There is a lot of confusion on GST rate on real estate, be it GST rate on under construction property or completed property. Let us see what were the taxes before GST and what are the current GST rate on real estate.
GST Latest News
As per the latest news, GST council has announced reduction in GST rates from 12% to 5% on all housing projects.
Also, for affordable housing projects, rates have been reduced to 1% from current 8%.
Revised rates would be applicable from 1st April, 2019 onward.
Revised rates are for under construction properties and ready to move in flats where completion certification has not been issued.
New GST Rates For Under Construction & Completed Property -Points to Note
- Builders had the option to choose the old rates or new rates for under-construction houses till 31st March 2019.
- All the new projects from April 1st, 2019 onwards had to compulsorily go for new GST rates.
- The buyers does not have the option to choose from new tax rates or old tax rates.
*RREP means where the carpet area of the commercial apartments is not more than 15% of the total carpet area.
What is affordable Housing?
Here is the latest classification of affordable housing as per GST Council
- Cost of Property – Upto 45 Lakhs
- Carpet Area
- In Metro Cities – 60 Square Meter (645 Square Feet)
- In Non-Metro Cities- 90 Square Meter (968 Square Feet)
If you have already paid 12% on your property, you can not claim it back as the rule is applicable from 1st April, 2019.
Goods and Services Tax (GST) – An Introduction
Unless you have been living under a rock for the last couple of years, you would know that India recently launched its extremely forward-looking and simplified tax system called the Goods and Services Tax. The Goods and Services Tax or GST as it is normally called overwrote all indirect taxes that affected the general public such as the VAT, Excise Duty, and Service Tax in one swift motion.
While the individual State Governments levied Value Added Tax on the exchange of goods, the Central Government levied Excise Duty on the manufacture of goods and provision of services. The Service Tax was also a Central levy on services provided within the country.
The issues with these were manifold, right from the fact that the States individually had the power to decide the rate of VAT on their products, which meant the VAT rate was never uniform throughout the country, too many of these taxes, if not all of them, were not applicable in the state of Jammu and Kashmir. All the manufactured and sold goods were also obviously double-taxed.
For example, let us say Mr. A manufactures an umbrella. The cost of manufacturing an umbrella is Rs. 20 and he intends to sell it for Rs. 25. The Central government would first levy 10% i.e. Rs. 2.5, let’s assume, as Excise Duty on this umbrella, thus increasing the actual cost of the umbrella to Rs. 27.5. The respective State government, not wanting to be left out, would levy a VAT on Rs. 27.5. Let us say this is at an assumed rate of 10% again, increasing the rate to Rs. 30.25. Therefore, due to the different layers of tax in the indirect tax system, you will notice from the above that a simple product costing only Rs. 25 would be inflated manifold.
How did the Goods and Services Tax (GST) change the game?
Simple. It came up with flat rate of tax, called the GST and got rid of all the taxes mentioned above. This was levied on all the products, whether manufactured, sold or even if they were just a service provider. This made it extremely simple for the general public to adhere to the regulatory measures in place, without hiring tax consultants or chartered accountants.
It is possible that in some instances, the GST levy could be much more than all other taxes put together. The truth is, compliance has definitely become simpler. The GST had seen multiple revisions in the tax rates post the date of introduction, July 2017, to ease the burden of tax faced by the consumer.
Now Lets see how GST on real estate has impacted our lives:
GST Rate on Real Estate Transactions
What was it before GST – Initially, the government levied Works Contract Tax on the construction of buildings. This was a middle ground between the VAT and the Service Tax. The complication with the construction or sale of a building is that it is extremely difficult to define it as a manufacture, sale or service. The argument could be that it is manufacture, and thus there was an Excise Duty levy on it. The counter-argument is that all manufactures are not excise duty leviable. Only things manufactured and moveable are Excise Duty leviable as per the Excise Duty Law. So, that is one out of the window. So is VAT leviable? Are goods being sold? Definitely.
The goods being sold here is the building. This has been marketed and sold to the end consumer. Therefore, VAT was leviable. What about Service Tax? Was there a service being provided? Yes! The building or flat was subject to the effort of labour. This definitely qualifies it as a service. So does this mean both VAT and Service Tax was levied? This is where the government decided to be a little kind and introduced the Works Contract Tax. The Works Contract Tax broke out a portion of the total sale value of the building and assumed this was the materials portion, and thus there is a VAT levy on this portion alone. The remaining portion was to be Service Tax levied. Confusing? Definitely!
GST on Completed Property (Ready to Move in Flats)
What did GST do – The GST rate on real estate simplified the whole approach. No more VAT. Neither Service Tax , nor Works Contract Tax. No more assuming a material portion and what not.
Completely constructed property would not be levied a GST. As the property was already constructed, the idea was that the whole determination of material and service was so difficult − so don’t pay a GST!
Does it mean I can save money by buying a completely constructed property?
Yes, sir! You can save money if you buy a ready to move in flat.
This is the impact of GST rate on real estate.
GST Rate and Impact on Under Construction Property
What about GST rate and impact on under construction property? This is where the government makes it a lot easier for laymen like you and me to understand the law. If it is a property under construction, you will only pay 18% on two-thirds the value of the property. Wait, why two-thirds? It is assumed that the remaining one-third is the value of the land, and there is no GST on the transfer of land. Thus, effectively, you are only paying 12% on the value of the property.
The question all of us should be asking is when can you call a property completely constructed? In order to avoid GST, many builders could just build a roof over their head and call it a constructed property. They might decide to further continue constructing the property once the sale is made. This is another area where the government has been extremely clever. A property is deemed to be constructed only if the Completion Certificate has been obtained. There are lots of rules and regulations in order to get the Completion Certificate, thus it is not easy to circumvent the provisions of law in this case.
Will you get the two-thirds benefit even if you sell an under construction building without selling the land attached to it?
No. The two-thirds benefit is only if you sell the under construction building with the land attached to it. Only the transfer of attached land gets the benefit, as emphasised previously. One more point to note with respect to the above change is the fact that, under the GST, complete input tax credit is available for the 12% paid above.
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Property with Completion Certificate issued and Sale amount is completely paid before 1st July, 2017
In this scenario, since the sale amount is completely paid before the introduction of GST, the benefits do not apply. The buyer will have to pay the Works Contract Tax when buying the property.
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Property with Completion Certificate issued and Sale amount is partly paid before and after 1st July, 2017
Let us look at an example to understand this situation better. You buy a property in 2012. It is constructed and completed only in 2018. The value of the said property is Rs. 30 Lakhs, out of which the value invoiced before 1st July, 2017 is Rs. 20 Lakhs. There is also Rs. 10 Lakhs of invoicing after 1st July, 2017. That is, there is invoicing before and after the introduction of GST. How will you handle this purchase as far as taxes are concerned?
Before GST, a Service Tax and VAT was being levied on all properties under construction. Therefore, there will be a VAT and Service Tax on the Rs. 20 Lakhs invoiced before the advent of GST. After the introduction of GST, the amount payable will be a flat 12% multiplied by the amount invoiced, i.e. Rs. 10 Lakhs in this case.
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Property with Completion Certificate issued and Sale value is completely paid after 1st July, 2017
In this scenario, since the purchased property has been completed post the introduction of GST, no tax applies.
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Impact of GST Rate on Resale properties
Since resale properties are immoveable and do not fall under the definition of Goods under GST, there is no impact. That is, there would be no GST on the resale of flats after the introduction of GST.
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CLSS Scheme- 8% GST Rate on Real Estate
In order to make housing affordable, the government has introduced various housing schemes for the general public and also by giving housing loans at subsidised rates of interest. The government initially reduced the GST on houses bought with these loans to 12%. The CLSS Scheme effectively became 8% after the one-third deduction given to land.
Latest News – GST on under construction flats
In a recent amendment, the government has decided to completely abolish GST on houses purchased through these schemes.
GST Notification on Real Estate
Here is the GST notification on real estate. The notification talks about GST rate on real estate.
GST Calculator Real Estate
I hope you will not require a GST calculator on real estate after checking below examples.
How to calculate GST on Under Construction property – an example!
Here are 2 examples to calculate GST on under construction property:
Situation – I buy a property for Rs. 60 Lakhs after the introduction of GST. The builder has already obtained the Completion Certificate. The value of the building is Rs. 50 Lakhs and the value of land is Rs. 10 Lakhs. What is the amount of GST payable?
Answer – If you take your calculator out to do a quick arithmetic check, you are wrong. There is no GST on the above property since it is a Completed Property as discussed previously too. Only Under Construction property is chargeable to tax.
Situation – I buy a property for Rs. 60 Lakhs after the introduction of GST. The builder has not obtained the Completion Certificate. The value of the building is Rs. 50 Lakhs and the value of land is Rs. 10 Lakhs. What is the amount of GST payable?
Answer – Here the amount of GST is determinable only on the cost of the building being transferred, and never on the cost of land. Thus, the value calculated is two-thirds of Rs. 60 Lakhs multiplied by 18% or 12% on Rs. 60 Lakhs. The crucial point here is that this was a single transaction for Rs. 60 Lakhs. Even though the value of land is measurable, the amount of GST is on the entire amount.
Conclusion – GST on Real Estate
It is clear from the above how the introduction of GST rate on real estate has simplified lives. The simplification of approach in calculating the GST rate on real estate has been a huge step forward. The GST has now reduced what was once an imperious task to just a walk in the park.
I have booked a flat in oct’2018. Now it is under construction only. And i have paid 90% of the flat value under home loan with GST 12%. Total flat value is 34lakhs. And still i have not done registration. Can i avail the revised GST rate benefits.
I had planing to Purchase a Residential flat at Durganagar which is in the North Dum Dum Municipality area. On conversion of purchasing , Builders/Promoter told me to pay Rs. 100000.00 (Rupees one laksh) only for acceptance of flat booking . I paid Rs.100000.00 to Builder by cheque 1st week of February 2019.
But no Agreement was done with us till 31st March 2019, both are waiting for Central Govt. decission for implecation of GST on Residential Flat.
Now by this week or next week we do the Agreement for purchasing of flat. Cost of Flat is around Rs.2600000.00 (Rupees Twenty Six Laksh) and coverd area 856 Sq. Ft including Share area of Staircase and Lift.
I want to Know what will be applicable GST in my case for purchasing of Flat.
Hi Ananda
Future payment would be according to new GST rules.
We had purchased a flat i western area of mumbai in 2015 which is still in under-construction .
cost of the property is 80lac and i have payed half of the amount i.e 47 lac
stamp duty and registration is done
Can u please help me with what amount of GST is applied on the property till date.
i am bit confused as it is written on the top that the underconstruction property the gst applied is 5%
and on the bottom it is mentioned 12% so….
Carpet Area-650 sqft
Hi Ravi
Any future payment, the GST would be 5%. The rules have been changed since April 2019
I am in the process of booking a Duplex worth 1.2 Crore in a large project that has many flats, row hoses and duplex. Many houses, have been constructed and sold and people have moved in. But several more are being constructed and the one I am trying to book …has not started construction yet and expecetd to start in next 4 to 6 weeks.
The GST I have been charged is 12 % on 1.2 Cr. Is that correct ?
Should that not be 5 %.
From April 2019 onwards, GST charges are 5%. If you have made any payment before that, GST would be 12%
I have booked house in Nov’17. Paper value of house is 40 Lakhs. Till date I have paid 85% to builder tilll Feb’ 19. I have not paid any GST till date. Carpet area of my flat is 90 Sqm. Now my flat is ready and i would get possession in May’19 as per payment terms. Can anybody guide how much GST I am suppose to pay to builder???
agaist purchase of a residential apatt the payment has been made in the following seq on 27/03/17RS51000,719000 on 29/04/17,on 24/07/17 RS1925000,on 20/10/17RS 885000now during handover bal RS 240600 to paid till now no gst has been paid what will be the amt of gst to bepaid
I signed a contract for building a new house of 2996sq feet estimate 55lakhs on my own property .The house is not completed yet What’s the GST I have to pay
I had booked a Studio Flat at Neral for 1497600/- Including Club house, Road development. I had paid almost 15 Lakh amount. Building is under construction. The agreement was done during Sep. 2017. Now the builders demanding from me that he had paid GST @ 12% on my Flat and he is not giving any proof for the same. Is I have to pay this amount to Builder and if I pay can I get any amount refunded, since after that the GST Rule on house property had been changed to 5% and recently to 1%.
Hi
Is the builder giving you the receipt with GST?
Hello,
I want to understand the GST liability as a member of society which is developed by builder .If i am getting 45 % additional area on old one. How to calculate GST ?
as per notification it is 5% flat ,is it on market value or on constructed value minus land value.
Hi Amit
It would be on the amount payable to the builder. 5% or 12% would depend on what rates builder have opted after 1st April.
Hi
I booked a flat in 2018 dec.. i paid booking amount and half the payment with 12% tax..: they will give the flat in 2020 dec…I booked in 11th floor n the basement itself is not constructed yet… for the remaining amount they r asking to pay 12% tax… can u let me know how much gst we have to pay for the remaining
Thank you
Hello,
I have bought a flat with “SALE AGREEMENT” of Rs.45,00,000/- and recently have been for registration for a semi finished flat with “SALE DEED” of Rs.31,50,000/- .So now should I pay GST for 45Lakhs or 31.5Lakhs?
I have booked flat in December 2018 and paid booking amount along with 12% GST, However till today they have not started construction. Can I get GST rebate on previous payment as construction has not yet started
I have booked flat in May 2018.and paid booking amount also i have done registration in may 2018.construction is going on they will give the flat in 2020.I have took loan from bank in jully2019 for whole amount they r asking me to pay 12%gst on whole amount because of i have done registraion in may 2018 can u let me know how much gst we have to pay
other under construction flats now the builder opted GST @ 12% where I have to pay GST including land cost or excluding land cost of the flat / property
i have booked a flat in july 2018 which has RERA CARPET AREA of 778 sqft with 7 lakhs Rs by cheque payment mode now in august 2020 i want to do the registrartion of the said property. builder has got completion certifacte in dec 2018. do i need to pay the GST? if yes then what would be my GST amount?
Hello sir,
I had booked flat in under construction scheme in 2017..
I have paid the amount to the builder step by step according to agreement rule..
I have paid 20 lack after april 2019..
My flat come under the affordable home category..
According to my understanding GST for 20 lack amount should be 1% (20000) value..
But builder is asking for 8%.
Can you please tell me,
For my home category , what is the gst value ???
Thanks in advance
BUILDER IS CORRECT BCOZ AGREEMENT WAS ON OR BEFORE 31ST MARCH 2019
Hi Experts,
Could you please provide support in understanding what percentage will be applicable for GST for a under construction flat which is More than 90sq mts area and less than 45 Lakhs bought in September year 2020.
We have Two Registered documents
1) sale deed worth 29 lakhs includes Land cost with government rate included.
2) Construction agreement worth 7 lakhs
Builder is saying we need to pay 5% GST on both i.e 29lakhs +7 Lakhs = 36Lakhs will the amount for which he is saying 5% GST needs to be paid.
3) Moreover sale deed already includes 62 sq yards *20000(govt land value)=12,40,000 rupees in the sale deed. We have total stamp duty is paid on sale deed value 29 lakhs.
I am confused as different Auditors mentioning different percentages.
Builder is saying 5% GST is applicable and needs to be paid for 36 lakhs. Please advise what is the correct percentage to be paid and do we need to consider land cost also i.e 12,40000 rupees for GST calculation???
Please Help and support with you expertise.
Thanks,
Kalyan
Hi,
I had booked a flat in sobha city gurgaon in Jan 2018, 30% of the total amount was paid in 2018 at GST of 12%, now sobha developers has raised the further demand based upon 12% GST. Is it correct, bcoz as per GOI GST has been slashed to 5% wef 01 Apr 2019.
Thanks