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.