It is important to buy a house and is a long-term investment of money. This article gives information on different GST rates and how they apply when buying flats that are either under construction or ready to use. In these transactions, GST needs to be acknowledged.
Knowing whether or not GST is applicable will affect the budgeting of the buyer on the same purchase.
What are the Scenarios for GST Rates on Under-Construction and Ready-to-Use Flats?
In the below section, we have discussed the scenarios in which GST rates are applied when buying flats under construction and ready-to-use:-
Purchase of Under-construction Property
GST is applicable on the construction services furnished via the developer if the purchase is of an under-construction flat from a developer. The GST rates alter as per the factors like the property type and the location.
Residential Properties
Properties where the carpet area of the commercial space does not exceed 15% of the total carpet area of all apartments in the project are Residential Properties.
Affordable Housing Projects
A concessional GST rate for affordable housing projects is been introduced by the government. Compared to standard residential properties, these projects secure a lower GST rate. For computing the gross amount all charges are to be regarded along with parking charges common facility charges etc and excludes Stamp Duty and Maintenance charges.
Ready-to-use Property
In the case of the purchase of ready-to-use property, no GST is applicable. Ready-to-use properties are specified as those that have obtained a certificate of completion denoting completion of construction and are ready for occupation.
| Area of Carpet | |
|---|---|
| Metropolitan Cities | Upto 60 square metres |
| Other Towns and Cities | Upto 90 square metres |
| Builder Gross Amount Charge | Upto INR 45 lakh |
Land
It is significant to cite that the sale and purchase of land are not counted under the ambit of GST. It is not a supply and hence not levied to GST. As per that on the purchase of under-construction Real Estate Property with land attached a fixed amount of 1/3rd of the Property Value will be attributed to the land and GST will be applicable on the balance 2/3rd portion only. For instance: Payment for Purchase = 120, Land = 40, and Property Purchase on which GST Chargeable = 120 * ⅔ = 80.
Commercial Property
GST is applicable on the purchase of commercial properties, including shops, offices, and other non-residential properties.
Non-affordable Housing Projects
Beyond Affordable Housing Projects. The expensive properties are in the interest of people who have higher purchasing power.
GST Rates On Real Estate Property
| Property Type | Till 31st March 2019 | GST Input Tax Credit | From 1st April 2019(new) | Input Tax Credit |
|---|---|---|---|---|
| Construction of affordable residential apartments | 8% | Available | 1% | Not Available |
| Construction of residential apartments other than affordable residential apartments | 12% | Available | 5% | Not Available |
| Commercial properties | 12% | Available | 12% | Available |
| Land and Ready-to-move(use) Properties | NA | NA | NA | NA |
- The developer is paid GST including the purchase consideration of the property who shall then remit the GST to the Government.
- Commercial Apartments in Real Estate Project (REP) apart from RREP or an ongoing project where the promoter has opted for old rates: 12% GST, ITC Available.
- Construction of commercial apartments in a Residential Real Estate Project (RREP), which begins on or after 01-04-2019 or in an ongoing project where the promoter has opted for the latest rates effective from 01-04-2019: effective GST rate is 5% with no ITC Available.
- To be entitled to the reduced GST rates of 1% and 5%, developers should ensure that at least 80% of the raw materials utilized in the construction process are obtained via registered dealers. It signifies that the majority of the materials, by value, must be sourced through the registered suppliers.
- On a Reverse Charge Basis, the developer is needed to pay GST at an 18% rate on any input falling short of 80% of input from registered suppliers. 28% if the input is cement ie purchase from an unregistered supplier.
- On the purchase of a flat, Stamp Duty and Registration charges will be applicable and to be paid separately. All these are not impacted by the GST.
- It is recommended to check whether the maintenance fees liable to be paid for these properties are subject to GST or not.
- Any Residential Welfare Association collecting exceeding INR 20 lakh (INR 10 lakh in some states) in annual maintenance is needed to mandatorily register for GST. This permits GST ITC advantages. Voluntary Registration is permissible.
- RWA does not need to be registered if turnover is more than INR 20 lakh but the monthly maintenance fees do not surpass INR 7,500 per member.
- But, GST on Maintenance Charges is just applicable when RWA has more than INR 20 lakh in turnover from furnishing maintenance services and the collections per member per month is more than INR 7,500. GST is liable to pay at 18% on the whole amount if it is more than INR 7,500.
Analyzing the particular cases of flat purchases to discover the GST applicability is important. Consulting with a tax professional or legal advisor can furnish personalized guidance established on the particulars of the transaction.