The Latest GST rates on Real Estate Purchase

By | January 27, 2018

After the latest GST rates are applicable, there is considerable confusion on the applicable GST rates on real estate. In this article, we will discuss about the GST rates on property purchase in the form of completed property or the under construction property.

Applicable GST on the Property

There was a lot of confusion about the applicable GST rates on the property or real estate purchase, till the last year December. However, a recent clarification has been issued by the Central Board of Excise and Customs, regarding the applicable GST on the under construction as well as completed property.

The GST was implemented in India from 1st July, 2017, while replacing the tax regime which existed. Now let us ponder on how the GST is applicable to the real estate purchase. There was a lot of confusion regarding the applicable GST on the property and many builders took advantage of this by spreading that the post GST, property rates will be higher and it is better to purchase property before GST. Also, as there was no proper clarification, many buyers accepted the stories, which were created by the builders.

The transfer of completed property like flats as well as “ready to move in” property does not involve any service part to the buyer and thus GST will not be applicable in these transactions. It is neither the supply of goods or the services. Thus, if you are buying completed property or completed flats etc. you will be saving the GST costs.

The GST rates on the under construction property will be as follows:

1)    Property, for which a complete certification is issued.

In case the builder has got a complete certificate before the purchase of it, it will be considered as “ready to move in” property and thus there will be no GST on such property purchase.

2)    In case the full sale amount is paid to the builder before the date 1st July, 2017

In case the full sale amount is paid to the builder before the application of GST or before 1st July 2017, in such cases the GST will be not applicable. However, as the transaction took place before the implementation of the GST, a service tax of 4.5 % is payable to the buyer, in this case.

3)    In case a part of the sale amount is paid to the builder before 1st July, 2017

In case a partial payment has been made to the builder before the date of 1st July, 2017, in this case the GST will not be applicable to the part payment done. However, a service tax of 4.5 % is payable to the buyer, with respect to such part payment.

4)    If the sale amount is paid to the buyer after the date of 1st July 2017

In this case as the transaction is happening post the GST implementation, in such case the GST will be applicable and will be payable to the buyer.

GST rates for under construction properties

The GST rate for the under construction property is currently 12 % with the full Input tax credit. In the actual terms the GST for under construction properties is 18 %. However the one third of the 18 % is deemed due to the value of land supplied to the buyer of the real estate property.

GST rates on the resale property as well as resale flats

As per the clarification given above the resale property or the resale flats comes under the category of “ready to move in” property and thus GST will not be applicable under these situations.

Thus, the readers can take benefit of the information mentioned in this article and clear their doubts about the applicable GST on the real estate transactions.

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