, under-construction houses attracted 4.5 per cent service tax and a value added tax (VAT) of 1-5 per cent depending on the state. Also inputs used in construction attracted 12.5 per cent excise duty in addition to 12.5-14.5 per cent VAT. Besides, entry tax was also levied on the inputs.

After adjusting for credits on inputs used, the effective per-GST tax incidence on such housing property was 15-18 per cent.

The Finance Ministry has time and again asked real estate dealers to pass on GST rate cut benefits to buyers, but to no avail.

Government is making efforts to rationalise the GST rates. In a blog post, Finance minister Arun Jaitley today hinted that India could go for a single standard GST rate going into the future.

"A future road map could well be to work towards a single standard rate instead of two standard rates of 12% and 18%. It could be a rate at some mid-point between the two," Jaitley said today.

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MUMBAI: In a judgement that offers far-reaching relief to prospective sellers and buyers of old properties in Mumbai where stamp duty is steep now, Bombay high court held stamp duty authorities cannot levy tax on old “historically concluded transactions”.
“Stamp is attracted by the instrument (sale deed), not the underlying transaction…,” said justice Gautam Patel in an order on December 13.

The HC passed the order in a matter where a spacious flat on Napean Sea Road in south Mumbai was sold in an auction.

Lajwanti Godhwani, who co-owned a 3,300 sq ft flat in Tahnee Heights CHS, had filed a suit in 2008 over a family property dispute. Her late father with others had purchased the flat in 1979 on stamp duty of Rs10. It was not registered either. Eventually, the flat was auctioned to Vijay Jindal, a businessman and resident of the same building, for Rs 38 crore.

Jindal’s counsel Karl Tamboly and Sharan Jagtiani had earlier pointed out the Sub Registrar of Assurances initially declined to register his transfer document dated November 14, 2018 on the ground that the anterior title documents were insufficiently stamped.

A day after the HC issued notice to the registrar’s office, it was registered on November 30.

The HC had, on December 6, issued notice to the stamp authorities. G Shah, counsel for defendants, and Ajay Panicker, counsel for the plaintiff, had questioned if acceptance of documents now meant the authorities no longer required old documents to be stamped.

There was no clear response from the stamp office on provisions which would justify stamping antecedent documents, observed the HC.

The HC said, “…the entire approach seems prima facie to be entirely incorrect.”

“ It is unclear just how far into the past the authority imagines it can travel by front-loading a current taxing regime on historically concluded transactions; and that too transactions that are in every sense complete...”

There is no question of either the purchaser or the flat’s co-owners being liable to pay stamp duty on the older documents, the HC order stated.

“This is a landmark judgement as lakhs of old flat agreements are neither sufficiently stamped nor registered and when they sell the flat, the collector of stamps charges present rate and penalty. With this order, such practices will come to an end,” said Panicker.