In order to reduce tax evasion, remove unnecessary obstacle and to make law easier the government implemented Goods and Services Tax (GST) in July last year. The real estate sector was also brought under its purview because it had the burden of various types of indirect taxes like VAT, service tax, excise, stamp duty and registration fees. But since its implementation, there is a lot of confusion about its rates and benefits. Let’s try to know in detail about the GST rates applied to real estate and under-construction properties.
GST on Real Estate: With the full input tax credits in the real estate sector, Goods and Services Tax will be at 12 percent rate. According to the list of GST rates for services sanctioned by the Council, in the real estate sector, the construction of a complex, building, civil structure or a part of it will be involved in the sale of a buyer whole or partially. The amount collected from the service receiver is included in the price of the land. It will be charged at the rate of 12 percent with full input tax credits. In other words, it means that all the under construction assets will be GST at the rate of 12 percent, but GST will not be able to stay ready for the property.
There are some illusion and differences about the under construction properties. There are various stages of under-construction properties and GST will be on the base of this.When you have purchased a property from the builder after the Completion Certificate has issued.Under such circumstances, GST will not apply as it is considered to be a ready asset to stay.And in this case there is no transfer or supply of goods and services.
Before the GST system starts, Goods and Services Tax will not be charged on the payment made to the builder partially or completely, but remember that on the basis of earlier rules, you will be charged a service tax of 4.5 percent.
GST on under construction flats, properties or commercial properties: The actual GST rate in this category is 18 percent, but one-third of this 18 percent is considered as undivided part of the land price or land given to the buyer of the property. Therefore, with the full input tax credit, GST is found at flats, properties or commercial properties at the rate of 12 percent.
GST on resold properties or flats: Since they are considered to be ready to stay property so GST will not be considered for them.
GST on houses purchased under CLSS: The purpose of the Credit-Linked Subsidy Scheme (CLSS) is to provide cheap houses to the people of lower and marginalized sections of society.The rate of GST on these houses will be effective 8 percent, not 12 percent, because of the cost of the land, one third will be deducted.
How GST will be beneficial for the builders and buyers?: A Property builder pays different types of indirect tax and duty during the construction of the house or complex. He imposes this cost on the shoulders of the end users, but due to the launch of GST, all these taxes are united in one place and as a result the cost of the property has reduced.
With this step, the sale of homes is expected to accelerate. For buyers, 12 percent GST looks a bit higher, but this has resulted in clarity and uniformity in taxation, which they would appreciate and expect to fully adopt GST.