Effective from 1st April 2019, there is a huge change in the GST rate on real estate. Let us understand the applicable GST rate on real estate or property purchase in 2020at 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.
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.
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 property will be classified as below.
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 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, 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.
As the transaction happened post-GST implementation date, in such transactions GST will have to be payable by the buyer.
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.
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.
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).
If you purchased the property under the schemes like:-
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.
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View Comments
Dear Sir
I purchased a property from Godrej Properties in April 2019. Builder has charged 18% GST on other charges. The possession will be given next month. Is it legal to charge 18%? Can I get 13% extra charged amount as refund?
Dear Tania,
It is illegal to charge 18% for the payments which you have done currently (at lower rate of GST).
Dear Sir,
I purchased a commercial shop space of 284 square ft from a builder in Noida in the year 2013 and made the payment of Rs. 11 lakhs for the Basic cost of the shop. No tax was claimed by builder or paid by me at that time as per the Allotment letter.
OC & CC of the project has not yet given. The builder is proposing to give the possession now and asking for Additional charges of Rs.5 lakh. They have sent me a demand Letter on which for GST @ 4.21 % on the full amount has been shown on the amount which I paid. He is also charging GST @12% on Additional Charges.
Incidentally, the Builder has agreed to offer Discount for delayed possession. I requested to adjust discount on Additional charges to be paid.
Now my questions are as follows:
1. Is GST applicable in this case as GST was not applicable when I made the upfront payment of Rs.11 lakh. if GST applicable, at what rate?
2. If Discount is adjusted on the Additional charges payable, will it reduce my GST liability to some extent.
3. What will be GST rate on Additional charges (Parking etc.).
4. If GST is applicable, Do I have to pay now or at handover or at what stage/s?
Thanks you in advance.
Sir we had a land and we approached a builder for house construction. He took the contract and completed the construction. With regards to payment, for all materials we paid directly to the supplier which ever we purchased. Remaining amount we did Cheque payment. Now our builder is asking us GST for the Cheque payment which we made directly to builder. He is asking 5 percent. Is that correct? Construction is one house in gfloor and one in first floor.
Dear Palani,
It is hard for me to suggest based on unknown facts of what the agreement earlier with you and builder.
Dear sir,
I have purchased flat in Ahmedabad I paid advance for booking 530000 (10% of total sale deed value via online transfer) before BU permission on 15 Oct 2023 , BU permission received on 22 Oct 2023 , our agreement (ATS) registered in RERA on 01 Nov 2023 I.e. after BU PERMISSION
Is GST applicable in this case ?
How much
It's affordable flat category sale deed 5300000.
Dear Naresh,
Yes.
Dear sir,
I had booked a flat in 2014 when it was starting its construction.I was paying the installments and service tax until January 2017.due to certain other legal matter involving my family member the builder was not allowed to take installments under the notice by police.in 2019 the OC was received. In 2022 I got the property defreezed and now the builder is allowed to take my rest of the payment.I paid rest of all the payment and got the property registered. In my particular case , will I be charged gst ? If so at what rate and will it apply on the amount paid in 2022?
Dear Priyanka,
As per me, you are eligible for GST as mentioned above.
Dear Sir,
I had booked flat in Jan 2017 for 99 Lacs. Till July 2017 I paid 37 Lacs with 4.5 % ST. And latter GST was introduced. But my issue is that I had paid VAT of 1% on full amount in Jan 2017 itself.
Now after GST, builder is refusing to return my VAT amount on 63 lacs stating that they have fully paid to govt.
Please advise.
Dear Farhan,
It is his fault to collect the VAT in advance. Hence, he has to repay you.
I have made part payment of ?59,00,000 to the builder and its under construction and We have done Registration too.My questions are as mentioned below :-
1. The Total cost of the flat is ?1,28,00,000 exclusive Stamp Duty and GST.I have paid ?59,00,000 as mentioned above and rest amount will be paid by loan.So,Now I have to pay GST on which amount ?1,28,00,000 now itself or just of ?59,00,000.
2. The registration of the flat was done on 30th March 2022 & Possession will be given by September-October.So,When should I pay the GST and on which amount?
3. Should I pay Gst on just the amount paid or what?
4. What will be the percentage of GST?
5. If I pay late then Is there any penalty of not paying GST?
Dear Harsh,
You have to pay the GST as and when you pay the installments based on the agreement done with the builder. Regarding the rates, refer the above post.
Dear sir,
I have purchased pre launch offer flat in Hyderabad in feb 2021 and paid full amount during MoU. Now the builder is asking gst @5% on amount paid for sale agreement preparation. Site work is started in November 21 & site in in excavation level only.
Please guide when to pay gst amount in pre launch flat buy case.
Dear Prabuu,
As you already paid the full amount, GST also be payable now.
Hello sir,
I have booked the flat in surat in 2017.
Still it is in under construction.
I have paid 5.5 lakhs as down payment in 2018.
For the remaining amount I have taken home loan.
Rs. 10 lakhs was disbursed by bank to the builder as part payment on 26th March 2019.
Rs. 8 lakhs has been paid after 1st April 2019 by the bank to the builder as part payment.
Flat comes under affordable home category.
Now builder is saying that I have to pay 8? GST for payments made before 1st April 2019 and
1%GST for payments made after 1st april 2019..
The registration is still pending
Please can you tell me,
Is the builder charging proper rates as per the rules?
Please reply
Because my possession date is after 2 months.
Thanks in advance
Dear Shrey,
Yes.
Hello Sir ,
I purchased flat 400 Sq.ft (39 Sq. Meter ) in Virar on 2015 . Agreement date is on 28 March 2017 & puzzation may be on April 2021 then what will be gst charges paid to builer .
Please clarify
Dear Vipul,
Refer the above post.