Is GST on real estate applicable?

Real Estate sector is a pillar of Indian economy. GST, also known as Goods and Service Tax, includes Central GST, State GST and Integrated GST. Previously, there were various modes of taxes like VAT, Sales tax, etc. levied on the properties.  However, now the Government has decided to fix a single rate GST on properties. We buy and invest in properties; however we are still unaware of GST on real estate sector.  

Who pays the GST on real estate sector?

The buyer and the investor who invests in under-construction properties pay the GST.  According to the old tax regime, the GST council used to charge 12% on under-construction properties. No taxes are levied on completed or ready-to-sale properties with completion certificates.

New tax regime :

The new tax policy is effective for projects from April 1st, 2019 onwards.  GST for affordable residential units is 1% without ITC. Also, GST is 5% for any other non-affordable residential or commercial and under-construction property without Input Tax Credit(ITC). If the promoters, landowners, investors, or buyers want to avail Input Tax Credit then they would have to pay 12%. In case of ongoing projects, the promoter has to choose between the two tax regimes. To avail the above tax rates, the input tax credit cannot be claimed and a promoter needs to purchase at least 80% of the total value of inputs from registered suppliers.

Important Terms :

  • Input tax credit refers to the deduction of the tax paid on the inputs from the final tax paid on the output by a business owner. In this way, the businessman is able to reduce his tax liability on a particular sale.
  • Affordable residential flats have carpet area upto 60 square meters in metropolitan cities and 90 square meters in other cities and the gross amount is 45 lakhs INR for it.
  • Carpet area is the residential inner area of the flat excluding the thickness of the walls.

If you’re still confused about GST charged on properties, don’t worry! We have got the best financial consultation available for you at no cost. Just visit our website to have your questions answered.


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