What is the impact of GST on real estate?

What is the impact of GST on real estate Sector in India?, How Goods and Services Tax is applicable on various types of properties – Plot, Land, Ready to Move Property, Under Construction Property? How GST is applicable on rental income from residential property and commercial property? How home buyers will benefit from input tax credit? Know all you want to know about the GST impact on Property and Real Estate in India.

What is the impact of GST on real estate? Explain this in detail and in simple language. So I thought this is quite a good occasion for Writing a Article about GST Because recently there has been an update from the government’s side Where the GST rates are decreased to 8% from 12% on affordable housing. So in this Article, we are going to see in detail that how much GST is applicable on what type of property?

 Whether it is ready to move property, any plot or an agricultural land, Whether it is an under-construction property or rental income We will see all these things in detail Along with that, we will understand the input tax credit What is an input tax credit in simple terms? And what is the benefit of it for the buyer? So stay tuned with the Article So that you will not miss any important points., we will learn how GST is applicable in real estate There are different rules in different properties

GST on Real Estate

 The first thing that you have to remember is that, The GST is applicable from the 1st of July, 2017. Now, what is the importance of this date? We will understand this is in detail….

Ready to move property

 So if we talk about the ready to move property then the GST is not applicable to that. So what is the meaning of ready-to-move property? If any property has got the completion certificate, Then it is considered ready to move property The GST is not applicable to that.

Plot and land

So if you buy a built property whether you buy it from an individual or the builder, Then the GST is not applicable to that. If you talk about the plot and land then the GST isn’t applicable to that either Plot and land are not considered as goods or services. That’s why the GST isn’t applicable on that.

Under-Construction Property:

If we talk about under-construction property, then GST is applicable on under-construction property whenever you buy a property from any builder. So how is it applicable? The under-construction property comes under the 18% tax bracket ⅓ value is considered of land in 18%. So land is neither considered as goods nor services So that’s why 18% is levied on ⅔ of the property value Assume the value of any property is 60 lakhs So the GST will be applicable on the value of only 40 lakhs The GST will be levied on 40 lakhs Rs So if we say what is the effective rate? Then the effective rate is 12% Right? So if I do ⅔ of 18% then the effective rate would be 12% for under-construction property.

After that, we will see the importance of the date of 1 July 2017 first. So if you have booked any property whose construction was started before 1 July 2017 So all the invoices raised before July 1st, 2017. The service tax and VAT are levied on that. Now this service tax is a central tax So this was generally 4.5% The one which was levied before 1st July 2017 And VAT is the matter of state There are different rates of VAT in every state. So if we take an example, assume there was a VAT of 5.5% in any state So the total effective rate of tax was around 10%. But now after 1st July 2017 because of the applicability of GST, all the invoices raised after 1st July 2017 The GST of 12% will apply to them I think this is quite clear here Now we will talk about affordable housing. Since earlier, affordable housing was in the bracket of 12% But a new update has come on 25th January 2018 The government has given the discount of 4% on this.

This means there will be an effective rate of 8% GST in affordable housing which comes under the CLSS scheme Pradhan Mantri Awas Yojana. CLSS scheme is Credit Link Subsidy Scheme In which you get subsidy on the interest rate of home loan, So first you get the subsidy on a home loan under the CLSS scheme And with that, there is a discount of 4% on GST So, 8% GST is applicable. With that, there are low-cost housing projects which has infra status GST of 8% will be levied on that also.

GST on Rental Income:

Now we will talk about GST on rental income.

In rental income If you have a residential property, then the GST will not be levied on that GST is not applicable on the rental income of the residential property But 18% GST is applicable on commercial property, Because this comes under the services category So 18% GST is applicable on commercial property But only in the case where your annual rent is more than 20 lakhs. If your annual rent is less than 20 lakhs from commercial property Then the GST will not be applicable in that case either.

So these were the broad things How GST is applicable in real estate After this, many people ask questions about What is an input tax credit? And what is its benefit? So I will explain to you quickly..

What is an input tax credit? And what are its benefit?

What is an input tax credit? So if we talk about the builder whenever a builder builds a house or a building Then there are three main components in that. The first is the land, The other one is the raw materials Raw materials mean goods After that, another component is services Services are contracts. Contracts mean someone is the architect Someone is CA, someone’s the contractor of the building To whom the work is outsourced. So the GST is levied in different ways to all these three. The GST isn’t levied on the land as we have already seen. The GST of 5% to 28% is levied on the raw materials Now, what is the meaning of 5 to 28%? It means on some raw materials it is 5% On some, it is 12%, 18%, or 28% Along with that, all the work contracts which we are talking about Architect or the construction work is outsourced to a subcontractor Then the GST of 18% is applicable on that.

So if we take an example Assume the cost of any property is 40 lakh. Then if we say the input GST that the builder has already paid to buy the raw material or the services, We will consider it to be approximately 4 lakhs Rs. On the other hand, if we talk about the output GST Then it will be charged 12% Builder will charge you 12% as a buyer, So if we talk about an example The GST of 4.8 lakhs as 12% will be charged on the property of 40 lakhs We call it the output GST. Now the government says that the input GST of 4 lakhs All this can be credited What this means is the builder has already paid the 4 lakhs For purchasing raw materials or the services. Now he has to pay the taxes on only 80000 Rs So 4.8 lakhs – 4 lakhs It is taxable on only 0.8 lakhs. Now if we take another example Here we have assumed that the GST is 4 lakh here. Assume the Input GST here would be 5.5 lakhs This is case one. This is case two if we consider. So assume the input GST of the builder would be 5.5 lakhs. How much tax does he have to pay in that case? He has already paid 5.5 lakhs Now his output GST is only 4.8 lakhs Rs How much credit will he get? He will get the maximum credit of 4.8 lakhs. Because the maximum credit that he can get is the amount which he has collected from you So this was input tax credit.

We have considered both cases. Now the government says that benefit from the input tax credit should be passed to the buyer. So the benefit that he is getting because of the input tax credit. This benefit should be transferred to the buyer by the builder. Not only builders but it’s also said in every case whether it is manufacturing or any other industry. The benefit from the input tax should be transferred to the buyer Or builder or any manufacturer So this is an input tax credit in short And I think I’ve covered all the major points Whatever will be the impact of GST on the real estate.

What is the GST rate on real estate?

As long as residential property is rented out, no GST is applied to rental revenue. However, if such a property is rented out for business reasons or if the annual rent exceeds Rs. 20 lakhs, 18 percent GST would be charged. The GST rate is 18% when renting out business buildings.

How much is GST on a flat purchase?

If flat owners pay their housing society at least Rs 7,500 in maintenance costs, they must pay 18% GST on residential property. A tax of 18% must also be paid by housing societies or RWAs that collect Rs 7,500 per month per flat.

Is there GST on residential property?

If the seller (vendor) is registered for goods and services (GST) purposes or is obliged to be registered, then GST only applies to the sale of specific types of property.

Does stamp duty include GST?

GST is not applicable to stamp duty. Stamp duty is typically capitalised with the related asset, such as real estate, a car, etc., if it corresponds to a capital transaction. A GST code of Capital Acquisition – No GST could be used. This may need the creation of a new tax code in “Tax Codes” with the rate set to 0.

The benefit that you will get as a home buyer You should know all the information. I have majorly covered all the information I have tried to cover all the major points in this Article. Then also if any point was missing or you want to add something Or if you have any other suggestions regarding the Article, So please comment below.

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