New Delhi: In what could provide a stimulus to the labour-intensive construction industry that has long struggled to get back to the grind, the Goods and Services Tax (GST) Council on Sunday approved reductions in the tax rates for ‘under-construction residential units’ — to 5% from 12% for the general category and to a much more benign 1% from 8% for units falling under a new definition of ‘affordable housing’.

The Council, however, referred a proposal to bring uniform rate for state-run and state-sponsored lotteries back to a ministerial panel for further deliberations as a consensus remained elusive.

The lower GST rates for housing units will come with denial of input tax credit (ITC) to the builders, and will be applicable from April 1. Also, to address the concerns over the developers turning to unregistered units to source inputs since ITC is not available, the council made it mandatory for them to procure 80% of the inputs from GST-registered enterprises. Also, capital goods won’t be included under the definition of inputs to ensure that expensive machinery purchases are not used to meet the condition easily.

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