The GST Council today (24-Feb-2019) has announced a rate cut in the goods and services tax (GST) charged on sales of residential properties under construction.
As per the latest decision, the new GST rate applicable for all housing projects will be 5%, down from the current 12%.
Whereas, the council also decided to lower the tax rate on affordable housing projects to 1% from 8 %.
However, in both cases, input tax credit (ITC) cannot be claimed.
What are considered as Affordable Housing Properties?
The GST council has also altered the definition of ‘affordable housing’ as below;
- Properties costing up to Rs 45 lakh will be considered as affordable.
- In metro cities, houses with a carpet area up to 60 sq mtr (645 Sq ft) will be classified under affordable housing.
- Metropolitan Cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR).
- In non-metro cities, houses with a carpet area of up to 90 sq mtr (968 Sq ft) will be classified under affordable housing.
Revised GST Rates on Real Estate Properties & Under Construction Flats
The following revised GST rates on new real-estate projects will be implemented from April 1, 2019. (New Property is the one where the construction begins after 31st March, 2019.)
Latest Update (19-March-2019) :
As per the latest update from the GST council, if a real-estate project has already been under-construction (or) where actual booking has been done before 31st March, 2019 then the builder has been given a one -time option to charge below GST rates;
- On non-affordable properties, a builder can levy old GST rate @ 12% (with Input Tax Credit) or new GST rate @ 5%.
- On affordable projects, a builder can levy old GST rate @ 8% (with ITR) or new revised GST rate @ 1%.
The option has to be exercised once within a prescribed time frame by the real estate builder and where the option is not exercised within the prescribed time limit, new GST rates shall apply.
Do note that the new GST rates are mandatory for Projects which commence on or after 1st April, 2019. The new GST rates are also applicable for on-going projects builders do not exercise their option by 20th May, 2019.
Applicability of GST on Real-estate
The GST Rates will be levied on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale. Kindly note that the GST will not be applicable in Re-sale transactions.
If you buy an under-construction property through Govt provided Credit Linked Savings Scheme then such property is considered as ‘Affordable housing’.
GST is exempted on Development Rights (Joint Development Agreement), Long Term lease, FSI etc.,
GST On Real-estate & Latest Updates :
- Builder can’t charge higher GST for services like PLC (Preferential Location), parking etc. These services should be treated as “composite construction service” and attract the same levy as construction. (Updated on 04-May-2019)
- Builders have to refund GST paid by Home buyers in case he/she cancels the Flat booked in the last fiscal (FY 2018-19). The Real-estate Developer shall be able to avail credit adjustment for such refunds. (Updated on : 08-May-2019)
- Home buyers will have to pay 12 % or 8% GST (the rates as existed prior to April 1, 2019 ) on balance amount due to the builder if the housing project has been granted completion certificate by March 31, 2019. (Updated on 15-May-2019)
- Flat owners will have to pay GST at 18 per cent if their monthly contribution to resident welfare association (RWA) exceeds Rs 7,500. As per the rules, RWAs are required to collect GST on monthly subscription/contribution charged from its members if such payment is more than Rs 7,500 per flat per month and the annual turnover of RWA by way of supply of services and goods exceeds Rs 20 lakhs. (updated on 23-July-2019)
- In case the charges exceed Rs 7,500 per month per member, the entire amount is taxable. For example, if the maintenance charges are Rs 9,000 per month per member, GST @18 per cent shall be payable on the entire amount of Rs 9,000 and not on (Rs 9,000-Rs 7,500) = Rs 1,500.
- If a person who owns two or more flats in the housing society or residential complex, the ceiling of Rs 7500 per month per member shall be applied separately for each residential apartment owned by him.
Continue reading :
- Checklist of Important Property Documents in India | Legal Checklist for Property Purchase
- Occupancy Certificate, Possession Certificate & Completion Certificate – Meaning & Importance
- How to calculate Holding Period & Capital Gains on sale of an Under-Construction property?
- Under Construction House : How to claim tax deduction on Home Loan Interest payments?
- What is GST (Goods & Services Tax) : Details & Benefits
- How Home Buyers can file complaints against Real estate Builders online? | RERA Act
(Post first published on 24-February-2019) (The above provided details are based on the limited available information, if required, this post will be edited/updated.)
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Thanks for sharing. I read many of your blog posts, cool, your blog is very good.
Hi sir I have purchased a two bhk apartment in 2018 at that time there was a no issue regarding gst but now the builder is harassing me to pay gst and I have taken loan also under pmay scheme so kindly suggest me
Dear Mohammad,
As per the latest update from the GST council, if a real-estate project has already been under-construction (or) where actual booking has been done before 31st March, 2019 then the builder has been given a one -time option to charge below GST rates;
On non-affordable properties, a builder can levy old GST rate @ 12% (with Input Tax Credit) or new GST rate @ 5%.
On affordable projects, a builder can levy old GST rate @ 8% (with ITR) or new revised GST rate @ 1%.
You may kindly take help of a civil lawyer (or) can also check with other flat owners (how they are handling this situation).
hello Sreekanth,
Please confirm how much GST do i have to pay on my under construction property. 8 % or 12 %
My home loan sanction under CLSS MIG 1
MY HOME SIZE IS 125 SQ MTR
home value is 75 Lakh ( non affordable segment )
Sir I have purchased UNDER CONSTRUCTION flat Feb 18 and paid gst 12 p in each installment and 5 p from april 19.but builder is not passing ITC FROM FEB 18 TO MARCH19.WHAT IS ADVISE FOR ME.builder adopt 5 p gst from april 19.
Dear Mr Misra,
You may Fill ‘Anti-Profiteering’ Complaint against your builder. But before doing so, you may formally request him once again preferably through a written letter/email..
Hi, I have just booked a flat in New Town area Rajarhat with a reputed builder called Loharuka Group. According to their cost sheet, they are charging 5% GST for the base price of the flat and 18% for PLC, Floor escalation and even parking. There are not even giving any logical or documental evidence but just denying my claim. Please advice and also refer any documents/circular regarding this. I have provided them the AAR of west bengal also in this matter.
Dear Pratim,
Do note that the new GST rates are mandatory for Projects which commence on or after 1st April, 2019. The new GST rates are also applicable for on-going projects builders do not exercise their option by 20th May, 2019.
Kindly check if the above two conditions are applicable for your (Project) property?
Hi Sree,
I am going to book/register a MHADA winning flat in jully 2019 with some amount. Buildings are already under construction from last 3 years and will be completed in 2021. basic cost is rs. 5570000, So i am worried about how much GST i will have to pay.can you help
Dear Abhijit,
This property falls under ‘non-affordable’ housing category.
Kindly check if your builder (Authority) has opted for new GST rate from this FY or not?
Hi Abhijit,
Did you get the flat in Pimpri Waghire area?
I purchased home in may 2019 price around 7Lacs how much gst I have to paid and PMAY Benefit get in my home in village
Dear Jakasaniya,
Is this an independent house?
Hi Sreekanth ,
Can u pls explain if builder opts for 12% GST option incase of under construction property which commenced before 1st April , u have mentioned he has a option to opt for 12% with input credit …
My question is what is input credit & how it’s gonna benefit exiting customer ….does it mean input credit will be given to the customer ?? If yes How it’s calculated & passed to customer??will it reduce the actual tax amount ??
Dear Ramesh,
You may kindly go through below articles ;
* What is Input Credit under GST ? & How to claim it?
*What is Input Tax Credit (ITC)?
* Input Tax Credit under GST
* ITC under GST – explained with Examples!
Hi:
Seems need clarity on ITC. This happen to me. I have booked apartment( GST 12% applicable) in Jan’19 and made two payments for GST12% applicable. however after new rule my so called reputed builder (Godrej) has denied for 5% GST applicable.
As per him, if it opt for 5% GST then it will impact quality of constitution.
My question is IF they opt for 12% GST with ITC, how can I get the benefit being end user of paying GST. Can we exercise Anti-profiteering law if yes ..what is the way out?
Dear Amit,
If they opt for 12% then they have to pass on ITC to their coustomers.
Kindly go through this article : Builder pulled up for not passing GST gain to buyers
hi sreekanth
As i want to buy a flat in second hand which is in ready to move but its already registered from builder to one client,and the client wants to sale the same to me ,so is it necessary to pay GST for builder,can u please revert back.
Dear Satish..GST is not applicable in this case..
Dear Shree,
I have home loan, 7 year going to completed from taken it. My loan a/c is noting but OD account, i am thinking to close this a/c and the liquidity will be little lower but not so much.
As of now my two kids are small, still education not started, not other liability other than this.
My EMI is 30K (20K Int + 10K Prin), i think after close this 30K i can save pm and after few year think about second home and education exp.
Please advice should i close home a/c?
Thanks
Rutushar.
Dear Rutushar,
May I know the source for closing your home loan outstanding amount? Is it from your current accumulated savings?
What is your home loan tenure (term)?
Dear Sree,
Yes, there are some accumulated saving & some LIC are going to matured, the O/s amt is around 15-16 lac.
Total tenure of Loan is 25 year, out of 7 year is completed.
Dear Rutushar,
Considering your profile, you may opt for both the options – continue with your investments for your long-term goals and also part-pay your home loan (not in-full).
Related articles :
* Investing in Mutual Funds while paying Home Loan EMIs | Cost-Benefit Analysis
* List of Articles on the key Components of Personal Financial Planning
Thanks a lot Sree….
Hi Sree,
Hope you are doing well!
I am seeking a valuable response to my below queries,
I bought under construction flat of measuring Carpet area of 32.42 sqm in Mumbai and the Agreement value was 41 Lakhs and made two Initial part payment of 10 % each of agreement value with 12% GST in February 2019. After that builder raised the new demand letter for another part payment in March 2019 on 12% GST, But my payment went to the builder in April 2019 after the implementation of a new GST slab.
So my queries are as follow
1. On March 2019 part payment demand, which is paid by the bank in April 2019 – Will new GST rate applies or Old GST rate apply? When I asked builder you have charged the wrong GST rate because bank paid in April 2019 so new GST rate will be applicable then builder told me “No they have charged correct GST rate because we have raised the demand letter in March 2019.” Kindly give me clarity on that it is correct or wrong?
2. What will be GST slab applicable as it in under 45 Lakhs and the Carpet area is 32.42 sqm?
3. How can I avail ITC from the builder on my 20% Part payment on which I paid 12% GST?
4. How much maximum percentage of ITC can avail from the builder?
I would be grateful to you if I and get any supporting reference documents for all my queries.
Regards,
Abhishek Chaurasiya
Dear Abhishek,
As your project is an under-construction property, your builder has the option to opt for old/new rates by 20-may-2019. So, kindly check with them about their choice.
FYI – Home buyers will have to pay 12 % or 8% GST (the rates as existed prior to April 1, 2019 ) on balance amount due to the builder if the housing project has been granted completion certificate by March 31, 2019.
Its the builder(s) who can claim the ITC (if any) and not the buyers..
Hi Shree,
Thanks for your reply!
I had checked with builder currently he applied the new GST rate from 1 April 2019 i.e. 5 %.
Still, I am confused regarding for my first query,
If he is collecting 5% GST from buyers then My April 2019 payment GST would be 5% for my below query?
1. Builder raised the Demand in March but Payment is done by bank in April 2019 then the builder should revise the GST slab from 12 to 5 % because the payment made in April?
2. As per the government rule, ITC should pass on the buyer so how can I get the benefit?
Regards,
Abhishek Chaurasiya
Dear Abhishek,
1 – Kindly check with your builder..
2 – You may kindly go through this link (quora), regarding non-payment of ITR by the builder..
IF Mr.A has booked an under construction flat at total 50,00,000, and paid as advance Rs.20,00,000 and paid GST advance also, but question is after completion certificate arrives and at the time of making purchase agreement after Completion certi. GST on balance amount of 30,00,000 is also have to pay or not??
Dear Harshit,
The GST Rates will be levied on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale.
So, answer is NO.
Dear sir
My affordable dues on 24 april 2019 but builder demand as per old GST rates that is 8%.
Pls send me govt. Effective new GST rate approval letter as per govt.that is 1%.
Dear Vicky,
As per the latest update from the GST council, if a real-estate project has already been under-construction (or) where actual booking has been done before 31st March, 2019 then the builder has been given a one -time option to charge below GST rates;
On non-affordable properties, a builder can levy old GST rate @ 12% (with Input Tax Credit) or new GST rate @ 5%.
On affordable projects, a builder can levy old GST rate @ 8% (with ITR) or new revised GST rate @ 1%.
The option has to be exercised once within a prescribed time frame by the real estate builder and where the option is not exercised within the prescribed time limit, new GST rates shall apply.