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12/20/2019

GST On Real Estate: FAQs And Clarifications

Ever since GST was launched, there have been a lot of confusions among property buyers regarding the new tax regime and its applicability on real estate. In this article, we look at some of the frequently asked questions this indirect taxation regime:

What are the new GST rates on flat purchase?

With effect from April 1, 2019, effective rate of GST applicable on flat purchase is 1% of the property value for units in the affordable residential apartments. The GST rate for other residential units is 5% of the property value, without the benefit of input tax credit (ITC) on these new rates. Earlier, the rate for affordable housing unit was 8% while the rate for other residential unit was 12 %. 

What is the rate of GST applicable on purchase of shops?

While the effective new GST rate on shops is five per cent of the total value without input tax credit, the old rate is 12 per cent with input tax credit.

On what type of projects will the new GST rates apply?

The new rates are applicable to all projects that started after April 1, 2019 as well as for on-going projects.

What is an on-going project?

A project is considered as an ongoing project if the following conditions are satisfied:

  • Commencement certificate for the project has been issued by the competent authority on or before 31st March 2019. The same is certified by architect/chartered engineer /Licensed surveyor. The certificate will indicate that construction of the project has started on or before 31st March 2019. Without this certificate, project will not considered as an outgoing project.
  • Completion certificate/first occupation of the project has not taken place on or before 31st March, 2019
  • Apartments under the project have been partly/fully booked on or before 31st March 2019

    What are the criteria for certifying that the construction of a project has started by 31st March 2019?

    If the construction of the project i.e. earthwork has been completed and excavation for foundation has started on or before 31st March, 2019, it shall be considered it has been started on or before 31st March 2019.

    Is the GST applicable on a resale property?

    GST is applicable on goods and services. Resale properties don’t fall not fall within the purview of GST. Therefore, in the case of resale property, there will be no GST levied.

    Do buyers have to pay GST in newly built ready-to move-in homes?

    According to the new GST tax structure, residential projects which have received an occupation certificate and where ready-to-move-in flats are up for sale, GST isn’t applicable. 

    Who is liable to pay GST on TDR and floor space index?

    The promoter shall be liable to pay GST on TDR or floor space index supplied on or after April 1, 2019, on reverse charge mechanism.

    Do buyers have to pay GST on land purchase?

    Land is identified as immovable property, and so, it does not fall within the purview of GST. Therefore, buyers don’t have to pay GST on land purchase.

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