GST On Residential Property (2023 Rates)

To meet their tax obligations, property buyers must pay GST on residential property purchases in addition to property tax. In recent years there have been some changes to his GST regime in the real estate sector. Potential investors and homebuyers must consider the impact of GST on real estate to make an informed decision about investing in this sector.

What is the GST rate for residential buildings?

People who buy residential property in projects under construction in India will have to pay GST on their purchases in 2022. GST on property purchases does not apply when purchasing property in a completed development.  A completed project has received a certificate of completion from the competent authority.

• If the landlord is registered under GST, it does not matter and GST does not apply.

• If the tenant is registered for GST, there is no GST when the property is rented to a private individual or for personal use.

• If a residential unit is rented to a business entity, the GST rate is 18%.

How do I pay GST on a flat?

Flat owners must pay 18% GST on residential property if they pay a minimum maintenance charge of Rs 7,500 to their housing society. The housing societies or Residents Welfare Association (RWA) impose a monthly charge of Rs 7,500 per apartment, taxed at 18% of the total amount.

Housing societies with an annual turnover of less than Rs.20 lakh are exempt from paying GST. Meet both conditions for GST to apply ie. 

• Each member must pay a monthly maintenance fee of Rs 7,500 or more and
• An annual turnover of RWA must be Rs 20 lakhs or more

The Government also clarified that if the charges exceed Rs 7,500 per member per month, the full amount will be taxable.

Example: 

If the maintenance fee is Rs 12,000 per member per month, 18% GST for a flat is payable for the total amount of Rs 12,000 and not paid for Rs 4,500 (Rs 12,000 to Rs 7,500).

Owners of multiple flats in the same housing societies are also taxable separately for each unit.

Why is there no GST on completed flats?

If a completed home is purchased in a secondary transaction, no Goods and Services Tax will apply to such sales transaction. It is therefore important to note that GST is due only on payments made to contractors for the provision of construction works. Therefore, when buying a finished (ready for occupancy) or second-hand apartment, the question of providing construction work does not arise. So, when buying completed apartments, GST would not be applicable.

Application of GST to the property is contingent on the competent authority issuing a certificate of completion. If a property’s certificate of completion is obtained before payment is made to the seller, this is considered a sale of the property ready for occupancy rather than an offer of goods or services. Therefore, no GST is levied on the completed apartment’s sale.

What if GST is not paid by the buyer?

If the buyer is not registered under GST laws, the seller is entitled to a refund of taxes and duties paid under the pre-GST regime. Refunds are only permissible if the items were sold not before 6 months from 1 July 2017 and are returned within 6 months from 1 July 2017.

Is GST applicable on the resale flat?

Buyers of resale flats do not have to pay taxes under the Goods and Services Tax (GST). Unlike other under-constructed apartments, the buyer does not have to pay GST at the time of purchase, as the apartment is ready-to-move-in and is not covered under the works contract. But, if the buyer purchased the property from a developer who paid GST during construction, the buyer must pay her GST amount before purchasing the home. According to the GST Council’s recommendations, the purchaser of the building will be liable to a tax of 18%. However, it is 12% for properties under construction.

How can I avoid paying GST on my property?

When purchasing a flat, you can avoid paying GST if you:

•  Purchase a completed or already constructed flat ( flat with a certificate of completion)
•  Purchase a flat with an occupancy certificate 
•  Purchase of second-hand flat

How do you calculate GST on 2022 flat?

To calculate GST on residential property in India, you need to know the terms for affordable or non-affordable properties. GST for affordable housing is lower than GST for non – affordable housing.

Let’s see an example of GST calculation when buying a flat in India.

GST Calculation for Affordable Property

GST Calculation for Non- Affordable Property

Frequently Asked Questions (FAQs)

Can a builder charge 12% GST?

A flat rate of 12% applies to properties under construction, but no GST applies to properties that are ready for sale if a Certificate of Completion (CC) has been issued.

Who should pay the GST builder or the buyer?

At the time of purchase, the buyer must pay GST to the builder.

Is GST on property refundable?

No, if you purchase a property under construction, GST is taxable and non-refundable. However, GST will not apply if the property is purchased after completion. It doesn’t matter when you register.

Who pays GST on residential property?

GST is payable by property buyers and investors when investing in properties under construction.

Do we need to pay GST for a resale flat?

No, you don’t have to pay GST resale flat.

Is GST mentioned in the sale deed?

 GST rate must be stated in the sale deed.

Wrapping UP

GST is one of the most important reforms in the property market. Property tax is simplified under GST. Taxation affects developers and property buyers. The new GST was 1% for low-cost residential developments and 5% for luxury properties. Input Tax Credit (ITC) is not available at a 1% GST rate. GST is payable by debiting the electronic cash ledger.

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