GST ON REAL ESTATE- ALL YOU NEED TO KNOW
Homebuyers in India have to pay GST on the purchase of under-construction properties like flats, apartments, and bungalows
1% for affordable housing
5% for non-affordable housing
In Real Estate, the GST is also applicable on the purchase of developable plots
GST on flat purchase is not applicable on completed projects
A completed project is that which has received a completion certificate from a competent authority
Meaning of GST
GST, or goods and service tax, is an indirect tax imposed on the supply of goods and services
Types of GST
1) Integrated goods and service tax (IGST)
2) State goods and service tax (SGST)
3) Central goods and service tax (CGST)
4) Union territory goods and service tax (UTGST)
GST on real estate in 2022
1) Affordable housing
GST rate till March 2019 8% with ITC
GST rate from April 2019 1% without ITC
2) Non-affordable housing
GST rate till March 2019 12% with ITC
GST rate from April 2019 5% without ITC
New tax rate without ITC will apply to all new projects
Builders were given a one-time option to pick between the old and new rates by 20 May 2019 for their ongoing projects
This offer was valid only for projects which were incomplete as of 31 March 2019
ITC in GST
Input Tax Credit means claiming the credit of the GST paid on the purchase of GST which are used for the furtherance of business
Affordable housing as per GST
1) housing units worth up to Rs 45 lakhs
2) in the metropolitan city cost up-to Rs 45 lakhs Carpet area up-to 60 Sqm
3) housing unit is other cities Cost up-to Rs 45 lakhs Carpet area up-to 90 Sqm
Metropolitan Cities
Metropolitan area is a major city together with its suburbs and nearby cities, towns, and environs over which the major city exercises commanding economic and social influence
1) Delhi-National capital region
2) Bengaluru
3) Chennai
4) Hyderabad
5) Mumbai-Mumbai Metropolitan region
6) Kolkata
GST calculation on affordable property Before 01/04/2019
1) property cost Rs 35000/Sqm
2) GST rate on flat purchase @ 8%
3) GST – Rs 2800/Sqm
4) ITC benefit for material cost of Rs 15000/Sqm @ 18% – Rs 2700/Sqm
5) Total property cost – Rs 35100/Sqm
After 01/04/2019
1) Property cost -Rs 35000/Sqm
2) GST rate on flat purchase @ 1%
3) GST – Rs 350/Sqm
4) ITC benefit – not applicable
5) Total property cost -Rs 35,350/Sqm
Impact of GST on luxury property Before 01/04/2019
1) property cost -Rs 70000/Sqm
2) GST rate on flat purchase @ 12%
3) GST – Rs 8400/Sqm
4) ITC benefit for material cost @ 15% -(Rs 8400/Sqm X 0.15) -Rs 1260/Sqm
5) Total – Rs 77140/Sqm
After 01/04/2019
1) Property cost – Rs 70000/Sqm
2) GST rate on flat purchase @5%
3) GST – Rs 3500/Sqm
4) ITC benefit – not applicable
5) Total – Rs 73,500/Sqm
GST on government housing schemes
The common man will attract only 1% GST under the new regime – clarification from the government
This housing scheme includes
1) Jawaharlal Nehru national urban renewal mission
2) Rajiv Awas yojana
3) Pradhan Mantri awas yojana
4) housing schemes of state governments
GST on construction services
1) Under-construction home bought under the PMAY credit-linked subsidy scheme (CLSS) – @ 8%
2) Under-construction home bought without the subsidy – @ 12%
3) Works contract for affordable housing – @ 12%
GST on maintenance charges for housing societies
1) 18% GST on residential property if maintenance charges is at least Rs 7500/Month or more.
2) housing society which has an annual turnover of less than Rs 20 lakh, exempted from GST if more than Rs 20 lakh – GST is applicable @ 18% for the entire amount.
3) RWAs are entitled to claim ITC on tax paid by them on capital goods (generators, water pumps, lawn furniture etc), goods (taps, pipes, other sanitary/hardware fittings etc) and input services such as repair and maintenance services.
GST on Rent
1) landlords do not have to pay GST on real estate rental income, as long as their premises are let out for residential purposes.
2) an 18% GST if the residential property is let out for a business purposes and if the rent amount per year exceeds Rs 20 lakh.
3) on letting out of commercial properties, a GST @ 18% is levied.
GST on home loan
1) there is no applicability of the GST on home loan repayment as far as the borrower is concerned
2) for housing loan, the bank would charge GST on the processing fee, technical valuation fee, and legal fees
GST fact check
1) Residential projects with up to 15% commercial space, are treated as residential properties under GST
2) the effective GST on commercial property is 12%
3) you do not have to pay any GST on the purchase of plots
4) you do not have to pay any GST on buying a flat that is ready to move in with a completion certificate from the authority
5) landlords do not have to pay GST unless the tenant is a business company
6) GST on house registration – GST does not subsume stamp duty or registration charges, you still have to pay these duties while buying a property
7) GST is applicable on the services that the bank offers, as part of the home loan, including processing fee, legal fee, etc
8) GST has subsumed at least a dozen other charges
9) sellers increase the cost of ready to move in properties, to factor in the GST cost
10) despite the applicability of GST, Under-construction homes are cheaper than ready homes
11) GST is not applicable on ready to move in flats – it is applicable on Under-construction flats only
GST on one-time maintenance deposit collected by builder
The GST is applicable to the one-time maintenance deposit that the builder collects from home buyers
GST on land transactions
GST is not applicable on land transactions
GST provides a standard abatement of 33% of the total contract value, towards the value of land for taxable real estate transactions
Calculation of GST on Under-construction flat
1) suppose that an Under-construction property is sold by a builder to a buyer worth of Rs 100
2) Land value is calculated as Rs 33
3) Construction value comes as Rs 77
4) GST is applicable for construction value ie Rs 77
Rate of GST on developable land
Buyers will have to pay 18% as GST if they are investing in developable plots Developable land
Only those plots, where the owner has obtained all the necessary permissions from local and municipal authorities to carry out future development over the land parcel, qualify as developable plots
To facilitate the future development, the owner also has to develop the basic infrastructure
Activities to be performed on the land parcel for developable land
1) plot demarcation
2) ground leveling
3) boundary wall construction
4) road construction
5) construction of overhead tanks
6) laying work of water pipelines
7) laying work of underground sewerage lines
8) setting up of water harvesting facilities
9) setting up of sewage treatments plants
10) development of landscaped gardens
11) setting up of a drainage system
GST on plot
1) GST is not applicable on the sale of plot
2) any small construction on the plot will attract GST
3) in such case GST is applicable for 77% of the sale value
GST on flat registration
There is not GST on the registration charges that are paid while registering a property
who pays GST on real estate
GST is paid by the home buyer and investor when investing in Under-construction properties
To claim ITC for promoters
A promoter should purchase at least 80% of goods and services from registered suppliers
Section 38-480 of GST act
It provides an exemption for the supply of a freehold interest in land-based on the use of that land
Requirements are
1) the land is land on which a farming business has been carried on for at least five (5) years preceding the supply
2) the recipient of the supply intends that a farming business be carried on, on the land
Compiled by:-
Avinash Kulkarni
Chartered Engineer, Govt Regd Valuer, IBBI Regd Valuer
