Tax obligations are meant to impact everyone. Home buyers also need to pay GST on property purchase along with other property taxes. For some years many changes have been introduced to the GST on real estate sector. The potential investors along with the homebuyers need to check the implications of GST on real estate to make a proper decision.

What Do You Understand by GST on Real Estate?

Usually, the investors as well as the home buyers pay GST in under-construction properties. Before the implementation of GST on real estate, there were several taxes such as stamp duty, VAT, service tax etc. that was expected from the homebuyers.

After GST on real estate came into force, you only need to pay taxes on under-construction properties. A property that is ready for sale or is completed must have a legitimate completion certificate.

How to Calculate GST on Real Estate?

You can calculate GST on real estate with the help of the cost of property and the applicable GST rate as well as other charges. The GST liability is calculated by adding the Central GST or CGST and the State GST or SGST.

Total GST on real estate= CGST+SGST

Exemptions on GST on Real Estate

The exemptions to GST on real estate has been explained below:

1. As per Schedule III of the GST Act, 2017, ready to move in properties has been excluded from the category of goods or services.
2. This activity is similar to the sale or purchase of the property.
3. GST on real estate must also not be paid on resale properties and sale or purchase of land.
4. The real estate developers must claim ITC on the construction material as per the GST system.

Key Points on GST on Real Estate

The following are the key points to be remembered with regard to GST on real estate:

• As per GST, if a residential property has 15% of commercial space it will be treated as residential property.
• The GST for the commercial unit is 12%.
• If in case the tenant is a commercial firm the landowners need to pay GST.
• On home loans, GST is applicable on services such as processing fee or legal fee etc.
• It is an important point to understand that even after applying the GST the under-construction houses are must cheaper than the ready to move in real estate projects.

Taxability of GST on Real Estate

The taxability on real estate applies to following points:

• The goods and services must include only movable property.
• Services can be defined as anything which means that immovable property can also be termed as services.
• Capital goods explain goods hence it includes only movable property.

Conclusion

Though the real estate market has faced a setback due to the pandemic in the year 2020 and also the beginning months of 2021. Still, market analysts believe that by the end of 2021 the real estate market will increase. Hence, investors and homebuyers can now safely make a move towards the real estate market. You can contact us to get a complete update about GST on real estate sector.

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