Homebuyers in India must pay a Goods and Services Tax (GST) of 1% for affordable housing and 5% for non-affordable housing when purchasing under-construction properties such as flats, apartments, and bungalows. The GST is also applied on the acquisition of developable plots in real estate
GST rate on flat purchase 2023
Property type |
GST rate till March 2019 |
GST rate from April 2019 |
Affordable housing* |
8% with ITC |
1% without ITC |
Non-affordable housing |
12% with ITC |
5% without ITC |
.
What is affordable housing under GST?
According to the government-determined definition, housing units worth up to Rs 45 lakh qualify as affordable housing. However, the unit must also conform to certain measurements to qualify as affordable housing. A housing unit in a metropolitan city qualifies to be an affordable house, if it costs up to Rs 45 lakh and measures up to 60 sqmt (carpet area). The Delhi-National Capital Region, Bengaluru, Chennai, Hyderabad, the Mumbai-Mumbai Metropolitan Region and Kolkata are categorised as metropolitan cities. A housing unit in any other city barring the ones mentioned above in India, qualify to be an affordable house, if it costs up to Rs 45 lakh and has up to 90 sqmt of carpet area.GST refund on flat purchase cancellation
Changes are likely to be made in the GST law to allow homebuyers claim GST refund in case they cancel home purchase for which they have already paid the tax. So far, there is no procedure in the new tax regime that allows unregistered entities ─ including homebuyers ─ to claim GST refund. In the 48th GST Council meeting held on December 17, 2022, the Council recommended an amendment in the CGST Rules, 2017, along with issuance of a circular, to prescribe the procedure for filing application of refund by the unregistered buyers in such cases.GST on maintenance charges for housing societies
Flat owners are liable to pay 18% GST on residential property, if they pay at least Rs 7,500 as maintenance charge to their housing society. Housing societies or residents’ welfare associations (RWAs) that collect Rs 7,500 per month per flat, also have to pay 18% tax on the entire amount. Housing societies which have an annual turnover of less than Rs 20 lakhs are, however, exempted from paying the GST. For the GST to be applicable, both the conditions should apply – i.e., each member should pay more than Rs 7,500 per month as maintenance charge and the annual turnover of the RWA should be higher than Rs 20 lakhs.
The government has also clarified that the entire amount is taxable, in case the charges exceed Rs 7,500 per month per member. For example, if the maintenance charges are Rs 9,000 per month per member, the 18% GST on flats will be payable on the entire amount of Rs 9,000 and not on Rs 1,500 (Rs 9,000-Rs 7,500). Also, owners with multiple flats in the same housing society will be taxed for each unit separately.
On the other hand, RWAs are entitled to claim ITC on tax paid by them on capital goods (generators, water pumps, lawn furniture, etc.), goods (taps, pipes, other sanitary/hardware fittings, etc.) and input services such as repair and maintenance services.
GST on home loan
While there is no applicability of the GST on home loan repayment as far as the borrower is concerned, financial institutions offer several ‘services’ as part of home loans. Based on the fact that these are services, the applicability of GST comes into picture. Consequently, if you are taking a housing loan, the bank would charge GST on the processing fee, technical valuation fee and legal fee.GST is not applicable on ready-to-move-in flats; it is applicable on under-construction flats only
It is important to note that the GST does not cover the real estate sector under its ambit. The tax rate applicable on a property building is charged under ‘work contracts’. This is precisely why a developer cannot charge GST on the sale of ready-to-move-in homes. Upon completion and after receiving the occupancy certificate, a property is categorised as ready-to-move-in and is out of the purview of work contract. In short, the GST would apply on the sale of under-construction properties that have yet to receive the OCs. It also begs mention here that in the previous regime, buyers also had to pay service tax on the purchase of ready-to-move homes. However, since the developer/owner has paid GST as part of the purchase, he would eventually package this expense as part of the overall cost of the property. This basically means that while there is no GST applicability on ready homes, the buyer ultimately pays it anyhow.GST impact on stamp duty and registration charges
Despite the demands made from time to time, ever since the GST regime into force, to discontinue stamp duty and registration charges on property, the government has made no move on this front. Hence, property transactions in India continue to attract stamp duty and registration charges. While states levy stamp duty in the range of 5%-10%, the registration charge is either 1% of the property value or a standard fee.
Is real estate included in GST?
GST is applicable on under-construction properties that have not yet received the OC (occupancy certificate).What is the current GST rate in India for real estate?
With effect from April 1, 2019, 1% GST is charged on affordable residential apartments without ITC, while 5% GST without ITC is charged on other residential properties.What is GST for under construction property?
With GST rate cut on under-construction properties, the GST for under-construction affordable housing units is 1%, while for non-affordable projects it is 5%, without input tax credit.How GST impact real estate in India
The GST Council’s decision to reduce the GST rates for under-construction residential housing projects will lead to marginal traction in demand and bring in more transparency for home buyers.Who pays GST on real estate?
GST is paid by the home buyer and investor, when investing in under-construction properties.Since when do new GST rates apply?
The new GST rates without ITC, will apply on all housing projects launched after April 1, 2019.What are the 3 types of GST?
GST in India is of three types: Central Goods and Service Tax (CGST), State Goods and Services Tax (SGST) or Union Territory Goods and Services Tax (UTGST), and Integrated Goods and Services Tax (IGST).What is an affordable property under GST?
An affordable home in India is that which has: Carpet area not more than 60 square metre it is is located in metropolitan cities Carpet area not exceeding 90 square metre if located in any other city Total worth not more than Rs 45 lakhIs GST refundable on the cancellation of flats?
So far, there is no procedure in the new tax regime that allows unregistered entities ─ including homebuyers ─ to claim GST refund. Only developers can apply for the same within a specific time window.Is GST applicable on the sale of old flats?
No, GST is not applicable on sale of ready-to-move-in flats that have received an occupancy certificate.