GST Rates Current Affairs - 2019

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GST council reduces Tax rates on Housing

The GST council has decided to slash the tax rate on under-construction residential properties and the affordable housing projects category.

Decision of GST council

  • The GST council has reduced the GST rate for under construction from the present 12 per cent to 5 per cent.
  • The GST rate for affordable housing category is now 1 per cent compared to the present 8 per cent.
  • The new rates will be applicable from April 2019.
  • For both under construction and affordable housing category the builders would not be able to claim the input tax credit (ITC) which they used to get when the tax slabs of 8 per cent and 12 per cent were applicable.
  • To ensure that the benefits of tax reduction are passed on to the consumers the government has created more conditions, especially for the affordable housing category.
  • Houses under the affordable housing category.are divided into two categories metro and non-metro.
  • In metro areas of Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad), Mumbai, Kolkata, Chennai, Hyderabad and Bangalore, the eligibility for affordable housing would be properties worth Rs 45 lakh and 60 sq metre carpet area and in non-metro cities it would be Rs 45 lakh and 90 sq metre.
  • The law committee has been mandated to frame the transition rules for those already in construction.
  • The government has created a safety net to ensure that the removal of input tax credit doesn’t drive the sector to the cash-based one, especially in black by mandating the builders selling houses under the normal and affordable category to procure a large percentage of their inputs from GST registered suppliers.

This decision of the GST council is expected to push demand and increase sales of under-construction properties. The new norms may even bring many more properties, even in the premium segment, into the affordable category.

GST Council Announces GST Rates

The GST Council headed by finance Minister Arun Jaitley has finalised tax rates and has approved all the seven rules for the GST regime that is scheduled to be implemented from July 1. The remaining two rules of the GST pertaining to transition and return is under the examination of the legal committee. In total, the council has fixed the rates of 1211 items. It will decide rates of some other items and services in the coming days.

Salient Highlights

  • Out of 1211 items, 81% of the items will attract tax of 18% or less. Only the remaining 19% of items will attract a highest rate of 28%
  • Household items like Sugar, Tea, Coffee and edible oil will attract 5% levy. Cereals and milk will be exempted from the tax.
  • Manufactured goods will attract 18% levy.
  • Luxury cars will attract 28% GST in addition to a cess of 15%. Small petrol cars will attract 28% GST plus a 1% cess, and diesel cars will be taxed at  28% plus 3% cess.
  • Capital goods, a key asset for the manufacturing sector, will be taxed at 28%.
  • Aerated drinks will fall under the 28% tax bracket.

Significance

The GST Council has not increased the overall tax in any of the 1211 items but have reduced tax on many items. For example, Soap, which is now taxed at the rate of 22-24%, will be taxed at 18%.

The present tax incidence in excess of 28% on luxury items will be treated as cess and will be deposited in the corpus for compensating states if they suffer any revenue loss. 

Food items are expected to become cheaper. Daily use items like hair oil, toothpaste, and soap are kept in the 18% tax slab instead of 28%.

The cost of energy generation is expected to become less as tax incidence on coal has been reduced from 11% to 5%.

GST regime is expected to unify the whole of the country into a common market eliminating both Central and State levies. Also, GST is expected to increase state and federal tax revenues, ease inflation and boost economic growth by 1-2% points in the medium term.