The GST in India Real Estate, or Goods and Services Tax, started on July 1, 2017, and it has affected many businesses in India, especially in real estate. This article explains the GST applicable to buying flats and residential properties.
Before GST, property buyers had to deal with various taxes like central excise and value-added service tax, making the process complicated. Thanks to GST, things are clearer now.
Initially, GST on residential property purchases was 8% for affordable housing and 12% for non-affordable housing. This allowed buyers to benefit from Input Tax Credit (ITC) on the initial GST rates. However, from April 1, 2019, new rates apply. Affordable housing now has a GST rate of 1%, while non-affordable properties have a 5% rate without ITC.
GST is applicable to flats and apartments under construction in major cities, but properties in finished complexes with an Occupation Certificate are exempt.
Here’s a summary of GST rates for flat purchases:
- Non-Affordable or Luxury Housing (Except Under Construction): 12% + ITC till 31-03-2019, 5% excluding ITC from 01-04-2019.
- Affordable Housing (Under Construction): 8% + ITC till 31-03-2019, 1% excluding ITC from 01-04-2019.
- Completed Residential Projects: GST not applicable.
To qualify for the 1% GST rate on affordable housing, certain conditions must be met. In non-metro cities, the under-construction property must be 90 sq.m. with pricing up to 45 lacs, while in metro cities, it should be 60 sq.m. with pricing up to 45 lacs.
Additional conditions include purchasing 80% of raw materials from registered dealers to get the 1% GST rate. Otherwise, under RCM, the developer must pay 18% GST.
Conclusion: The GST has brought significant changes to the Indian real estate industry, simplifying processes and reducing the burden on property buyers. The real estate tax rate has been reduced, making property acquisition less stressful for Indians.
If you need assistance with real estate, Cosmotown Shelters LLP can help with finding the ideal property and negotiating the best price for a hassle-free experience. Contact them for more information.
