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alisha | 31 Jul 2019

What Is The Role OF GST In Real Estate In India?

What Is The Role OF GST In Real Estate In India?

The conceptualisation and discussion of GST in India started in the year 2000 by the Vajpayee government.

Goods and Service tax, more popularly known as GST, is a uniform tax system that was introduced in India on July 1, 2017, by the Narendra Modi-led Government. The purpose of introducing GST was to give freedom from multi-level tax payment. While the GST procedure includes VAT, Service tax and more, a structured GST Council is formed to discuss and track the process.

The concept of GST which is inspired by the idea of one nation one tax completed its two years on July 1, 2019. Hence, to make the country one market, GST seems to have fairly succeeded.

Since the tax system of GST in Real Estate in India is equally applicable along with other sectors, people who are willing to invest in real estate are curious to know the GST application and effect on their property investment decision. 

1. How will the abolishment of Input Tax Credit affect the property prices?

The old GST price gives the developers an advantage of Input Tax Credit (ITC) on the ongoing projects. Now, the government has come up with an option to practice the new GST format, which doesn't include ITC. The rate as per old GST on the under-construction property is 12 percent whereas the new GST rate is 5 percent. The new format was made applicable from 1st April 2019 and the old GST had a deadline of 20th May 2019. Hence, the under-construction property that was brought post 1st April 2019 by the homebuyer will be charged a 5 percent GST in case the developer opts for new GST rate.

2. In case of a woman being a property holder, is she eligible for GST rebate?

With an objective of one nation one tax in GST implementation, gender difference or being a woman doesn't provide any special benefit on GST. The GST policy is same for all. 

3. How about the GST application on extended area redevelopment?

GST is very much applicable on all redevelopment projects and 5 percent GST is levied on the projects with an increased property area.

4. Besides residential properties, what is the treatment of GST on commercial properties?

A 12 percent GST is applicable on the commercial properties across the country. In case where the residential properties have a partial area for commercial properties, the rate increases from 12 to 15 percent.

5. Who is liable for the payment of Goods and Service Tax amount on the resale of under-construction property?

The new owner of the under-construction property is liable to pay the outstanding GST amount.

6. Are GST rates on ready to move property applicable?

The ready-to-move-in properties are kept out of the GST policy.

7. What is the procedure of paying GST to the Government by the developer?

The happening of any event from the developer's end at the earliest is accountable to pay the taxable amount to the Government. Therefore, the developer submits the Goods and Service tax amount to the Government 

  • Either on the day of project completion.

  • Or on the first occupation of the project.

  • Also, for those apartments that are not booked at the time of availing the project completion certificate, the developer has to pay the amount on a reverse charge basis.


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