When it comes to purchasing property, prospective homebuyers must factor in several costs, including applicable GST on real estate. Over the years, the Goods and Services Tax (GST) regime has introduced significant changes in the real estate sector, creating a more transparent tax system.
Understanding how GST works on property transactions is crucial for investors and homebuyers to make informed decisions. This guide will help you understand the basics of GST on real estate, its impact on property prices, and how it affects homebuyers.
GST on real estate applies to homebuyers purchasing under-construction properties. Before GST implementation, buyers had to pay multiple taxes such as VAT, service tax, and registration charges. With the advent of GST, a more simplified tax structure has emerged. The key point is that GST is only applicable on under-construction properties, while completed or ready-to-move properties with a valid Completion Certificate are exempt from GST.
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| Property Type | GST Rate | Input Tax Credit |
| Affordable Housing | 1% | No |
| Luxury Properties | 5% | No |
| Works Contract | 18% | Yes |
| Ready-to-Move Properties | Exempt | Not applicable |
There is no GST on resale properties. Buyers do not need to pay any GST on these transactions, making resale properties an attractive option for those looking to avoid additional taxes.
GST has made it easier for homebuyers to estimate their tax liability, adding more transparency to the process. The lower GST rates on affordable housing (1%) have made it more appealing for buyers to invest in properties under ₹45 lakh. Moreover, the GST reduction introduced in 2019 has allowed buyers to save significantly, making housing more affordable.
Luxury properties are subject to a 5% GST rate without the benefit of ITC. While homebuyers of luxury properties don’t receive the tax-saving benefits of ITC, they still benefit from simplified tax rates compared to pre-GST taxes.
The under-construction segment witnessed a slowdown, but the reduced GST rates have helped to boost demand. Additionally, the increase in the tax deduction limit on housing loan interest has also encouraged more buyers to invest in under-construction properties.
Registration charges (usually around 1%) and stamp duty (5% – 10%) are not affected by GST. While buyers are exempt from paying GST on registration, they must still pay stamp duty and registration charges as per state rules.
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Let’s assume an under-construction property is priced at ₹1,000,000.
If the property falls under the affordable housing category (1% GST):
For luxury properties (5% GST):
Some property transactions are exempt from GST, including:
Additionally, developers can claim Input Tax Credit (ITC) on construction materials, provided they meet certain conditions. These include submitting invoices and ensuring the goods and services are received.
The introduction of GST in real estate has simplified the tax regime and eliminated multiple taxes on property purchases. Homebuyers now benefit from more transparency, especially when investing in under-construction properties. However, prospective buyers should also be aware of the GST exemptions and consider their investment horizon when deciding between under-construction and ready-to-move-in properties.
By understanding the GST implications on real estate, buyers can better plan their investments and reduce overall tax liabilities.
No, GST is not applicable on ready-to-move properties that have a valid Completion Certificate.
For affordable housing, the GST rate is 1% without ITC. For other properties, the GST rate is 5% without ITC.
No, homebuyers cannot claim ITC on under-construction properties, but developers can claim ITC on construction materials, provided they meet the required conditions.
No, there is no GST on resale properties.
No, GST does not apply to stamp duty and registration charges. However, these charges still need to be paid separately as per state regulations.
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