At the 33rd GST Council Meeting held on 24thFebruary 2019, new GST rates have been introduced for residential real estate which will come into effect from the 1st of April 2019. The new GST rates on residential real estate transactions have been proposed as follows:
- GST to be charged at 5% without Input Tax Credit (ITC) on residential properties that are not part of the affordable housing segment.
- GST to be charged at 1% without ITC on residential properties that are included in the affordable housing segment.
GST on real estate in case of under construction properties is 12%. GST does not apply to sale of completed properties (where completion certificate has been issued) or to the resale of old properties. Builders receive input tax credit on the materials purchased from suppliers/contractors and under the current GST structure, were expected to pass it on to home buyers. However this has not happened so far. As a result there may be changes in the GST regime with respect to real estate in the future.
Real Estate has historically been a preferred investment choice for many Indians and the sector has been driven to a large extent through investments made in the residential property segment. A joint report from JLL and CREDAI (Confederation of Real Estate Developers’ Associations of India) has estimated that housing sector investments in India since 2014 amounted to Rs. 59,000 crore and accounted for approximately 47% of the total investments in the sector with projections indicating further increase in the coming years.
During the pre-GST era of taxation, multiple taxes were applicable to real estate namely VAT, stamp duty charges, registration charges and service tax each of which featured different rates and also varied from one state to another. Implementation of GST on real estate has played a significant role in simplifying the taxation of Real Estate in India and can range from 5% to 18% depending upon some key factors. In the following sections, key aspects of GST on real estate are discussed.
GST Rate Comparison before and after 1st April 2019
As mentioned in an earlier section, GST on residential property has been slashed and the new rates will come into effect from the 1st of April 2019. The following is a comparison of the real estate GST rates as applicable before and after the 1st of April 2019: content source: Paisabazaar.com