Home buyers availing the Credit Linked Subsidy Scheme [CLSS] scheme under Pradhan Mantri Awas Yojana [PMAY] for purchasing homes can heave a sigh of relief. The GST council has proposed that the Goods and Services Tax prevailing on these homes will reduced.
All under construction projects which are a part of CLSS will see a 4 percent cut in GST and will be charged at 8 percent instead of 12 percent.
Buyers who do not qualify for CLSS will continue to pay the same i.e GST at 12 percent for the same house.
Low-cost housing projects, where the maximum carpet area of units is 646 sq.ft. and have been given infrastructure status as per affordable housing definition, also fall under this GST benefit.
There has also been a change in the carpet area of houses for Middle Income Group falling under PMAY. In November, the cabinet approved that for:
-MIG-I category, the unit size was increased from 90 sq.m. to 120 sq.m.
-MIG-II category, the unit size was increased from 110 sq.m to 150 sq.m.
* Update as of June 12, 2018*
Earlier the eligibility of carpet area was 1291 sq. ft. for MIG-I and 1614 sq. ft. for MIG-II. This has now been enhanced to 1722 sq.ft. and 2153 sq.ft.
The reduction in GST along with the interest subvention scheme will result in a significant amount of saving for buyers while purchasing homes under PMAY-CLSS. These segments of home buyers are price sensitive and even a small change makes a considerable impact on their budget and hence influences their decision to buy a home.
This scheme is expected to convince developers to pass on their savings in terms of Input Tax Credit on construction, raw materials to home buyers, reducing the actual rate they have to pay for their home.