Tenants of commercial properties must pay 18% GST on their electricity bills.

Posted on November 3, 2023 by supriya

The Central Board of Indirect Taxes and Customs released a circular on Tuesday regarding the applicability of GST on the reimbursement of electricity charges that airport operators, mall operators, and real estate companies receive from their lessees or tenants.

The government explained that tenants, especially those renting commercial properties, must pay 18% Goods and Services Tax (GST) on electricity charges if the supply coincides with the rental of immovable property and facility maintenance. However, the power billed on an actual basis by real estate owners or malls, which act as discus agents, will not be subject to any GST.

The Central Board of Indirect Taxes and Customs (CBLC) released a circular on Tuesday about the applicability of GST on the reimbursement of electricity charges that airport operators, mall operators, and real estate companies receive from their lessees or tenants.

It clarifies that providing electricity in conjunction with the rental of real estate or the upkeep of buildings, as the situation may dictate, constitutes a composite supply and is subject to the appropriate taxation, the statement read.

“The leasing of real estate and grounds maintenance is the primary supply; the provision of electricity is incidental,” the statement reads. “The GST rate on renting immovable property or maintaining premises would be applicable even if electricity happens separately,” the document said.

It also stated explicitly that homeowners in housing societies would not be subject to GST. The resident welfare associations (RWAs), real estate developers acting as pure agents, or real estate owners provide the electricity; it will not be included in the price they pay. “Furthermore, they will appear to be acting as pure agents for this supply where they charge for electricity on an actual basis, that is, they charge the same amount for electricity that the State Electricity Boards or DISCOMs collect from their lessees or occupants,” the statement went on.

Expert opinions on this clarification vary. “The real estate industry is concerned about the CBIC’s most recent clarification. This clarification applies GST to electricity charges, regardless of whether they are provided separately or in conjunction with real estate. Although there are some exceptions, such as when property owners recover electricity costs on an actual basis or act as pure agents,” according to Saurabh Agarwal, a partner at the consulting firm EY.

In his view, “The implications of this clarification remain a concern in cases where real estate companies convert high tension lines to low tension lines and charge higher rates due to transmission loss.” “Going forward, landlords may factor in the GST cost on electricity when determining lease rental amounts, which could increase the rental cost,” he continued.

But MS Mani, a partner at Deloitte India, thought it was for businesspeople. “This will help the recipients of such composite supplies who were uncertain about their eligibility for input tax credits (ITC), in addition to ensuring uniformity of procedures throughout the real estate industry,” he said regarding the clarification on electricity charges recovered as part of a composite supply.

GST on Renting of Residential Property

Posted on November 1, 2023 by supriya

The 47th GST Council meeting recommended that GST be made applicable in cases where the residential property has been rented out to a registered person under the GST starting on July 18, 2022, there has been a lot of discussion about the applicability of GST on renting residential property. Let us first clarify the status of the GST Law about the GST on renting residential property on or before July 17, 2022.

Refer to Notification No. 12/2017 from June 28, 2017. The GST Act exempted several services, including those provided by renting a residential property for habitation. Thus, regardless of the person’s status (registered or unregistered), GST did not apply to rent a residential property.

Let us also consider what has changed as a result of the 47th GST Council meeting’s recommendation, effective as of July 18, 2022: Following Central Tax (Rate) Notification No. 04/2022 dated July 2022, CIBIC has revoked the exemption granted to the registered person.

By RCM, CBIC has announced the following via Central Tax (Rate) Notification No. 05/2022 dated 13/07/2022:

Category of Supply Services	Supplier of Service	Recipient of Service
Rental of a residential property to a registered person as a form of service	Every Person	Any Registered Individual

The PIB has now made it clear that a residential unit is only taxable for rental purposes when it goes to a business entity:

Rent is only taxed when a business entity leases a residence.
GST is not applied when a private individual rents it for personal use.
No GST, even if the business’s owner or partner rents the home for personal use.

Let us now assess the various scenarios to determine the effect of the GST’s applicability on renting residential property starting on July 18th, 2022:

Registered under GST: If the tenant and the landlord are listed under GST, the tenant will be liable for paying GST due to the reverse charge mechanism. The tenant is thus eligible to submit an ITC claim.
Renting property from a landlord not registered under GST: In this case, liability arises for the tenant under the reverse charge mechanism.
When an unregistered tenant leases property from a legal landlord with the government, the tenant is not liable for paying the tax because the landlord stands with the law. 12/2017 Notification, dated 29 June 2017.
Unregistered Landlord and Tenant: No GST liability exists because both parties are still subject to the GST. 12/2017 Notification, dated 28 June 2017.

There might also be some other situations:

Renting a residential property for employees is done by Company/LLP/Firm/AOP/BOI: In this scenario, GST will be paid via RCM, and ITC can be reclaimed.
Rental of a home by a registered composition dealer: In this scenario, GST will be paid under RCM, but under the rules that apply to composition dealers, GST paid under RCM cannot be claimed as ITC.
An individual registered for GST as a proprietorship business decides to rent a residential property for himself. In this situation, GST must be paid under RCM, and since it is a blocked credit under the terms of the GST Act, it cannot be claimed as an ITC. However, according to PIB’s clarification on Twitter, no GST is applicable.

GST on Sale of Residential Property by Individual

Posted on September 12, 2023 by supriya

On July 1st, 2017, the GST was implemented and became law. Numerous Indian businesses, particularly those involved in real estate, have been significantly impacted by this tax plan. This blog discusses the applicable GST for purchasing homes, apartments, and other real estate, all of which have been adversely affected by this tax plan. This blog post addresses the applicable GST for residential property sales.

What is the GST on Residential Property in India?

Before the GST took effect, property buyers had to deal with the hassle and stress of several taxes, including the central excise tax, the VAT, and others. There is no doubt that the taxation of properties at that time was complex and opaque. The GST has changed the way things are.

When purchasing residential property, the GST was initially 8% for affordable housing and 12% for a home that was not. The taxation system allowed property buyers to benefit from the ITC (Input Tax Credit ) on the initial applicable GST rates.

However, the 33rd GST Council meeting’s decision to implement new and revised GST rates took effect on April 1, 2019. As long as it is an affordable housing unit, the new GST rate is 1%. In contrast, the GST rate for expensive or luxury properties is 5% without ITC.

GST on Residential Property

If a property exists in one of India’s megacities, everyone must pay GST on it. Buying residential real estate in finished complexes, including condos or apartments in finished complexes, is exempt from the GST if it comes with a visible occupancy certificate.

GST on Residential Property

Residential Property Type	GST until March 31, 2019	GST As Of April 1st
Luxury or Unaffordable Housing, Unless Under Construction	12%+ ITC	5% Excluding ITC
Building Affordable Housing	8% +ITC	1% Excluding ITC
For finished residential projects (properties available for immediate occupancy),	GST is not Applicable	GST not Applicable

GST on Residential Property: Prerequisites & Conditions

A residential property purchase with a 1% GST exemption is subject to some requirements or prerequisites. You must meet several criteria to purchase a residential property with a 1% GST exemption. The housing development must satisfy the following needs to be considered affordable housing:

Residential real estate in non-metropolitan areas falls under the affordable housing category if it is 90 square meters in size and costs up to 45 lacs.
Affordable housing in metro cities means The 60 sq.m. under-construction flat/house/apartment has a price range of up to 45 lacs.

For flat purchases, you need 1% GST. Meet these requirements

One must purchase at least 80% of the raw materials from any registered dealer to be eligible for a flat GST rate of 1%. If not, the owner of the housing or apartment project must by RCM to pay 18% GST.

Affordable housing currently under construction does not qualify for an ITC. It would give access to a 1% GST rate. As a result, the buyer cannot deduct the GST they pay when buying property from their income.

The Impact of GST on Real Estate, Conclusion

Following the implementation of GST, the real estate sector in India underwent a significant reform. Previously, the housing developer had to pay fees for permits, service taxes, legal costs, excise duty, VAT, customs duty, etc., which had an impact on their taxation procedures and increased the amount of money that buyers of real estate had to pay.

However, the GST law has simplified and organized things. By increasing the real estate tax rate to 12%, the most recent GST tax regime significantly reduced the burden on property buyers. The GST rates on residential property have fallen because of the GST Council meeting in 2019. Since then, it has become easier for Indians to buy real estate.

GST on Rental Income from Residential Property in India

Posted on July 29, 2023 by supriya

GST applicability on renting properties in India has been a source of concern due to continuous changes in the law since the implementation of GST. The rules for renting residential property under GST changed on July 18, 2022, a decision made by the GST Council at its 47th meeting. The CBIC has issued a new notification to clarify the scope of GST on rental income from residential property rentals. Let us look at the GST provisions on this topic.

We will immediately clarify that renting an immovable property is considered a supply of service and is subject to GST at 18 percent. The CBIC recently issued Notification No. 15/2022- Central Tax (Rate), which goes into effect on January 1, 2023. To learn more about the notification in question, we must first examine the provisions on this subject in India since the implementation of GST.

GST applies to residential properties until July 17, 2022.

The entry at Sr.No. twelve of Notification No. 12/2017 – Central Tax (Rate) stated that the GST rate for “Services by way of renting of residential dwellings for use as a residence” shall be “Nil.” Accordingly, from July 1, 2022, GST was not in effect (whether registered or unregistered under GST). However, the legal position under GST changed on July 18, 2022. Please note that renting commercial property is always under the ambit of GST.

GST applies to residential properties after July 18, 2022.

In its 47th meeting, the GST Council recommended that the government impose GST on a person who has given property to a registered person to rent residential property.
As a result, the CBIC issued Notification No. 4/2022- Central Tax (Rate) on July 13, 2022, withdrawing the earlier allowed exemption from GST for those renting residential dwellings. This notification was made effective from 18th July 2022.
The net effect of the above amendment is that beginning July 18, 2022, any person who provides services by renting residential property for use as residence to a registered person will be subject to the GST at the rate of 18%.
It is important to note that GST will continue to be exempt in cases where a residential property is left to an unregistered person after July 17, 2022.

The obvious next question is, “Who will pay tax to the government for renting residential property to a registered person?” The reply can be found in Notification No. 5/2022 – Central Tax, dated July 13, 2022.

The previous Notification, dated June 28, 2017, added a new entry 5AA to Notification No. 13/2017-Central Tax (Rate), which specifies services subject to GST under reverse charge.

According to Entry No. 5AA, anyone who provides services to a registered person by renting residential property is subject to GST 18% under the reverse charge mechanism.

In a nutshell, beginning July 18, 2022, if a landlord rents residential dwellings to a registered person (tenant), such tenant will be required to pay an 18% tax to the government. It should be noted that even if the landlord is registered for GST, the registered tenant is responsible for paying GST under RCM. This table will assist you in summarizing:

Residential Dwelling Rental Services

Landlord	Tenant	GST applicability	ITC availability
Unregistered	Unregistered	No GST	NA
Registered	Unregistered	No GST	NA
Unregistered	Registered	GST payable by a tenant under RCM	If the property is rented for business purposes, ITC can be claimed.
Registered	Registered	GST payable by a tenant under RCM	ITC can be claimed if the property is rented for business purposes.

The Impact of GST on Renting of Residential Property in India

Posted on June 2, 2023 by supriya

On June 28 and 29, 2022, the 47th GST Council meeting occurred. Following the previous GST Council meeting, there were multiple modifications to the Goods and Services Tax (GST). The partial elimination of the GST exemption for services provided in connection with the rental of residential property is one of these significant changes.

It’s crucial to recall that services involving the rental of residential properties for use as a residence were exempt from GST as of July 1, 2017. As of July 18, 2022, certain elements of the exemption will be withdrawn.

Residential and commercial rentals are subject to the GST on residential property rentals. Therefore, even if a residential property is rented out for commercial purposes, the rent remains subject to GST.

Particulars	New notifications	Old notifications which are amended vide the new notifications
Notice covering exemption available under GST	Notification no. 04/2022- Central Tax (Rate) dated 13th July 2022 [amendment effective from 18th July 2022]	Notification no. 12/2017- Central Tax (Rate) dated 28th June 2017
Notification covering the applicability of the reverse charge mechanism	Notification no. 05/2022- Central Tax (Rate) dated 13th July 2022 [amendment effective from 18th July 2022]	Notification no. 13/2017- Central Tax (Rate) dated 28th June 2017

The said amendment relating to the applicability of GST on the rental of residential property is briefly covered in the present article.

GST liability for renting a residential property till July 17, 2022

Since the beginning of the Goods and Services Tax (GST), or as of July 1, 2017, any person who is engaged in renting out residential properties specifically for habitation was eligible for a GST exemption. Notably, the exemption listed at SI No. 12 of Notification No. 12/2017- Central Tax (Rate) from June 28, 2017, is tabulated below:

Heading	Description of service	Rate	Condition
Heading 9963/ Heading 99721	Facilities through the rental of a home for use as a residence	NIL	NIL

The aforementioned makes it abundantly clear that renting out a residential property to anyone who intends to live there is exempt from all regulations. In other words, when renting a residential property to someone for a business purpose, GST is due.

GST validity for residential property rentals as effective from July 18, 2022

According to notification number 04/2022- Central Tax dated July 13, 2022, SI. No. 12 of notification number 12/2017- Central Tax (Rate) dated June 28, 2017, changed. The amendment states that the phrase “except where the residential dwelling is rented to the registered person” will be added after the words “as a residence.”

Therefore, after the publication of notification no. 04/2022- Central Tax (Rate) dated July 13, 2022, SI. No. as of July 18, 2022, will read as follows:

Heading	Description	Rate	Condition
Heading 9963/ Heading 99721	If the property is not rented by a registered person, renting it to be used as a home is prohibited	Nil	Nil

With effect from July 18, 2022, GST will apply to residential rentals as follows:

Particulars	GST Position post 18th July 2022
Renting a residential property for residential use to the person registered under GST	Taxable as of July 18, 2022 (Free from 1 July 2017 to 17 July 2022 and Taxable from 18th July 2022)
Renting a residential property for a personal reason to an individual who isn’t registered with the GST	Exempted from 1st July 2017
Rental of a residential property for a business purpose to a person who is registered for GST	Taxable from 1st July 2017
Renting a home for a business for an individual not registered under GST	Taxable from 1st July 2017

The corresponding modification to the reverse charge service mechanism for renting residential dwellings-

The fundamental notification, Notification No. 13/2017-Central Tax (Rate), dated June 28, 2017, covers the list of services to which the Reverse Charge Mechanism is applicable. SI. NO. 5AA was added to Notification No. 13/2017- Central Tax (Rate), dated June 28, 2017, by Notification No. 05/2022 – Central Tax (Rate), dated June 13, 2022. The said SI.No. 5AA is tabulated hereunder-

SI.No.	Description of Service	Service provider	Service receiver
5AA	Renting the residential dwelling to the registered person as a service	Any person	Any registered person

As a result, the registered person (also known as the service recipient) who receives services by renting a residential property is required to pay GST under the Reverse Charge Mechanism. In nut-shell, even if the service provider of the renting of a residential dwelling is registered under the GST, the registered service receiver will be liable to discharge the GST under Reverse Charge Mechanism.

The conclusion that GST applies to the rental of residential property –

The following table offers an overview of how GST will be used for residential property rentals starting July 18, 2022.

Particular	GST Applicability	GST payable by the service provider	GST payable by the service receiver
Services of renting of residential dwelling for residential purposes to the person registered under GST	GST-taxable as of July 18, 2022,	No	Yes
Services related to renting a home for private purposes to a person not registered under GST	Exempted	NA	NA

OTHER CHARGES WHEN BUYING A HOUSE

Posted on May 22, 2023 by supriya

When you start your property search, you will be amazed by the extra charges involved in buying a house or investing in property. There are two options: buying a ready-to-move-in property or an under-construction property. However, most people prefer to buy a ready-to-move-in property because it is less risky than an under-construction one. So, let’s assume that a property is coated at Rs. 3000 per square foot—this is its basic rate—but there are also other charges on top of that that people often fail to consider and that can be more than 40% to 50%. Let’s discuss all the additional charges so that you can make an informed decision about the total price of any given property before agreeing to purchase it.

Let’s consider an example

Suppose a property’s basic price rate is Rs. 45 lakhs. When we make the final payment for this property, it will be around Rs. 58 – 67.5 lakhs—which includes the basic price of the property and the extra charges. We will discuss all these charges in detail below:

First comes the basic charge. It is the charge excluding all the extra costs. Before RERA Act came into force, properties used to be sold in the super built-up areas; after the enactment of the RERA Act, properties are supposed to be sold based on the carpet area. For example, if the property has a carpet area of 1500 square feet and the rate per square foot is Rs. 3000, then its total essential cost would be Rs. 45 lacks. And this is just the essential cost; you will also have to pay multiple charges for it, as mentioned below.

PLC (PREFERENTIAL LOCATION CHARGES) – PLC is charged according to the property’s location. Like; a corner flat, park-facing, sea-facing, lower floors, or higher floors. For example, sea-facing view residences have higher PLC charges than non-sea-facing. Therefore, if you own any such property there is a PLC charge coated. Generally, PLC charges are Rs 150-200 per square foot.

PARKING CHARGES – When you buy a property, you will be charged a parking fee of 5-7% of the base price of the flat. For example, if you purchase a property for Rs. 45 lakhs, you will be charged Rs. 2 to 2.5 lakhs for the parking facility.

INFRASTRUCTURE DEVELOPMENT CHARGES (IDC) – An infrastructure charge usually consists of complete internal infrastructure within a complex. For example, water and electricity supply, as well as sewage treatment plants may be charged separately. Developers usually charge these services together because it costs less to do so. However, if we add them together in one place according to IDC’s input-demand curve, there will be an IDC charge added at around 6% of the base price of the flat or house.

EXTERNAL DEVELOPMENT CHARGES (EDC) – In some cities, there is also an external development charge. For example, in Gurgaon and Faridabad. This charge goes to the government and includes the infrastructure of a complex—for instance; road facilities, sewage, water, and electricity. The EDC charges are applied to all these expenses so it is approx. 5% of the base price of a flat. And here if we talk about their total cost, IDC and EDC are charged about Rs. 300 to 400 per square foot.

CORPUS FUND/ IFMS – Builders collect corpus funds, also called IFMS. It is interest-free maintenance security, similar to an emergency fund, and not like regular monthly maintenance. To purchase a property costing Rs. 45 lakhs, builders can collect from Rs. 50,000 to Rs. 1,00,000.

POWER BACK-UP – The next charge for power backup is provided to each flat on a per KVA basis. The backup is provided from 3KVA to 5KVA, ranging from 1 lakh to 1.5 lakhs.

AMENITIES AND CLUB CHARGE – These charges apply to luxury flats with a clubhouse, swimming pool, and gym. The developer will charge you for these amenities at a lump sum of Rs. 50,000 to Rs. 1.5 lakhs.

STAMP DUTY AND REGISTRATION CHARGES – In this case, stamp duty varies from state to state. So you must pay the stamp duty according to the state. Therefore, stamp duty and registration charges are 5-10% of the property value.

GST – In an under-constructed property, both stamp duty and GST are levied where GST is 18% on ⅔ of the property cost. Therefore, the effective GST rate is 12%.

BROKERAGE – Most deals for resale property or ready-to-move-in property are closed through a real estate agent or broker, who charges a 1-2% fee on the property’s final value.

GST on Flat Purchase: A Guide for Home-Buyers

Posted on May 16, 2023 by supriya

GST, or the Goods and Services Tax, on home purchases, flats, and apartments is one of the many taxes buyers must pay when purchasing a home.

In this article, we look at how the GST affects real estate and how it affects homebuyers and flat purchases in general. In addition, we’ll talk about the GST rate on flat purchases and the GST rate on land purchases in 2022.

GST on flats

On February 24, 2019, the 33rd GST Council Meeting introduced new GST rates that will go into effect on April 1st for residential flat purchases.

The new proposed GST rate for flat purchases for residential (real estate) transactions is as follows:

5% GST charges on a flat purchase will be paid on residential properties outside the affordable housing segment without an input tax credit (ITC).
A 1% GST without an ITC will apply to residential properties in the affordable housing segment.

The GST on under-constructed flat purchase rates is 12%. The sale of completed homes or the resale of older properties is exempt from the GST for flat purchases. Under the current GST framework for buying flats, builders receive an input tax credit on goods from suppliers or contractors, intending to pass it along to homebuyers. As a result, the current GST on flat purchase systems concerning real estate may alter.

Input Tax Credit (ITC)

Understanding input tax credits (ITCs) is crucial before learning about the GST. You can use the ITC to reduce the output tax you pay. You can only pay the final Rs 200 in taxes if you claim an input tax credit of Rs 300. The GST Act permits producers, suppliers, agents, aggregators, e-commerce operators, etc., if the tax on your final product (the output) is Rs. 500 and the tax paid on the purchases (the input) to make the final product is Rs.

Utilizing the GST Input Tax Credit

Before claiming the ITC, keep the following things in mind:

You must possess the tax invoice for the purchase or the debit note issued by the registered dealer.
You should have received all the goods and services.
The supplier must pay the government tax on your purchases in cash or by claiming input credit.
GST returns filed by suppliers
The supplier has uploaded the invoice for their GSTR-1, which must reflect in the GSTR-2B of the company.

The positive impact of GST on flat purchase

Low-Cost Construction: GST on a flat will lower the rate of things like cement, steel, and other building materials, resulting in dramatically lower construction costs. Lower real estate prices will eventually help middle-class buyers.
ITC (Integrated Taxation Solution): A unified tax base is critical in the real estate market, but recently builders and developers have been taxed even on the raw materials they purchase. GST on purchases solves these problems by unifying all taxes.
Zero income rate: The real estate sector’s fiscal operation is not subject to VAT or service tax rules.

In 2023, how do you calculate the GST on a flat purchase?

Starting on April 1, 2023, GST is applicable on the purchase of an apartment. And if you ever find yourself in a situation where you need to figure out how much GST you will have to pay on a flat purchase, follow these steps:

Steps for Calculating GST on a Flat Purchase in 2023

Calculate the apartment’s total cost before GST is applied. It involves accounting for all additional costs like stamp duty, registration, and legal fees.
Add 5% GST to get the total price.
The amount after the GST deduction from the total will be your final payment.

It’s important to remember that this only applies to apartments purchased starting on April 1, 2023. For any flats purchased before April 1st, no GST will apply to the purchase price.

With the aid of this guide, estimate the amount of GST you’ll have to pay when buying your next apartment and guarantee a smooth transaction!

How do I avoid GST on flat-rate purchases?

When purchasing a flat, you can avoid paying GST by

Purchase a completed and constructed flat.
Purchase a flat that has an occupancy certification.
Purchase a second-hand flat.

The amount of GST enabled for building services would be less if the land’s worth was removed from the total weight. If you want to know how to avoid GST on flat purchases, the deduction would always be beneficial when the value of the land represents a percentage of the total value greater than 33.33 percent.

The impact of GST on the real estate market

The GST has been one of the most significant reforms in the real estate market. The developer already pays customs duty, VAT, excise duty, legal expenses, service taxes, permission fees, etc., hampering their tax processes and burdening homeowners.

The GST simplified the property tax. The new GST regime increased the real estate tax rate to 12% and lowered property buyers’ burdens. Taxation impacts developers and property purchasers. The 34th Council meeting held in 2019 announced new GST rates.

Conclusion

In general, the subject of GST on flat purchases is difficult to understand. When purchasing a flat, buyers must be aware of the fundamentals of GST and seek current advice from a reputable expert to ensure that they’re making the right choices.

Be sure to understand any applicable GST at the time of a flat purchase, as well as what the GST rate will be and how to calculate the GST payable. It’s essential to confirm your eligibility for any applicable GST exemptions.

Home buyers can ensure that their purchase is compliant and legal, fully understand GST on flat purchases, and protect themselves from any unpleasant surprises in the future by carefully reading this guide and doing additional research.

Things you should know about GST in Real Estate

Posted on January 16, 2023 by deepshikha

Centre's FY22 GST compensation amount should be higher than projected Rs 1.58 lakh crore: Opp-ruled states - The Economic Times

OVERVIEW OF GST:

In 2000, the late Atal Bihari Vajpayee, the then prime minister of India, initiate a committee to draft new indirect tax law and i.e. GST which stands for Goods and Services Tax. It was launched to replace multiple indirect taxes in India. Such as excise duty, value-added tax (VAT), services tax, purchase tax, octroi, entry tax, luxury tax, and so on. Here, propertywala brings every fact and figure that you should know about GST in real estate.

DEFINITION:

The Goods and Service Tax Act was driven in Parliament on 29th March 2017 but it came into effect on 1st July 2017. It is the only tax that applies all over India and imposes on the supply of certain goods and services. However, GST does not replace customs duty, which is still required on imported goods and services. Different categories of products and services attract different tax rates under GST.

Now, we will go ahead with the GST regime which is given by our Honorable Prime Minister Shri Narendra Modi, In his words, the Goods and Services Tax (GST) is “a path-breaking legislation for New India”. Then, GST is not just a tax reform but a milestone in realizing Sardar Vallabhbhai Patel’s dream of building ‘Ek Bharat – Shrestha Bharat’.

GST APPLICABILITY IN REAL ESTATE:

APPLICABLE –

1. It is applicable to under-constructed flats only.
2. It is because the GST does not cover the real estate sector under its range. Therefore, the tax rate applicable on a property is charged under ‘work contracts.

NOT APPLICABLE –

1. GST does not apply to ready-to-move-in flats, plots, and lands.
2. Upon completion and receiving the occupancy certificate i.e.(OC), the property is categorized as ready to move in. That is why a developer cannot charge GST on selling ready-to-move-in homes.

GST RATE ON REAL ESTATE 2022:

Everyone has a dream of a house. Well! It is fine if you are planning to buy a property. Because buying the right property is one of the biggest achievements in life. So, home buyers in India have to pay GST on the purchase of under-construction properties such as flats, apartments, and bungalows. Before hurrying on to the process, the foremost thing you must ask yourself is, “what is the GST rate on real estate?”

PROPERTY TYPE	GST RATE FROM APRIL 2019
Affordable housing	1% without ITC (Input Tax Credit)
Non-affordable housing	5% without ITC

According to the table, if the property is affordable, the GST rate from April 2019 is only 1% without ITC. Also, for non-affordable housing, the GST rate is 5% without ITC.

WHAT IS ITC?

Input Tax Credit refers to the tax already paid by a person on any purchase of goods and/or services that are used or may use for business. Therefore, it is available as a deduction from tax payable.

AFFORDABLE HOUSING AS PER GST:

According to government norms, housing units worth up to Rs 45 lakhs are referred to as affordable housing in metro cities in which carpet area measures up to 60 sq. meters. The Delhi-National Capital Region, Bengaluru, Chennai, Hyderabad, the Mumbai-Kolkata are categorized as metropolitan regions. A housing unit in non-metro cities barring to be an affordable house, if it costs up to Rs 45 lakhs and has a carpet area of up to 90 square meters as mentioned in the given table.

CITIES	PRICE	Carpet AREA (SQ/M)
METROS	up to Rs. 45 lakhs	60 sq./m
NON- METROS	below Rs.45	90 sq./m

SOME FACTS TO BE NOTED WHEN CONSIDERING GST IN REAL ESTATE:

It does not subsume the stamp duty and registration charges, which you still have to pay.
Seller increases the cost of ready-to-move-in properties to factor in the GST cost. So, overall the under-constructed properties are still cheaper than ready-to-move-in properties.

That’s all you need to know about GST when it comes to real estate.

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