GST on sale of House /Flats – Rates and Valuation
GST on sale of House /Flats : GST is levied on transactions that are considered as supply as per the Goods and Service Tax law. Supply includes supply of goods or service or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance or business. It also includes imports or other activities specified in Schedule I made or agreed to be made without a consideration.
However, some activities or transactions (specified in Schedule III) shall be treated neither as a supply of goods nor a supply of services.
So basically, it means if GST is to be charged on a transaction then that transaction shall be considered a supply as per GST. The amazing thing is that sale of ready to move Residential property (after completion certificate) is out of GST.
GST on Under Construction & Ready To Move in Property
As per GST law, construction of a complex, building, civil structure including a complex or building intended for sale to a buyer, wholly or partly except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier, is a supply of service and liable to GST.
It flows from the above facts that, sale of ready to move in or completed property does not attract GST. GST is payable only on under construction property.
Accordingly, construction of a complex, building, civil structure intended for sale to a buyer is considered a service and liable for GST- if any consideration is received before issuance of completion certificate. However GST is not applicable if the whole of the consideration for a property is paid after issuance of completion certificate or first occupancy, whichever is earlier.
GST rate on the construction of commercial apartments
The rate of GST applicable on the construction of commercial apartments [shops, godowns, offices, etc.] in a real estate project are-
|Description||Rate (after deduction of the value of land)|
|Commercial Apartments in Residential Real estate Project (RREP)||5% without ITC on the total consideration|
|Commercial Apartments in Real estate Project (REP) other than RREP||12% with ITC on the total consideration|
GST rate on sale of house projects
GST council in April 2019, changed GST rates for housing projects-
|Property Type||GST rate till March 2019||GST rate from April 2019|
|Affordable segment (excluding value of land)||8% with ITC||1% without ITC|
|Non- affordable segment (excluding value of land)||12% with ITC||5% without ITC|
Affordable Housing means a residential house/ flat of carpet area of –
- upto 90 square meter in non-metropolitan cities/towns and
- 60 square meter in metropolitan cities
- having value upto Rs. 45 lacs (both for metropolitan and non-metropolitan cities).
Metropolitan Cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai.
Some Conditions to avail new tax rate
- Input tax credit shall not be available
- 80% of inputs and input services shall be purchased from registered persons. On shortfall of purchases from 80%, tax shall be paid by builder @ 18% on RCM basis. However, Tax on cement purchased from unregistered person shall be paid @28% under RCM and on capital goods under RCM at applicable rates.
For the purpose of calculation of GST on sale of under constructed property, the value of supply is calculated in a different method. In this method 1/3rd of total amount charged for transfer is deducted, to arrive at the value on which tax will be levied. Accordingly, value of taxable supply shall be 2/3rd of total value of supply. 1/3rd of the total amount is deemed as value of land or undivided share of land supplied to buyer and GST is not charged on sale of land as per Schedule III.
The author of the above article is Manav Khanna.
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