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GST on flat purchase and real estate in India

GST on flat purchase and real estate in India

GST on flat purchase and real estate in India

GST (Goods and Service Tax) was introduced in 2017 and has changed the face of the taxation system in many ways. When it comes to real estate, GST benefited and also confused property buyers. People wonder whether they should buy a flat or a house. It is because the GST on flat purchases and real estate in 2022 is not clear to many people.

This article aims at providing all the answers related to GST and its effect on homebuyers in 2022.

GST on flat purchase and real estate: Rates in 2022 and impact on home buyers

  • GST on real estate

Homebuyers in India are required to pay GST (Goods and Services Tax) for affordable and unaffordable housing. GST on affordable housing is 1% while GST for not affordable housing is 5%. GST is applicable on the purchase of under-construction properties like flats, apartments, and bungalows. If plots can be developed in the future, GST will be applied.

 

  • GST on flat purchase

One is required to pay GST if he/she is buying a flat/apartment in an under-construction project in 2022. If one is buying a flat/apartment in an already developed project, then GST will not be applied. Make sure that the completed project has the certificate of completion from the responsible authorities.

 

  • Taxes before GST implementation

GST (Goods and Service Tax) was introduced in 2017, and before that, there were other applicable taxes on real estate. Some of the taxes that real estate developers had to pay before GST are as follows:

  1. VAT (Value Added Tax)
  2. Central Excise
  3. Entry Tax
  4. LBT
  5. Octroi
  6. Service Tax 
  • GST on real estate and Flat purchase in 2022

As said, GST on affordable housing is 1% without ITC (Input Tax Credit), while GST for non-affordable housing is 5% without ITC (Input Tax Credit). These rates were applied from April 2019. 

 

Till March 2019, GST on affordable housing was 8% with ITC (Input Tax Credit), and GST on Non-affordable housing was 12% with ITC (Input Tax Credit). 

 

  • Effect of GST 2022 on Homebuyers

New GST rates have affected homebuyers in many ways. Priorities of homebuyers have changed now, and it has affected the real estate market in both ways, positive and negative.

 

The new GST rates have caused 3 major changes for home buyers. These changes are as follows:

  1. The increased cost of construction

GST (Goods and Service Tax) was an additional tax in the list of other applicable taxes. It has increased the overall construction cost for a house.

  1. Inclination towards constructed properties

Because of the no tax on developed properties, people are shifting their interests from buying a house to buying an apartment in a developed project.

  1. The decreased cost of affordable and unaffordable housing

The most noticeable effect of the new GST (Goods and Service Tax) rate is the decline in the cost of affordable and unaffordable housing.

  • 5 Important GST Facts 2022

  1. GST on commercial properties is 12%.
  2. One does not have to pay GST for purchasing a plot.
  3. One does not have to pay GST on ready-to-move apartments.
  4. Even after GST, under-construction homes are more affordable than ready-to-move apartments.
  5. After GST, builders have increased the cost of ready-to-move apartments.

 

  • Real Estate GST FAQs

  1. What is the current GST rate for real estate?

From April 2019, the GST rate for affordable housing is 1% while, the GST rate for non-affordable housing is 5%.

  1. Who Pays GST on real estate?

Both home and investors pay the GST on real estate.

  1. When did new GST rates come into practice?

New GST rates come into the practice with immediate effect from 1 April 2019.

  1. What is ITC?

ITC stands for Input Tax Credit. It is a tax paid by businesses on a purchase to reduce sales tax on that thing.

  1. Does one have to pay GST on the purchase of a new house?

Yes. It is necessary to pay GST on the purchase price of a new house.

The provided information will clear many aspects of GST on real estate in 2022. This information can save you from fraud in the name of taxation. It can also help you to decide where you should invest your hard-earned money.

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