GST on Real Estate: Buying a property?

With the Goods and Services Tax (GST) intended to replace multiple levels of taxation, we look at how it will affect the real estate sector – from home loans and housing purchase to rentals, across various segments and the grey areas that will impact the final price for a home seeker.

It is important to understand various Good and Services Tax GST rates if you are planning to buy a property. Read on to know how it affects you.
In a bid to reduce tax evasion, make laws easier and remove unnecessary hurdles, the government rolled out Good and Services Tax (GST) in July last year. The real estate sector was also bought under its purview as it was burdened by various indirect taxes such as VAT, Service Tax, excise, stamp duty and registration fees. However, ever since its implementation, there has been a lot of confusion regarding rates and benefits.

Let’s take a detailed look at the GST rates on real estate and under-construction properties.

GST Rate On Real Estate:

Real estate sector will invite GST at the rate of 12 per cent with full input tax credit. According to the schedule of GST rates for services as approved by the council, real estate sector will comprise “construction of a complex, building, civil structure or a part thereof, intended for sale to a buyer, wholly or partly. The value of land is included in the amount charged from the service recipient.” These will be charged @ 12 per cent with full input tax credit. In other words, it means all under-construction properties will invite a GST of 12 per cent. However, GST will not be applicable for ready-to-move-in properties.

However, there are still some variations for under-construction properties and confusion regarding the same.

There are various stages for under-construction properties and GST will be dependent on it.

When You Have Bought A Property After The Completion Certificate Was Issued To The Builder:

In such a situation, GST will not be applicable as it is considered a ready-to-move-in property and there is no transfer or supply of goods and services.

Payment Made To The Builder In Part Or In Full Before The Roll Out Of GST Regime:

Whether you paid in part or in full, if the payment is made before the roll out of GST regime, then it will not invite any GST tax. However, keep in mind that you will be charged applicable service tax rate of 4.5 per cent.

GST On Under-construction Flats, Properties Or Commercial Properties:

In this category, the actual GST rate is 18 per cent. But one-third of this 18 per cent is deemed as the value of land or undivided share of land supplied to the buyer of the property. Hence, GST rate lowers down to 12 per cent on under-construction flats, properties or commercial properties with full input tax credit.

GST On Resale Properties Or Flats:

As they are considered ready-to-move-in properties, they will not invite GST taxation.

GST On Houses Purchased Under CLSS:

The Credit-Linked Subsidy Scheme (CLSS) is meant to provide affordable houses to the lower and weaker sections of the society. The GST rates on such houses will be effectively 8 per cent and not 12 per cent as one-third will be deduction towards the cost of the land.

How GST Will Benefit Both Builders And Buyers?

A builder pays various indirect taxes and duties during the construction of a property – house or complex. He passes on this cost to the end users. But with the roll out of GST, all these taxes have been combined into one, and thus has resulted in lowering the cost of the property. The move is expected to boost home sales. For buyers, though GST of 12 per cent is on a higher side, there is clarity and uniformity in taxation which they would appreciate and hopefully embrace GST fully.



GST on Real Estate: Buying a property?
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GST on Real Estate: Buying a property?
GST has replaced multiple levels of taxation, we look at how it affects the real estate and the grey areas that will impact the final price for a buyer.
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SAVI Developers Blog
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