Understanding the Goods and Services Tax (GST) on residential property, is crucial. When it comes to buying a flat, GST on flat purchase is a significant factor to consider. Here we will explore the GST rates on flat purchase to help you make informed decisions.
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GST on Property in India
GST was introduced in 2017 which impacted property pricing directly. It applies to under-construction properties in India, not to ready to move in or resale flats. The current GST rate for under construction properties including affordable housing, is lower than the previous GST rate. This makes easier the process, adds transparency, and eases the tax burden on Home buyers.
GST on Flat Purchase in India
1. GST on Affordable housing Projects
When it comes to GST on flat purchase, the affordable housing projects are subject to specific rules. According to the GST Act 2017, the flats or houses priced below Rs 45 lakhs fall under this category. These properties must have a carpet area of 645 square feet or less if it is located in metropolitan cities like Delhi NCR, Bengaluru, and others. And if it is located in non-metropolitan cities with smaller carpet area and is priced at or below Rs 45 lakhs, it also qualifies as affordable housing under the GST Act.
2. GST on flat purchase under-construction
When it comes to GST on flat purchases for properties under construction, The tax rate has been reduced from 12% to 5%. For affordable homes priced up to Rs 45 lakhs, the tax rate is even lower at 1%. However, this 1% rate applies only if the property does not include Input Tax Credit. The affordability criteria include price under Rs 45 lakhs for both metro and non-metro projects. In metro cities like Delhi-NCR, Mumbai, Bengaluru, and others, the affordable under construction flats must have a carpet area of 60 square meters and in non-metro areas, the requirement is 90 square meters to qualify for the 1% GST rate.
3. GST on Ready to Use property
When it comes to GST on flat purchases for ready to use properties, GST is not applicable. Once a property has received its certificate of completion, GST does not apply on that property which makes things simpler for buyers.
4. GST on Non affordable housing projects
When it comes to GST on flat purchases for non affordable housing projects, there has been a change in tax rate. The tax rate has been reduced from 12% to 5%. These projects are other than affordable housing projects that are more expensive and are purchased by the people having high purchasing power.
5. GST on commercial properties
GST is applicable to commercial properties with 12% GST rate. This includes shops, offices, and any properties that are not primarily used for residential purposes.
6. GST on flat maintenance charges
GST is applicable on maintenance charges exceeding Rs. 7,500 per member per month if the the annual turnover society is Rs. 20 lakhs or more at 18%. Maintenance charges may cover property tax, water, and electricity for common areas. Societies can claim Input Tax Credit on GST paid for maintenance. Societies is required take registration, issue tax invoices and file returns properly. GST is not applicable on property tax and non-taxable services.
GST Rates on Flat Purchases in India
| Type of Properties | GST Rate | Input Tax Credit (ITC) | Effective Date |
|---|---|---|---|
|
Residential flat purchase (non-affordable housing) |
5%
|
Not available
|
May 20th, 2019
|
|
Affordable housing flat purchase
|
1% |
Not available |
May 20th, 2019
|
|
Flats under construction |
1% |
Available
|
-
|
|
AvailableFlats after completion certificates or reselling old property |
N/A |
N/A |
- |
|
Commercial Properties |
12%
|
Available
|
-
|
Impact of GST on home buyers
GST on flat purchases has big impacts on home buyers in several ways:
- Affordability: The Reduced GST rates (1% on affordable housing) have made homes more accessible, especially for middle income and first time buyers.
- Non-affordable housing: 5% GST on non-affordable housing projects is reasonable. However the removal of Input Tax Credit may increase the overall project costs and as a result, there will be higher prices for buyers.
- Under construction properties: GST applies only to under-construction properties which gives the savings for buyers who opt for ready to move in properties.
- Clear taxation: The Uniform GST rates nationwide have given clarity as compared to the previous tax system where VAT and service tax rates were different across states.
- Price transparency: GST has made tax structures easy by combining multiple indirect taxes, and by helping buyers understand the taxes better.
Read also: GST on Tobacco And Tobacco Products – Latest Guide 2024
Conclusion
Understanding GST on flat purchase is important for home buyers. It impacts GST rates, overall costs, and flat maintenance charges. Being informed helps you make wise decisions that ensures your dream home does not become a financial burden on you.
Frequently Asked Questions (FAQ)
You can get a refund of the GST paid on the advance amount if you cancel your flat purchase before taking possession. The developer will refund it, but there may be deduction for cancellation charges. You should keep all cancellation documents for processing the GST refund.
The buyers can avoid GST on flat purchase by opting for completed or ready to move in properties. GST is applicable on under-construction properties and not on ready to move properties.
The Current GST rate is 5% without Input Tax Credit (ITC) for residential properties and 1% for affordable housing projects. GST is required to be paid on the sale of under-construction properties by developers.
A developer can take or pass on ITC to its buyer. 5% GST is applicable for the home buyer for non affordable housing projects. But Developers have option to choose whether they will pass on ITC to home buyers or not.