GST on Residential Property Purchase: Understanding and Impact
Aug 16, 2023Home Ally

GST on Residential Property Purchase: Understanding and Impact

by Godrej Properties Limited



Buying a home is a significant financial commitment, and taxes are an integral part of the home buying process. One such tax that homebuyers need to understand is the Goods and Services Tax (GST) on residential property purchases. GST is a value-added tax applied to the supply of goods and services, including under-construction or new homes. Let's delve into the details of GST on residential property purchases and its impact:

GST on Residential Property Purchase

GST is applicable only to under-construction or new homes, not to ready-to-move-in properties or land purchases. The GST rate on residential properties varies based on factors like property type (affordable or luxury), construction phase, and property value. Input Tax Credit (ITC) is a crucial component of the GST system. ITC can be claimed with proper documentation, like a tax invoice. For under-construction affordable housing, the GST rate is 1% without ITC and for under-construction luxury housing (non-affordable), the GST rate is 5% without ITC. Ready-to-move-in new flats and land purchases are exempt from GST.

Impact of GST on Residential Property Purchase

The revised lower GST rates (1% and 5%) have encouraged demand for under-construction properties, especially in the affordable housing segment. GST rate changes have not impacted stamp duty and registration fees, which remain unaffected by the new GST rates.

Common Misconceptions about GST on Residential Property Purchase

Misconception: GST on property purchases is calculated similarly to other GST implementations.
Fact: GST on property purchases varies based on factors like property type, construction phase, and affordable/luxury housing.

Misconception: GST is applicable on land purchases.
Fact: GST is not applicable on land purchases.

Misconception: Affordable housing projects always offer better GST rates.
Fact: GST rates on affordable housing projects depend on property size, value, and other factors, making it not universally cheaper with GST applicability.

Understanding GST on residential property purchases can be complex, especially for first-time homebuyers. Seeking professional advice is recommended to navigate through the various steps and processes involved, including GST computation and other associated taxes. As GST rates and regulations can change over time, consulting experts can help you make informed decisions while purchasing a property.


Frequently asked questions

1. Is real estate subject to GST?

Ans. Yes, real estate is subject to GST (Goods and Services Tax) in India, depending on the type of property.

2. How to avoid GST on flat purchases?

Ans. GST is a mandatory tax levied by the government and cannot be avoided. However, a homebuyer can avoid GST by purchasing a completed flat or ready-to-move-in property, as such type of properties are not subject to GST.

3. What is the GST % applicable on commercial property?

Ans. The GST rate is 12% on commercial property.

4. How to calculate GST on a flat in 2023?

Ans. The GST on an under-construction flat (Affordable housing) was 8% with ITC till March 2019 but was revised to 1% without ITC from April 2019, GST on luxury flats was 12% with ITC and was changed to 5% without ITC from April 2019 onwards.

5. How to avoid GST on an under-construction property?

Ans. GST cannot be avoided on under-construction property purchases.

6. What is the new GST rule on property purchases?

Ans. There are no recent developments in GST norms on home purchases.

7. Who pays GST, the builder or the buyer?

Ans. The GST (Goods and Services Tax) is paid by the home buyer, and it is the responsibility of the builder to remit the GST to the government of India.

8. How do I claim a GST refund on a flat?

Ans. GST can be claimed only on under-construction flats by submitting a refund application to the GST authorities with details such as the GSTIN of the property builder and the amount of GST paid.

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