Priya Mulukutla
Table of Contents
Buying a house is a significant and often long-term investment of money. GST is to be considered in such transactions. Knowing whether or not GST is applicable shall affect the budgeting of the buyer on such a purchase.
Chargeability
In India, Goods and Services Tax (GST) applies to certain instances related to flat purchases. Here are some scenarios:
Residential Properties
Properties where the carpet area of the commercial space is not more than 15% of the total carpet area of all apartments in the project are Residential Properties.
Ready-to-use Property
GST is not applicable in the case of the purchase of ready-to-use property. Ready-to-use properties are those that have received a certificate of completion indicating completion of construction and ready for occupation.
Purchase of Under-construction Property
When buying an under-construction flat directly from a developer, GST is applicable on the construction services provided by the developer. The rate of GST varies depending on factors such as the type of property and the location.
Affordable Housing Projects
The government has introduced a concessional GST rate for affordable housing projects. These projects typically have a lower GST rate compared to standard residential properties. For calculating the gross amount all charges are to be considered including parking charges common facility charges etc and excludes Stamp Duty and Maintenance charges.
| Carpet Area | |
| Metropolitan Cities | Up to 60 square metres |
| Other Cities and Towns | Up to 90 square metres |
| Gross Amount charged by Builder | Up to ₹ 45 lakh |
Non-affordable Housing Projects
Other than Affordable Housing Projects. Properties that tend to be more expensive than Affordable Housing Projects and cater to people with higher purchasing power.
Land
It is relevant to note that the sale and purchase of land do not fall under the ambit of GST. It is not a supply and therefore not chargeable to GST. Accordingly on the purchase of under-construction Real Estate Property with land attached a fixed amount of 1/3rd of the Property Value will be attributed to the land and GST shall be applicable on the balance 2/3rd portion only. Example: Payment for Purchase = 120, Land = 40 and Property Purchase on which GST Chargeable = 120 * ⅔ = 80.
Commercial Property
GST applies to the purchase of commercial properties, including shops, offices, and other non-residential properties.
Rates of GST
| Type of Real Estate Property | Till 31st March 2019 | Input Tax Credit | From 1st April 2019(new) | Input Tax Credit |
| Construction of affordable residential apartments | 8% | Available | 1% | Not Available |
| Construction of residential apartments other than affordable residential apartments | 12% | Available | 5% | Not Available |
| Commercial properties | 12% | Available | 12% | Available |
| Land and Ready-to-move(use) Properties | NA | NA | NA | NA |
- Construction of commercial apartments in a Residential Real Estate Project (RREP), which commences on or after 01-04-2019 or in an ongoing project in respect of which the promoter has opted for new rates effective from 01-04-2019: effective GST rate is 5% with no ITC Available.
- Commercial Apartments in Real estate Project (REP) other than RREP or an ongoing project where the promoter has opted for old rates: 12% GST, ITC Available.
- GST is paid to the developer along with the purchase consideration of the property who shall then remit the GST to the Government.
- To qualify for the reduced GST rates of 1% and 5%, developers must ensure that at least 80% of the raw materials used in the construction process are procured from registered dealers. This means that the majority of the materials, by value, should be sourced from registered suppliers. The developer should pay GST at the rate of 18% on a Reverse Charge Basis on any input falling short of the 80% of input from registered suppliers. 28% if the input is cement ie purchase from an unregistered supplier.
- Stamp Duty and Registration charges on the purchase of a flat shall be applicable and to be paid separately. GST does not affect these.
- It is advised to check whether the maintenance fees payable for such properties are subject to GST or not.
- Any Residential Welfare Association collecting more than ₹ 20 lakh (₹ 10 lakh in some states) in annual maintenance has to mandatorily register for GST. This allows for ITC benefits. Voluntary Registration is allowable.
- However, GST on Maintenance Charges is only applicable if RWA has more than ₹ 20 lakh in turnover from providing maintenance services and the collections per member per month exceeds ₹ 7,500. GST is payable at 18% on entire amount if it exceeds ₹ 7,500.
- RWA is not required is register if turnover exceeds ₹ 20 lakh but the monthly maintenance fees does not exceed ₹ 7,500 per member.
It's essential to review the specific circumstances of the flat purchase to determine the applicability of GST. Consulting with a tax professional or legal advisor can provide personalized guidance based on the details of the transaction.
Procedure for getting GST refund on cancellation of Flat - Click here
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