All you need to know about the GST applicable on properties

Real estate is the second largest employment provider in the country, making it a crucial part. Like all other commodities, GST is also applicable to buying and selling of real estate.

However, a standard GST rate of 12% is applicable across the sector for properties under construction. This rate is quashed for ready-to-move-in and other properties that have received Completion Certification (CC). 

In the GST council meeting held in 2019, the applicable rates were reduced to 5% from 12% on residential properties. GST on property purchase under affordable housing has been reduced to 1% from 8%.

Let us learn about these GST rates in detail

Types of central and state taxes covered under GST  

Here are some state and central taxes that were subsumed under GST (Goods and Service Tax).

Central Taxes

  • Excise duty
  • Custom duty
  • Service tax
  • VAT
  • Special Additional Duty of Customs
  • Central Sales Tax
  • Central Surcharge and cess on supply of goods and services

State Taxes

  • State VAT
  • Entertainment tax
  • Luxury tax
  • State excise duty
  • State surcharge and cess on supply of goods and services
  • Ad taxes
  • Purchase taxes
  • Taxes on lottery, gambling, and betting
GST on Real Estate

The real estate market has been in a state of slowdown even before the pandemic began last year. Since the outbreak of the pandemic, the Indian government has modified GST rates to stimulate the industry.

Property TypeGST Before March 2019GST After March 2019
Affordable housing8% with ITC1% without ITC
Non-affordable housing12% with ITC5% without ITC
Commercial Properties12% with ITCRemains unchanged

GST Rates for Construction Material*

DescriptionGST Rate
Building bricks5%
Marble rubble5%
Fly ash blocks5%
Roof bricks/tiles5%
Natural sand for construction5%
Marble/granite blocks12%
Refractory bricks/tiles18%
Glass for construction 18%
Prefab components for building18%
Marble/Granite other than blocks18%
Portland/Slag cement28%

* Subject to changes suggested at the GST council Meetings

GST on Construction Services*
Construction ServicesGST Rate
Under construction properties under (CLSS) Credit Linked Subsidy Scheme8%
Under construction properties (excluding those under CLSS)12%
Composite supply of works contract for affordable housing12%
Composite supply of works contract to local agencies/ govt bodies12%
Composite supply of works contract (other than local agencies/ govt bodies/ affordable housing)18%
Works Contract (other than govt bodies)18%

*Subject to changes suggested at the GST Council Meetings

Note: Registration and Stamp Duty remain the same as per state government laws and policies.

Input tax credit for Real Estate developers

Input Tax Credit (ITC) is claimed by real estate developers in terms of multiple inputs like cement, bricks, labour, and construction raw materials. The main aim of ITC is to prevent double tax situations wherein the GST amount charged at every stage is offset by ITC received on the amount charged in the previous stage.

Case conditions for claiming ITC in Real Estate are:

  • Claim making person must produce debit note/ purchase or tax invoice as GST proof
  • Goods and/or services have already been received by the claim making person
  • ITC claiming person has not used the goods and/or services received for personal use
  • Due tax paid to the government by the supplier
  • Valid GST return filed by ITC claim making person
Benefits of reduction of GST rates on residential properties

The reduction proposed by the GST council has been implemented from April 1, 2019, that offers the following benefits:

  • Better or easier tax structure that leads to greater compliance from property builders
  • Ensures fair price for both buyers and sellers due to GST rate cuts on the residential properties
  • Elimination of issues associated with ITC claim benefits
  • Better overall prices in the residential sector
FAQs
  1. How has GST impacted the real estate sector? With recent GST rate cuts for finished and under-construction properties in India, the residential sector is trying to boost as the entire processes have become more transparent.
  2. Who must pay GST on real estate? GST is typically paid by the homeowners or builders, especially for investments in under-construction properties.
  3. What are the different types of GST rates in India? There are only three types of GST rates in India – Central Goods and Service Tax (CGST), State Goods and Service Tax (SGST), and Integrated Goods and Service Tax (IGST).

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.

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