2016 was full of unpleasant surprises. The surgical strikes, JNU protests, and Uri & Pathankot attacks had unnerved the citizens. On the real estate front, the RERA Act and NaMo’s Demonetization created shock waves.

E-way Bill Registration, GST impact on Real Estate

It is no secret that the real estate sector deals mostly in cash. Investment in real estate dipped after the ‘demonetization’ bomb. The government’s decision to roll out GST from July contributed to the market’s sluggishness.

The GST Council keeps making amendments to the GST law to make it more viable for the aam janta. So, there confusion regarding property prices and GST rates prevails. Let us understand about the inclusion of real estate in GST and applicable rates.

GST Rates for real estate

  • Ready-to-move-in Property:

Properties with an Occupancy Certificate (OC) are deemed completed and ready to move in. Transfer of such completed flats or ready-to-move-in property does not include supply of goods or services. Hence, GST is not applicable on such transactions. Also, a builder is eligible to claim input tax credit.

Stamp duty and registration charges have not been subsumed under GST. Both the charges vary from state to state.

Note: Local municipal authorities issue an OC. A property without OC cannot be occupied.

  • Under Construction Property:

GST Rates for Real Estate, GST Impact on Real Estate

 

The actual GST rate for under construction (residential & commercial) properties is 18%. However, 1/3rd of the 18% is considered as the value of land. Land is an immoveable property and as such exempt from tax. Therefore the effective GST rate comes down to 12%. Builders can claim full ITC .

GST Invoicing, GST Impact on Real Estate

In the last GST Council meeting, the concessional GST rate of 12% was extended for construction of houses under Credit Link Subsidy Scheme. Government asked builders not to charge GST from home buyers as the effective rate on affordable housing projects can be adjusted against input credit.

  • Resale:

Resale of completed flats that have received Occupation Certificates will not attract any GST.

  • Rent on Residential and Commercial Property:

Landlords who let out their properties for residential use do not have to worry about GST. Rental income from a residential house is exempt. But landlords who have given their premises on rent for commercial or industrial usage will pay GST. If they earn more than Rs. 20 lakh annually, they will have to pay GST @18%.