GST on sale of Real Estate and Rates

GST on sale of Real Estate and Rates

GST on sale of Real Estate and Rates: Various activities undertaken in the real estate sector are under the ambit of GST. GST was  launched to streamline and rationalize the indirect tax system and establish a consistent market throughout the nation. Lets see applicability of GST on sale of Real estate properties in India and the current GST rates on real estate in 2023.

GST on sale of Land

As per Schedule III of the CGST Act, the land sale is neither considered a sale of goods nor a supply of services. The land is an immovable property, the sale of which attracts only stamp duty. Thus, GST does not apply to the sale of land solely.

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GST on sale of land after some development

Under GST, the value of supply is the price that the seller is charging from the buyer for the sale of goods or services. As land is an immovable property, no GST is applicable on its sale.

However, through circular no. 177/09/2022-TRU it has been clarified that sale of land after levelling, laying down of drainage lines etc. is sale of land and does not attract GST. However, it may be noted that any service provided for the development of land, like levelling, and laying of drainage lines (as may be received by developers) shall attract GST at the applicable rate for such services.

Read Also: GST on Renting of Immovable Property – Residential and Commercial

GST on sale of Residential Apartments or home

A “Residential Real Estate Project” means a “Real Estate Project” in which the carpet area of the commercial apartments is not more than 15 per cent. of the total carpet area of all the apartments in the project.

For levy of GST, there should be an underlying supply of goods or services, or both, for a consideration in the course or furtherance of business. So, GST is applicable only on under construction building, flat & apartment including commercial property (Shops, godowns , offices etc.) and not on sale or transfer of property after issuance of completion certificate (CC) or after its first occupation.

Government has divided the residential properties as affordable and non-affordable for levy of GST on it. The residential properties which does not fall under the criterial of affordable residential apartments are non-affordable residential apartments and that will be taxable accordingly.

Read also: Maintenance of books of Account and Records under GST law

What are Affordable Residential Apartments?

An affordable residential apartment is one in which:

  • Carpet area is up to 60 square meters for metropolitan cities;
  • Carpet area is up to 90 square meters for cities and towns other than metropolitan cities and;
  • The gross amount charged by the builder is not more than Rs.45 lakh.
[Metropolitan cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR) with their geographical limits prescribed by Government.]

GST is 1% for affordable residential apartments on the property value excluding land. While GST is 5% for non-affordable residential apartments on the property value excluding land.

Note : The rates given above is after one-third deduction for the value of land.

Read Also: 10 Common mistakes to Avoid When Filing GST Returns

GST rate on the construction of commercial apartments

As per Para 5(b) of Schedule II of CGST Act, 2017,  construction of a complex, building, civil structure or a part thereof, 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.

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

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GST Exemptions on Real Estate 

Under schedule III of GST Act, 2017, ready-to-move-in properties do not come under the category of goods or services. It is more like an activity of purchase or sale of a property. This is why GST is not applied to ready-to-move properties with a legitimate Completion Certificate.

Similarly, individuals will not be required to pay GST on resale properties and purchase and sale of land.

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Current rates of GST on sale of Real Estate

Type of Property Status GST Rate ITC Available       
Residential properties Under construction 1% or 5% depending on affordability criteria (after deducting value of land) No
Commercial Properties in RREP Under construction 7.5% (effective rate 5% after deducting land value) No
Other Commercial Properties Under construction 18% (effective rate 12% after deducting land value). Yes
Commercial Completed or ready-to-move No GST if CC is issued before the sale. No
Land Purchase or sale No GST as it is neither goods nor services. No
Read Also: Mismatch in GSTR-1 & GSTR-3B: GST department started recovery

Impact on registration charges and stamp duty 

Under the real estate GST scheme, the registration and stamp duty fees are unaffected. The registration fee is typically 1% of the property value, though occasionally the state may impose a flat rate. On the other hand, stamp duty is assessed at a rate between 5% and 10%.

However, people are exempt from paying GST on their apartment registration.

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