Sudip got his first job when he was still in his final years of college. And, thatâ€™s when he met Ashima and both decided to get married. Since neither of them was earning enough to afford an apartment of their own in the city, they chose to live in a rented flat.
Today, things have changed for better for families like Sudipâ€™s who couldnâ€™t become homeowners for the lack of fund â€” thanks to the CLSS Scheme under Pradhan Mantri Awas Yojana. Helping economically weaker section (EWS), low-income group (LIG) and middle-income group (MIG) with the benefit of interest subsidy and other features, this scheme has realized the dreams of many aspiring home buyers.
According to government data, more than 1,65,000 people in urban areas have benefitted from theÂ Credit-Linked Subsidy Scheme (CLSS) during 2015-18. During these three years, over 45 lakh dwelling units have been approved for construction. About 27 lakh houses are in various stages of completion with over 8 lakh houses having been already completed during the period.
This is a direct reflection of what has been the present governmentâ€™s focus since the time it came to power â€” ‘Housing for All’. But thereâ€™s more good news for home buyers eligible for CLSS.
Home Buying Gets More Affordable with Reduced GST
Â In theÂ Union BudgetÂ for 2018, the Finance Minister, Arun Jaitley made a landmark announcement of granting infrastructure status to affordable housing. This has been a welcome move for both, the consumer and the real estate industry since housing and infrastructure, we believe, are two important pillars to increase GDP and accelerate economic growth.
What has made affordable housing projects even more lucrative is the slashing down of GST applied to these projects. As per the latest budget, projects using at least 50% of FAR/FSI for dwelling units with carpet area not more than 60 sq. m. now attract a GST of 8%.
The GST council in its statement has stated: “It may be recalled that all inputs used in and capital goods deployed for construction of houses attract GST of 18% or 28%. As against this, most of the housing projects in the affordable segment in the country would now attract GST of 8% (after deducting the value of land).”
For example, if a CLSS eligible person wants to buy a home worth Rs 40 lakhs, he/she can avail an interest subsidy of up to Rs.2.7 lakhs and save an additional Rs 1.6 lakhs in GST.
How Can You Avail the Benefit of 8% GST?
A number of Primary Lending Institutions (PLIs) such as banks, housing finance institutions, and NBFCs are identified for the implementation of the CLSS Scheme. They are required to be registered with the CNAs (Central Nodal Agencies) in order to release subsidy under the scheme. The interest subsidy will be credited to the loan account of beneficiaries through the registered PLIs, which will result in reduced housing loans and EMIs.
Additionally, the Ministry of Housing and Urban Affairs may prescribe a certificate by banks or other lending bodies, on the basis of which the builder may charge the reduced rate of GST on houses constructed or purchased under CLSS.
Generally, a home buyer books a flat from his/her own funds and later on applies for a loan. In this case, the builder will apply the regular rate of GST and subsequently apply the reduced rate of 8% when the buyer becomes eligible for CLSS. The excess GST can be adjusted against the builderâ€™s future GST liability (by issuing credit notes).