GST on Real Estate - All You Need To Know About GST impact On Under Construction Property Purchase


Everyone wants to have a home which will enhance the lifestyle of the all family members, buying of this dream home now comes under the scanner of GST which has replaced multiple levels of taxation in India. So one must know details about GST rates for various types of property, If you are planning to buy a property in India.

Buying a house is once in a lifetime investment and a very significant one. But there are many costs, besides the cost of property, which goes unnoticed while making a decision. GST is one of them. Let’s try to understand how you can avoid GST on real estate.
GST on Real Estate

For better understanding GST impact on real estate, let’s divide property types into three categories 
  1. Under Construction Property 
  2. Ready to move property and 
  3. Rented property.

GST on Under Construction Property

When we call property as Under Construction ?

The property which is under construction and where BUC (Building Usage Certificate) is not issued by the local authority is classified as under construction property.

Applicable GST 

As the supply of goods and services is involved in under construction property GST is applicable for this type of properties. The rate of GST is 12% with full input tax credit. This means if you are planning to purchase real estate property, you should buy a property where BUC is issued. This will help you to save extra 12% GST cost.

The rate of GST on under construction property for residential and commercial usage is same. The amount of GST needs to pay by a buyer to the builder. On the other hand, the builder has to pay GST on services availed, and also on the services provided by government or local authorities, like municipalities, etc. Builder will receive the benefit of input credits, on materials such as steel, etc, which will be deducted from their tax liabilities. As per law, it is mandatory for a builder to pass on the benefits accrued from GST to home buyers. If builder pass on this benefit base price of property will be less and it will benefit the buyer.

GST on ready to move property

Great news for this type of property is that GST is not applicable on ready to move property and resale property. The property which is ready for usage including resale property is out of scope from GST. This means if you are planning to buy property opt for resale property or ready to move property.

Although the other government charges including Stamp duty 4.9% and 1% registration charges will continue to be applicable, irrespective of whether the property is under-construction or constructed.

Stamp duty cannot be avoided. However, 1% registration charges will be NIL if a property is purchased on the name of women.

GST on Rental

GST on rent is taxed @18% of the rent paid. But don't worry as GST is only applicable on renting of commercial property. It is not applicable on renting of residential property.
The limit of Rs.20 Lakh is for all states. This means if the total value of services provided and goods supplied by the landlord during the financial year is less than 20 Lakh, a landlord is not required to obtain GST registration number and is exempted from collecting GST on Rent. In case of GST is levied on rent, the landlord is required to prepare proper GST invoice.

After understanding impact of GST on real estate property let’s take a look at simple checklist that property buyer can follow. You must follow below simple checklist which will save your time

Real Estate Checklist for property buyer

For Builder

  • Builder work experience and credibility
  • Builders capability and track record to complete the projects on time
  • Is the builder is known for qualitative work?
  • Builder and project are registered under RERA or not.
  • Is the project matching with the quality you are looking for or not?

For project

  • Location of the project and rate applicable to the area.
  • Easy accessibility of the project.
  • Locality and civil infrastructures nearby project like schools, hospitals, market, daily necessities available in close vicinity.
  • Availability of water supply, drainage, gas supply for the project.
  • BUC completion of the project and applicability of GST.
  • The power supply backup facility, CCTV, Lift, garden and other amenities offered in the project.
  • Future prospects of facility nearby project.
  • Availability of enough parking place for every flat.
  • Monthly maintenance detail if available.

For the Property/Apartment

  • Floor Plan of the apartment and size of the flat/property.
  • The additional facility offered by builder along with the property.
  • Availability of electric, TV and AC fitting points.
  • Provision of storage room.
  • Carpet area of the property.

For Documentation

  • Legal and approval document of the construction is available or not.
  • Old registry document of the property and plan clearance document.
  • The rate quoted by the builder is as per prevailing rate in the market or not.
  • Hidden charge or extra charged if any asked by the builder.
  • Clearance from local authority and issuance of occupancy certificate in case of ready to move property.
  • The clearance document of the project for the loan.

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