Buying A Property? Know The GST Rates First

By Adhil Shetty | February 15, 2018

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.

Buying A Property? Know The GST Rates First

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 percent. 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 rollout 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 percent.

GST On Under-construction Flats, Properties Or Commercial Properties: In this category, the actual GST rate is 18 percent. But one-third of this 18 percent 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 percent 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 percent and not 12 percent 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 rollout 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 percent is on a higher side, there is clarity and uniformity in taxation which they would appreciate and hopefully embrace GST fully.

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About Adhil Shetty

Adhil Shetty is the Founder and serves as the Chief Executive Officer of BankBazaar.com. Adhil has a Master’s degree in International Relations with a specialization in International Finance and Business from Columbia University in the City of New York, and a Bachelor’s degree in Engineering from the College of Engineering Guindy, Anna University. Adhil is an expert in Personal Finance (Car loan/Home loan and personal loan) and he majorly consults on investment and spends rationalization for the Indian loan borrowers. His guidance is number based with real time interest rate calculations and hence useful for consumer’s real time query.

6 thoughts on “Buying A Property? Know The GST Rates First

  1. praveen

    Its a good write up on GST pertaining to real estate on different types of purchases made, I want to add something If you paid the full sale consideration amount before the applicability of GST (i.e 1st July 2017), then GST will not be applicable in such situation.

    Reply
  2. Nandini

    Now with the launch of GST, it is expected to subsume these multiple indirect taxes. So, it tends to simplify tax compliance, meanwhile minimizing the scope for double taxation. That means a sign of relief for home buyers.

    Reply
  3. Asti De

    Enlightened to some extent. Will someone ok extend information in respect of actual official stage the builder is on certain date .

    Reply
    1. Team BankBazaar

      Hi Asti, RERA might have this information. However. please contact the builder or check out the project. Cheers, Team BankBazaar

      Reply

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