Goods and Services Tax (GST) on New Flats in India: A Comprehensive Guide

Goods and Services Tax (GST) is applicable on new residential flats in India, with varying rates depending on whether the flat is classified as affordable or non-affordable. As of the last update in August 2023, the current GST rates are typically 1% for affordable housing and 5% for non-affordable housing when the property is under construction.

Affordable Housing vs. Non-Affordable Housing

The GST rate on new residential properties can vary based on the status of the housing. Affordable housing is generally defined as properties that are available at a lower price point, while non-affordable housing refers to luxury properties that come with higher price tags.

For affordable housing: The GST rate is 1% without Input Tax Credit (ITC).

For non-affordable housing: The GST rate is 5% without ITC.

These rates specifically apply to under-construction properties. For completed flats, GST is not applicable since the transaction is considered a service that has been completed.

Regular GST Rates and Abatement

As of January 7, 2019, a 7.5% GST (3.75% for both Central and State GST) is applicable on the purchase of flats in new real estate projects. However, there is an allowance of one-third abatement on the price charged due to the undivided share of land given to the buyer.

For example, if a residential flat costs Rs 90 lakhs, the GST would be calculated as follows:

Calculate the abatement: 1/3 of Rs 90 lakhs Rs 30 lakhs. Calculate the taxable value: 90 lakhs - 30 lakhs Rs 60 lakhs. Calculate the GST: 7.5% on Rs 60 lakhs Rs 4.5 lakhs.

Alternatively, if the GST is applied to the total amount without abatement:

Apply 5% GST on Rs 90 lakhs: 5% of 90 lakhs Rs 4.5 lakhs.

It is important to note that no GST is payable if a residential flat is purchased after receiving a completion certificate from the Municipal authorities.

Who Collects and Pays GST?

The seller is responsible for collecting and paying the GST on the sale of a new flat. The buyer does not have an obligation to pay GST to the government.

Exclusions and Exceptions

It is worth noting that GST is not applicable on ready-to-move-in homes (flats that are already completed). This is because the transaction is considered a supply of a completed service, and there is no additional construction or work involved.

In conclusion, understanding the GST applicable on new flats in India is crucial for both buyers and sellers of residential properties. Rencently, the tax rates and definitions may have changed, so it is advisable to check for any updates or changes in legislation.