The Government of India rolled out Goods and Services Tax (GST), in July of 2017. Implementation of GST is a revolutionary step taken by the government with the aim of reducing tax evasions and eliminating unnecessary hurdles. However, ever since GST was launched, there have been a lot of confusions regarding GST rates and benefits.
GST rates are different for several segments, and there is a particular tax rate for real estate industry while buying a property. Before purchasing the property, let’s take a detailed look at the GST:
GST Rate On Real Estate
Real estate sector will draw GST at the rate of 12% with the full input tax credit. Approved by the council, this rate is applicable to the construction of any of the following with the intention for sale to a buyer, wholly or partly:
- Construction of a complex or a part thereof,
- Construction of a building or a part thereof, and
- Construction of a civil structure or a part thereof
The value of land is included in the amount charged from the recipient of the service. However, GST will not be applicable to ready to move in properties in the country.
There are different stages for under-construction properties and GST will be dependent on it.
The actual GST rate applicable on purchase of under construction property is 18%. But one-third of the amount is deemed as the value of land or undivided share of land supplied to the home buyer of the property. Hence, GST rate comes down to 12% on the under-construction flats
GST on Completed Flats
In case of purchase of completed flats in a secondary transaction, GST would not be applicable to the sale. GST is only applicable on payments made to a developer for offering the services of construction. Hence, in case of purchase of a completed or used flat, the question of providing construction service does not arise. Thus, there would be no GST applicable if you buy a completed flat.
GST On Completed Flats/Property or ready-to-move-in property
Transfer of completed flats or property or ready-to-move-in property will not include any services to the home buyer. Therefore, there would be no GST applicable on such transactions. Because there is no transfer of goods and services. Hence, if you are purchasing a completed flats/property or ready-to-move-in property then you may not pay the GST cost.
GST On Resale Properties Or Flats
In this category, resale property or resale flats are considered as ready to move in property, thus they will not invite any GST taxation.
GST Rate For Houses Purchased Under CLSS
Effective from 25th January 2018, if you purchased the houses under the Credit-Linked Subsidy Scheme (CLSS), then the applicable GST rate on such houses will be 12%. The GST rates will be effectively 8% as one-third will be deducted for covering the cost of the land.