GST On Real Estate: FAQs
Confusion prevails among property buyers on the goods and services taxes (GST) and its applicability on real estate. In this article, we answer some of the frequently asked questions about the new tax regime.
What is the GST rate on flat purchase?
From April 1, 2019, effective GST rate on flat purchase is one per cent of the property value for units in the affordable housing category (home worth Rs 45 lakh or less). The GST rate for other residential units is five per cent of the property value. Do note that builders don’t get the benefit of the input tax credit (ITC) on these new rates. Earlier, the rate for affordable housing was 8 per cent while the rate for other residential units was 12 per cent. Under the old regime, builders could claim ITC.
What is the GST rate on purchase of shops?
While the new rate sans ITC is five per cent of the total value, the old rate is 12 per cent with ITC.
On what type of projects will the new rates apply?
The new rates are applicable on any project that started after April 1, 2019. It’s also applicable on all ongoing projects if the builder decides to switch to the new rates.
Will the buyer who booked a flat earlier, have to pay GST at old rates?
Yes, if the builder decides to stick with the old rates. However, the buyer will pay tax at new rates of the outstanding amount if the builder switches to new rates.
Do buyers have to pay GST on a resale home?
GST is applicable on goods and services. Resale homes, by definition, don’t fall in any of these categories. Therefore, buyers of resale property don’t have to pay GST on their flat purchase.
Do buyers have to pay GST in newly built ready-to move-in homes?
In projects that have received an occupation certificate and where ready-to-move-in units are up for sale, GST isn’t applicable. However, the buyer must carefully check the price breakup, since the builder will ultimately recover the price he must have paid towards taxes. GST might be adjusted in some form while selling the unsold ready-to-move-in stock.
Do buyers have to pay GST on land purchase?
Buyers don’t have to pay GST on land purchase as the transaction neither involves services nor goods.'
Do buyers have to pay stamp duty even after GST?
The GST subsumed various state and central levies when it came into effect in July 2017. However, it doesn’t cover stamp duty and registration charges and buyers are obliged to pay them separately.
While there have been demands for scrapping stamp duty after the launch of the GST regime, the charges of this state duty going away are slim to none, considering states largely depend on this levy for revenue purposes.
Do landlords have to pay GST?
Landlords earning rental income have been kept out of the purview of the GST regime. However, landlords earning more than Rs 20 lakh annually by renting their premises for commercial or industrial purposes have to pay 18 per cent GST.
How to avoid paying GST?
Builders are legally obliged to pay the GST and so are buyers. However, under pressure to increase sales in a slow-moving market, builders launch special offers under which they waive the GST.