In a recent notification, the Central Board of Excise and Customs (CBEC) has clarified the doubts on GST (Goods and Services Tax) liability on an under-construction property and ready-to-move-in property. New indirect tax reform was introduced in the country on 1st July 2017. Here we are going to tell you how new indirect tax reform will be treated wherever you go to purchase property:-
No GST Being Levied on completed property
Transferring of the completed property is not considered as offering services under the GST and no taxes are being levied on it. As per the CBEC’s recent notification, “Sale of the building is an activity or consideration which is neither a supply of goods nor a supply of services. (Para 5 of schedule III of the CGST Act, 2017).” So, if in case if you have purchased a ready-to-move-in property you will be able to save money in respect of the tax.
GST Being Levied on under-construction properties
On another hand, if you have purchased an under-construction property, it will be considered as rendering services under GST and you are liable to pay taxes on it. As per the GST rules, construction of a building, complex or a part of it, intended for sale to a buyer, levies GST on the sale price of the property. Additionally, the taxes should not be applicable in cases when you have purchased the property after getting the certificate of completion from the government authority or in case of transferring the occupation to another one, that simply means in case of reselling the property.
Read Also: Impact of Goods and Services Tax on Real Estate Sector in India
Under new GST reform, an under-construction property is being levied at the rate of 18%. However, it is not applied to the whole amount (value) of the property but it is applied only to the two-thirds value of the property. One- third portion of the property is the value of the cost of land. “Effective rate of GST payable on the purchase of under-construction residential or commercial properties from builder involving the transfer of an interest in land or individual share of land to the buyer is 12% with full input tax credit (ITC)”, said CBEC.
If you have opted property which is under- construction from 2015 and will be completed in 2018, in this circumstances the service tax should be applicable at the rate of 4.5 %. But payment made after the implementation of GST in respect of purchasing the house or property, taxes should be levied at the rate of 12%.
Those agents or real estate services do not comprise transfer of land rights, liable to pay GST on the whole amount of the property. According to CBEC clarification, “consideration which doesn’t constitute a transfer in land or undivided share of land as part of the consideration, such as construction services provided by a subcontractor to the builder, attract GST at the standard rate of 18% with full ITC.”
It is anticipated that the real estate firms or service providers are likely to pass the Input Tax Credit (ITC) benefits to home buyers, which will help to reduce the total tax incidence on the value of the property.
