Property buyers must pay GST on residential property purchases in addition to property tax to meet their tax obligations. His GST regime in the real estate sector has changed in recent years. Potential investors and homebuyers need to consider the impact of GST when making real estate investments.
What is the GST rate for residential construction?
In 2022, individuals who invest in under-construction projects in India will have to pay GST on their purchases. When buying a home in a finished project, the GST on property purchases does not apply. A completed project has received a certificate of completion from the appropriate authority.
| Type of Property | GST Rate through March 2019 | GST Rate in April 2019 |
| Affordability of housing | 8% with ITC | 1% without ITC |
| Unaffordable housing | 12% with ITC | 5% without ITC |
| Commercial Space> 15% of Total Carpet Area in Residential Property | 12%, with ITC | 5% without ITC |
Residential Property GST Rate
- It makes no difference whether or not the landlord is GST registered; GST does not apply.
- When a business entity rents a residential property, the GST rate is 18%.
- When the property is rented to a private person or used for personal reasons, there is no GST if the tenant applies for GST.
How do I pay GST on a flat?
If a flat owner pays a minimum maintenance charge of Rs 7,500 to their housing society, they must pay 18% GST on a residential property.
Residents Welfare Association (RWA) imposes a monthly charge of Rs 7,500 per apartment, which is taxable at 18% of the total amount.
GST is not payable by housing societies with an annual turnover of less than Rs 20 lakh. Meet both conditions for GST to apply, i.e.,
- Each member must pay a monthly maintenance fee of Rs 7,500 or more.
- RWA’s annual turnover must be at least Rs 20 lakhs.
The government also stated that if the monthly charges exceed Rs 7,500, all of them will be taxable.
Example:
If the monthly maintenance fee is Rs 12,000, 18% GST for a flat is payable Rs 12,000 but not Rs 4,500 (Rs 12,000 to Rs 7,500).
Owners of multiple properties in the same housing society must also pay taxes on each unit separately.
Why is there no GST on completed flats?
A completed home purchased in a secondary transaction will not be subject to Goods and Services Tax. It is thus essential to understand that Gst is only payable on payments made to contractors who offer construction services. As a result, when purchasing a completed (ready for occupancy) or used apartment, the issue of providing construction work does not arise. As a result, when purchasing completed apartments, GST is not applicable.
The application of GST to the property is conditional on the competent authority issuing a certificate of completion. When a property’s certificate of completion arrives before payment is due to the seller, it is considered a sale of the property ready for occupancy rather than an offer of goods or services. As a result, no GST applies to the sale of the completed apartment.
What if the buyer fails to pay GST?
If the buyer fails to register under GST laws, the seller is entitled to a refund of pre-GST taxes and duties. Refunds are only available if the goods were bought and returned within six months of July 1, 2017.
Is GST applicable on Resale flats?
Buyers of resale apartments are exempt from the Goods and Services Tax (GST). Unlike other under-construction apartments, the buyer won’t have to pay GST at the point of purchase because the apartment is ready to move into and doesn’t abide by the works contract. However, if the buyer purchased the property from a developer who paid GST during construction, she must pay her GST total before buying the home. According to the GST Council’s recommendations, the buyer of the building will be subject to an 18% tax. However, it is 12% for the properties under construction.
How to avoid paying GST?
If you buy a flat, you can avoid paying GST if you:
- Purchase a completed or already built flat (flat with completion certificate).
- Purchase of a used apartment.