A government panel focused on Goods and Services Tax (GST) for the real estate sector is set to propose significant changes that could impact affordable housing across India. According to sources, the Group of Ministers (GoM) is preparing an interim report that recommends raising the affordable housing price limit from the current ₹45 lakh per unit to ₹56 lakh per unit, making more homes eligible for the reduced 1% GST rate. This rate currently applies to affordable housing projects without Input Tax Credit (ITC).
The proposed increase in the price limit is aimed at widening the eligibility for affordable housing across all regions in the country. Sources close to the discussions revealed that the GoM is considering applying this limit uniformly across India. Additionally, the panel is awaiting a formal report from the Reserve Bank of India (RBI) before deciding on further adjustments to the price limit.
The GoM is also reviewing the way GST is charged on housing projects, particularly in relation to land cost. One key suggestion under consideration is whether GST should be applied only to the construction cost, excluding the land component. Currently, the land cost is calculated as two-thirds of the total project cost, while construction makes up the remaining one-third. If the new recommendations are implemented, the cost of land in housing projects could either be based on the circle rate or two-thirds of the total unit cost, whichever is higher.
If these interim recommendations are accepted, they could make housing more affordable for homebuyers by reducing the overall tax burden on residential projects.
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