Planning to Purchase a Property in India? Learn more about GST Rates

Updated on: 18 Jan 2024 // 3 min read // Home Loans
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The Government of India rolled out the much-awaited Goods and Services Tax (GST), in July of 2017. This was a revolutionary step taken with the aim of reducing tax evasions and eliminating unwanted hurdles so that a more significant chunk of the population gets motivated to pay taxes.

As was expected, this measure has brought about a radical change in the way real estate functions. And why not? After all, it was one of the only segments which was heavily burdened by numerous indirect taxes such as VAT, excise duty, stamp duty, service tax as well as registration fee.

While the implementation of GST has eased the taxation rules pertaining to the purchase of a property, there are some points of confusion. In a bid to help you clarify your doubts regarding GST rates on plots as well as under construction properties, we have consolidated the most relevant information.

Not only will this information help you calculate the exact amount of funds you will need to buy a home, but will also help you prepare a better case towards Your Home Loan eligibility.

The GST rate on real estate segment is levied at 12% with full input tax credit. This rate is applicable for the construction of any of the following with the intention for sale to a buyer, wholly or partly:

  • Complex or a part thereof,
  • Building or a part thereof, and
  • Civil structure or a portion thereof

In this case, the value of such land is included in the charge levied for service recipient.

Exception – GST is not levied on ready-to-move-in properties.

To put it in simple words – All under construction properties will attract a GST rate of 12%. However, the GST rates may differ depending on the stage of construction that the property is in. Let’s take a closer look at how this works:

After the buyer received the completion certificate

This will be considered as a ready to move in property, with no transfer or supply of good and services involved. Hence such a property will not attract any GST.

HDFC Home Loan Offer

Apayment was made to the builder before the implementation of GST

In case the buyer has made a part or full payment to the builder before the rollout of GST, then the property will be exempt from this tax. In this case, however, the buyer will be liable to pay a service tax at the rate of 4.5%.

The property Isunder-Construction

While the actual rate that such a property attracts is 18%, however, it is deemed that one-third amount of this 18% is considered as the value of the land. Hence, the effective GST falls to 12% with full input credit.

The property or flat is put up for resale

Again, such property will classify as a ready-to-move-in, thereby inviting no GST.

The house is being purchased under CLSS

The Credit-Linked Subsidy Scheme (CLSS) is primarily deployed to offer cheaper housing solutions to the people belonging to the lower economic classes of the society. In this case, the GST will further reduce from 12% to 8% due to the deception of one-third amount towards the value of the land.

The Benefits of GST on Property

As far as builders are concerned, with the rollout of GSTthey will only be required to pay one unified tax instead of numerous indirect taxes and duties, during the construction of the property. This has resulted in lowering the overall cost incurred by them, and this benefit can now be passed on to the buyers.

To look at it in the first glance, buyers may find a 12% rate to be on the higher end. However, given the clarity in tax model, and the uniformity, the value that rolling out of GST offers surpasses the actual tax levied.

Now that you know all there is to regarding GST on the property, go ahead to find a befitting mortgage offer and buy the home of your dreams. On the basis of your needsand preferences, you can apply for a Home Loan online through MyMoneyMantra.