GST in real estate clarification fromG
No GST is applicable on the sale of complexes or buildings or ready to move-in flats where the sale takes place after issue of completion certificate by the competent authority
GST is applicable on the sale of under construction properties or ready to move-in flats where completion certificate has not been issued at the time of sale
GST of 8% is applicable on housing projects in the affordable segment, such as – Jawaharlal Nehru National Urban Renewal Mission, Rajiv Awas Yojana, Pradhan Mantri Awas Yojana or any other housing scheme of State governments etc. The reason behind the same is, that for such projects, after offsetting ITC, the builder or the developer most of the times, will not be required to pay GST in cash, as he would have enough ITC in his books of accounts to pay the output GST
For projects other than those in the affordable segment, it is expected that the cost of the complexes/buildings/ flats would not have gone up due to the implementation of GST. In such cases, it is expected that builders pass on the benefits of the lower tax burden to buyers by way of reduced prices or instalments
Real Estate GST Rates – Pre vs Post-GST
Before the implementation of GST, the effective tax rate on real estate was around 15% to 18%. No ITC was available on VAT and Central Excise duty, and thus it got added to the valuation of properties. Considering that goods constituted approximately 45% of the value, the embedded ITC was close to 10% to 12%.
After GST came to light on the 1 st of July 2017, real estate GST rates were pegged at 12% after abatement of one-third of the value of the land. As mentioned before, real estate GST rates were set at 8% for the affordable housing segment. On the other hand, the majority of the construction materials involved in real estate incurred 18% GST, but for which ITC was available. As a result, the effective rate of tax in the GST era has actually gone down, rather than going up, and this is precisely what this notification has also sought to clarify to both real estate buyers and builders.
This timely clarification from the GST Council is bound to make life much simpler, as it will lead to more awareness for buyers in this particular segment. more
GST is applicable on the sale of under construction properties or ready to move-in flats where completion certificate has not been issued at the time of sale
GST of 8% is applicable on housing projects in the affordable segment, such as – Jawaharlal Nehru National Urban Renewal Mission, Rajiv Awas Yojana, Pradhan Mantri Awas Yojana or any other housing scheme of State governments etc. The reason behind the same is, that for such projects, after offsetting ITC, the builder or the developer most of the times, will not be required to pay GST in cash, as he would have enough ITC in his books of accounts to pay the output GST
For projects other than those in the affordable segment, it is expected that the cost of the complexes/buildings/ flats would not have gone up due to the implementation of GST. In such cases, it is expected that builders pass on the benefits of the lower tax burden to buyers by way of reduced prices or instalments
Real Estate GST Rates – Pre vs Post-GST
Before the implementation of GST, the effective tax rate on real estate was around 15% to 18%. No ITC was available on VAT and Central Excise duty, and thus it got added to the valuation of properties. Considering that goods constituted approximately 45% of the value, the embedded ITC was close to 10% to 12%.
After GST came to light on the 1 st of July 2017, real estate GST rates were pegged at 12% after abatement of one-third of the value of the land. As mentioned before, real estate GST rates were set at 8% for the affordable housing segment. On the other hand, the majority of the construction materials involved in real estate incurred 18% GST, but for which ITC was available. As a result, the effective rate of tax in the GST era has actually gone down, rather than going up, and this is precisely what this notification has also sought to clarify to both real estate buyers and builders.
This timely clarification from the GST Council is bound to make life much simpler, as it will lead to more awareness for buyers in this particular segment. more
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Oct 31
Govt should first reduce GST rate on Cement from 28% to say 12%.This will give boost to all type of construction activity and will reduce construction cost.Cement is one of the basic thing for all infrastructural projects. more
Jan 02
Yes very true, there is ambiguity and builders take advantage of the same, so best is to levy 5% GST on buildings, with no input credit, so customer is clear and builders cannot take advantage too... earlier the better it is clarified soon Thanks more
Dec 30
What would be GST Implication when you have made the 10%down payment at initial stage and execute the “SaleDeed” after CC has be obtained??? more
Dec 30
Although the clarity is welcome but the builders have jacked up the prices nullifying the ITC as they function as a big cartel. Inspite of banning sale and advertising of projects on super area etc except on carpet area basis they continue to do so under the newly coined concept of saleable area which in fact means the Super Area thus not only Contravening the law but cheating the buyer with impunity. Instead of taking 'Suo moto' action the RERA administrators are sleeping over the matter leaving field free for the Builders to hoodwink the purchasers.until and unless an effective implementation of laws is there even a plethora of laws will help the people. So need of the hour is for the implementing agencies to be vigilant and proactive in serving the public. But who will compel them to do so is the big question before us, the State and Central Governments. more
Dec 29
I am fearful that RERA will just become one more corrupt Department the rules of which the politicos and builders will learn to circumvent easily through bribe and favors. This will lead to higher end user cost as the builder will pass on the impact of bribing through higher end user price.
Impact of ITC will be clear post facto i.e. at financial year end. Not sure of end situation, there will be resistance to pass on any likely benefit to customer. I much prefer the solution mooted by others in the forum. Estimate the likely offset of ITC by industry and reduce GST by that percentage for that industry and drop ITC too - in other words implement a net GST. This will greatly simplify execution, understanding by all stakeholders and make business life easier. Advance tax, TDS etc are measures that allow Government to get their revenue upfront and not wait till year end. This assists Government to plan and run its business. Why should businesses be different? Give them the advantage that you as Government take as your right.
Ongoing there could be consultative committees with participation from industry to periodically assess ITC for the industry to take action on any revision in net GST rate necessary. This could be once in 3 years. more
Impact of ITC will be clear post facto i.e. at financial year end. Not sure of end situation, there will be resistance to pass on any likely benefit to customer. I much prefer the solution mooted by others in the forum. Estimate the likely offset of ITC by industry and reduce GST by that percentage for that industry and drop ITC too - in other words implement a net GST. This will greatly simplify execution, understanding by all stakeholders and make business life easier. Advance tax, TDS etc are measures that allow Government to get their revenue upfront and not wait till year end. This assists Government to plan and run its business. Why should businesses be different? Give them the advantage that you as Government take as your right.
Ongoing there could be consultative committees with participation from industry to periodically assess ITC for the industry to take action on any revision in net GST rate necessary. This could be once in 3 years. more
Dec 29
