GST is payable on affordable housing flats and apartments in India. Do you want to know how much is GST rate for affordable housing in India (2023)? Or do you want to understand the exact Meaning of affordable residential apartment under GST?
We shall be discussing these in this updated article on What is Affordable Housing and GST rate payable on Affordable Housing in India.
What Is Affordable Housing?
As per the current definition provided by the GST council, the Affordable housing in India (2023) comprises of the following based on city, size and cost of the housing unit:
- Flats/apartments/houses with a carpet area of up to 60 square meters (or about 645 square feet) in the major Metro cities of (Delhi NCR limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad, Bengaluru, Chennai, Mumbai and whole of MMR, Hyderabad and Kolkata) AND costing up to Rs 45 lakh are considered affordable housing.
- Flats/apartments/houses with a carpet area of up to 90 square meters (or about 960 square feet) in all the non-metro cities of India, AND costing up to Rs 45 lakh are considered affordable housing.
Note – In both cases, no input tax credit (ITC) can be claimed by developers.
And what is the GST rates on these affordable units?
What Is GST rate on Affordable Housing in India (2023)?
As per the current GST rates as announced by the Goods and Services Tax Council, the GST rate on Affordable housing is 1% percent (without input tax credit). And to become eligible for this subsidized 1 % GST rate on affordable units, the builder needs to procure at least 80% of the raw material from the registered dealers.
The new rates have been applicable since 1st April 2019.
Earlier, the GST rates were 8%. So after the reduction of 7% in rates, the GST rate on Affordable housing stands at 1% percent.
So earlier if you purchased an affordable residential unit worth Rs 45 lakh, it would have been taxed at 8% and which meant an GST tax of Rs 3.6 lakh. But after the rate reduction to just 1%, GST on Rs 45 lakh affordable housing will be just 1% of Rs 45 lakh, which is Rs 45,000 only.
And what about the other types of residential units that don’t fit in the above defintion of affordable housing?
That is technically the non-affordable housing units?
For flats/apartments other than affordable housing units (as per above definition), the applicable GST rates would be 5% percent.
So that is the answer to question – What is the difference between affordable housing and non affordable housing?
Now let’s see How to calculate GST on Affordable Property (2023)?
GST Calculation on Affordable Property (2023)
Let’s take few examples to understand how to calculate GST on affordable flat purchase in the affordable housing segment since 1st April 2019 when the new GST rates were implemented:
- If the property cost is Rs 3500 per sq. ft. and the size of affordable house in a metro city like Mumbai is 600 sq. ft, then applying the GST 1% tax on the cost, we have final cost of Rs 3500 + 1% of 3500 = Rs 3535 per sq. ft. So the total cost of this affordable house will be Rs 21.21 lakh (inclusive of 1% GST on affordable housing)
- If the property cost is Rs 6100 per sq. ft. and the size of affordable house in a metro city like Bengaluru is 720 sq. ft, then applying the GST 1% tax on the cost, we have final cost of Rs 6100 + 1% of 6100 = Rs 6161 per sq. ft. So the total cost of this affordable house will be Rs 44.35 lakh (inclusive of 1% GST on affordable housing)
- If the property cost is Rs 2900 per sq. ft. and the size of affordable house in a non-metro city like Mysore is 875 sq. ft, then applying the GST 1% tax on the cost, we have final cost of Rs 2900 + 1% of 2900 = Rs 2929 per sq. ft. So the total cost of this affordable house will be Rs 25.62 lakh (inclusive of 1% GST on affordable housing)
- If the property cost is Rs 4100 per sq. ft. and the size of affordable house in a non-metro city like Chandigarh is 730 sq. ft, then applying the GST 1% tax on the cost, we have final cost of Rs 4100 + 1% of 4100 = Rs 4141 per sq. ft. So the total cost of this affordable house will be Rs 30.2 lakh (inclusive of 1% GST on affordable housing)
A lower GST rate for affordable housing segment definitely helps as it also reduces the home loan and the home loan monthly EMI that needs to be serviced. And adding the home loan tax benefits, the actual effective cost of these affordable housing flats and apartments becomes more affordable for the buyers.
How to calculate Rs 45 lakh limit while checking eligibility for an affordable housing project?
To calculate whether the housing unit qualifies for affordable housing or not, you need to calculate what all costs come under the Rs 45 lakh limit. For that, you have to consider and add all the charges like including preferential location charges (PLC), parking charges, development charges, common facility charges, etc., and then calculate whether the total cost exceeds the Rs 45 limit or not. However, as per many experts, you can exclude the stamp duty, maintenance charges, deposits for maintenance of the apartment, and maintenance of common infrastructure from the cost. But please check with your CA before doing so.
1% GST On Government Housing Schemes Too
The Affordable Housing Scheme was launched by the Indian government to promote home ownership and purchase of housing among lower and middle income households. So the low 1% GST rate will also be applicable on government’s large-scale housing projects like Jawaharlal Nehru National Urban Renewal Mission, the Rajiv Awas Yojana, the Pradhan Mantri Awas Yojana, as well as similar programs run by governments of different states as well.
So that was about What is GST Rate on Affordable Housing in India (2023) and what is the size of affordable housing units and the upper cost limit of these to qualify under affordable housing category for lower GST rate benefits.
Disclaimer – The views expressed above should not be considered professional investment advice or advertisement or otherwise. The article is for general educational purposes only. The readers are requested to take into consideration all the risk factors including their financial condition, suitability to risk-return profile and the likes and take professional investment advice before taking any financial decisions or actions which may have financial implications now or in future.