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Current GST on Flat Purchase (2024) – A Complete Guide for Home Buyers

by Ashiana / / 3687 views/ Reading Time: 5 minutes

Purchasing a home is a big life event for many people. However, the path to homeownership frequently involves numerous financial considerations, one of which is the Goods and Services Tax (GST). The adoption of GST on flat purchases has had a substantial influence on home buyers, changing the entire cost of purchasing a property and informing decision-making processes. Whether you’re a first-time buyer or an experienced investor, understanding the GST’s role in real estate is critical for making sound decisions.

GST, which was introduced in 2017, is a comprehensive tax applied on all value additions. In the real estate sector, GST has a direct impact on the cost and pricing of assets, especially flats. In India, GST on property is levied on the sale of under-construction or development-stage properties. This tax does not apply to ready-to-move-in flats or resales, which are deemed completed projects with GST paid during the construction period.

How does GST impact real estate in India?

A variety of property classifications, such as luxury homes, affordable housing, and GST on apartments under construction, as well as registration and stamp duty costs, can be used to analyze the impact of GST on the real estate industry. Affordable housing benefits from a minimal GST rate of 1%, directly benefiting buyers. Conversely, luxury housing sees a revised GST rate of 5%, leading to increased savings for property owners. However, GST on under-construction flats has struggled due to reduced demand, prompting government initiatives to stimulate demand by lowering GST rates and offering tax benefits on interest payments for buyers. These measures, combined with reduced GST rates, facilitate faster sales for builders. Crucially, the new GST on apartments has no bearing on registration or stamp duty fees, which normally total 1% of the property value for registration and, depending on state laws, can range from 5% to 10% for stamp duty.

GST rate on Real Estate 2024

The current GST rate for under-construction projects, including affordable housing, is significantly lower than the former tax regime, which contained several taxes such as VAT, Service Tax, and so on. This not only streamlines the process and increases transparency, but it also lowers the tax burden for buyers. As discussed above the rate of GST varies according to the type of properties under which it falls. For affordable housing options, it is 1% and for other categories, it is 5%. Homebuyers in India pay GST on under-construction flats, apartments, and bungalows too. Even the rates of GST on new flat purchases and GST on ready-to-move-in are different.

GST on Flat purchases in 2024

Type of property GST rate
GST on flat purchase – under construction (affordable housing) 1% without Input Tax Credit (ITC)
GST on flat purchase – under construction (non-affordable housing) 5% without Input Tax Credit (ITC)
GST on read-to-move flats Nil
Reference – Tata Capital

5 Important Things Home Buyers Should Know about GST on Flat Purchase

  • GST on under-construction flats is economical compared to GST on ready-to-move flats, even after the incidence of GST.
  • GST on a home loan does not directly influence the interest rate or the equated monthly installments (EMIs) of your home loan.
  • GST applies to services such as legal fees and processing fees that are associated with home loans.
  • Under GST regulations, if a buyer cancels a flat booking before possession, they can request a refund of the GST paid on the advance amount. This is because GST applies to the sale transaction, which is only finalized upon possession of the property.
  • The GST on home purchases can increase the cost of your property. However, by ensuring proper documentation, you may be eligible to recover a portion of this through Input Tax Credit (ITC).
 

How Does GST Impact Luxury Property?

Under the revised GST rates, purchasers of luxury properties can now save more money than they could have previously.
Luxury housing Before April 1, 2019 After April 1, 2019
Property cost per sq ft Rs 7,000 Rs 7,000
GST rate on flat purchase 12% 5%
GST Rs 840 Rs 350
ITC benefit for the material cost of Rs 13,000 at an average of 15% Rs 126 Not applicable
Total Rs 7,714 Rs 7,350
 

Tax Benefits for Women and Old Age:


  • Tax Benefits for Women –

Previously, there existed distinct income tax slab rates for women, entailing higher tax exemptions than men. However, since 2012-13, the income tax slabs for women and men have been unified. Income tax slabs in India are determined based on critical factors such as the taxpayer’s income and age.

Taxpayers fall into three categories for income tax purposes: 1. Individuals below 60 years of age
  1. 2. Individuals aged between 60 to 80 years (senior citizens)
  2. 3. Individuals over 80 years of age (super senior citizens)
 
  • 1. Individuals below 60 years of age –
Income range Income tax rate
Up to Rs. 2,50,000 Nil
Rs. 2,50,001 to Rs. 5,00,000 5% of the total income which exceeds Rs. 2,50,000
Rs. 5,00,001 to Rs. 10,00,000 Rs. 12,500 + 20% on income exceeding Rs. 5,00,000
Above Rs. 10,00,000 Rs. 1,12,500 + 30% on income exceeding Rs. 10,00,000
 
  • 2. Individuals aged between 60 to 80 years (senior citizens) –
Income slab (in Rs.) Income tax rate
Up to Rs. 3,00,000 Nil
3,00,001 to 5,00,000 5% of income over Rs. 3,00,000
5,00,001 to 10,00,000 Rs. 10,000 + 20% of income exceeding Rs. 5,00,000
Above 10,00,000 Rs. 1,10,000 + 30% of income exceeding Rs. 10,00,000
 
  • 3. Individuals over 80 years of age (super senior citizens)-
Income slab (in Rs.) Income tax rate
Up to Rs. 5,00,000 Nil
5,00,001 to 10,00,000 20% of income over Rs. 5,00,000
Above 10,00,000 Rs. 1,00,000 + 30% of income over Rs. 10,00,000
Reference – ClearTax

  • Tax Benefits for Old Age –

Senior citizens aged 60 years and above can choose between the old and new tax regimes. The new tax regime, introduced by the central government in the Finance Act of 2020, offers concessional tax rates. However, it’s important to note that non-resident senior citizens aren’t eligible for the tax slabs, as standard income tax provisions apply to them. Under the new tax regime, individuals can opt for concessional tax rates as per Section 115BAC, subject to conditions regarding exemptions, deductions, and losses. On the other hand, in the old tax regime, senior citizens can enjoy exemptions and deductions without any conditions.

Conclusion

In conclusion, all house buyers must understand the complexity surrounding GST on flat purchases. Understanding GST rules can have a big impact on decision-making processes, from the effect on real estate costs to the advantages for various buyer types. Home purchasers will be able to make better-informed decisions that are in line with their financial objectives and more skillfully navigate the real estate market thanks to the updated GST rates and available tax perks. Keeping up with GST laws and tax advantages is essential for optimizing savings and guaranteeing a seamless house-buying experience as the real estate market develops. Additionally, tax benefits are available for women and senior citizens, offering concessions based on income slabs and age categories. Overall, understanding the current GST on flat purchases is essential for homebuyers navigating the real estate market in India.

Real Estate Frequently Asked Questions:

 

1. Is GST applicable on flat purchases??

GST does not apply to ready-to-move new flat purchases. The GST rate on an apartment that is under construction (affordable housing) is 1% without ITC. GST on luxury flats (under non-affordable housing) is 5% without an Input Tax Credit (ITC).

2. Can we claim GST paid on a flat purchase?

Yes, but only flats that are still under construction qualify for GST claims. To apply for a refund, submit an application to the GST authorities together with the property builder’s GSTIN and the total amount of GST paid.

3. Is real estate included in GST?

Yes, real estate is included in GST for new or under-construction homes. A 1% GST is applied to the affordable housing category. For real estate falling into the non-affordable category, GST is 5%. On the sale of business property, there is a 12% GST. The GST on a property that is still being built is 12%. Fully constructed properties are not subject to GST.
Category: Real Estate, Investment,

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About The Author

Ashiana, Ashiana Housing build homes. Homes surrounded by vast green spaces and fresh breeze. Homes cocooned in secured gated complexes. Homes where futures are forged and there are opportunities to grow. And Homes in environments brimming with healthy activity, trust and respect. At heart, we build communities with care.

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