Effective from 1st April 2019, there is a huge change in GST rate on real estate. Let us understand the applicable GST rate on real estate or property purchase at both levels of under construction property and completed property.
Up to last year December, there was a lot of confusion regarding the applicable GST rate on real estate or property purchase. However, the Central Board of Excise and Customs (CBEC) recently issued a clarification regarding the applicability of Goods and Services Tax (GST) on the under-construction and ready-to-move-in property.
You may all aware that GST was implemented from 1st July 2017 in India by replacing the existing service tax regime.
GST rate on real estate or under construction property purchase
Now let us understand where the GST is applicable on real estate. As I said above, there was a huge confusion among property buyers due to no clarity in this front. Many builders created some fear among buyers that post GST the property values will go up and hence better to buy it before GST.
Also, due to unavailibility of proper clarification, many buyers felt it helpless and accepted stories created by builders.
GST on completed Flats/Property or ready-to-move-in property
Transfer of completed flats, property or ready-to-move-in property will not involve any service part to the buyer. Hence, GST will not be applicable in such transactions. Because it is neither supply of goods nor service.
Hence, if you are buying a completed flats/property or ready-to-move-in property, then you may save the GST cost.
GST rate on Under Construction Flats or Property
GST rate on under construction property will be classified as below.
# Property for which Completion Certification issued
If the builder got the completion certificate before you purchase it, then it is considered as ready-to-move-in property. Hence, in such cases, there is neither supply of goods nor service. Therefore, no GST on such properties.
# If you paid the full sale amount to the builder before 1st July 2017
If you paid the full sale consideration amount before the applicability of GST (i.e 1st July 2017), then GST will not be applicable in such situation.
However, as the transaction was done before the implementation of GST, service tax @ 4.5% has to be payable by the buyer in this regard.
# If you paid the part of sale amount to the builder before 1st July 2017
If you paid the part of sale amount to the builder before 1st July 2017, then GST will not be applicable to such part payment.
Because as the transaction was done before the implementation of GST, service tax @ 4.5% has to be payable by the buyer in this regard on such part payment.
# If you paid the sale amount to the builder after 1st July 2017
As the transaction happened post-GST implementation date, in such transactions GST will have to be payable by the buyer.
GST Tax Rate for under construction flats, properties or commercial properties
The applicable GST rate for under construction flats, properties or commercial properties in land or undivided share of land is currently at 12% with full Input Tax Credit (ITC).
However, effective from 1st April 2019, this is slashed to 5% WITHOUT Input Tax Credit (ITC).
The actual GST rate for under construction flats, properties or commercial properties is 18%. However, 1/3 of 18% is deemed as the value of land or undivided share of land supplied to the buyer of the property.
Refer this below image for the clarification given by Central Board of Excise and Customs (CBEC). Please refer below image to understand the definition of what is the meaning of Under Construction of the Property and what is Ready To Move In Property. But do remember that rates are now changed effective from 1st April 2019.
GST rate on resale property or resale flats
As per above clarification, such resale property or resale flats are considered as ready-to-move-in properties, GST will not be applicable in such resale transactions.
GST rate for homes purchased under the Credit-Linked Subsidy Scheme (CLSS)
Effective from 25th January 2018 (Refer this NOTIFICATION), if you purchased the property under the Credit-Linked Subsidy Scheme (CLSS), then the applicable GST rate will be 12%. The effective rate of 8% after deducting one-third of the amount charged for the house towards the cost of land.
However, effective from 1st April 2019, the GST applicable for CLSS house is 1% without Input Tax Credit (ITC).
What is Credit-Linked Subsidy Scheme (CLSS)?
If you purchased the property under the schemes like:-
- Economically Weaker Sections (EWS)
- Lower Income Group (LIG)
- Middle Income Group-1 (MlG-1) or Middle Income Group-2 (MlG-2) under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana (PMAY Urban).
Hope this will clear many doubts about property buyers.
Let me bring in the new rate in a tabular form as below.
The link for the new notification of Government is HERE.
Refer our other posts related to real estate:-
- All about BDA Kempegowda Layout Notification 2018
- How to pay TDS on sale of property online?
- Guidance Value of Bangalore – How it affects property price?
- Flat, land and Property Stamps and Registration charges in Bangalore and India
- EPF withdrawal for house, flat or construction of property