Real estate has emerged as the cornerstone of Indian economic development. Previously, under the tax regime, purchasers had to pay multiple taxes like registration charges, stamp duty, VAT, service tax, etc. However, things have changed since the implementation of the GST law.
Under the new GST law, purchasers must pay 12% GST on real estate properties that are under construction. However, they won’t have to pay any GST for ready-to-move-in or completed housing units, provided the Completion Certification has been granted for that property.
As of April 2019, the GST council decided to reduce the GST on residential property from 12% to 5%. It also reduced the rate from 8% to 1% for purchasing an affordable residential unit. However, no purchaser can avail of the benefits of the input tax credit (ITC) under the revised GST rate on a flat purchase.
This article explores all the frequently asked questions about GST on an under-construction property, commercial property, rental income, etc. So, keep reading.
What is the revised GST rate on residential housing projects?
Here is a table representing the latest revised GST on property purchase (residential) without ITC as of April 1, 2019:
| Basis | Applicable GST Rate |
|---|---|
| Under construction affordable residential projects w.e.f April 1, 2019 (When the developer chose the new tax rates) | 1% without ITC |
| New affordable residential units started on or after April 1, 2019 | 1% without ITC |
| New projects, except for the affordable residential projects as of April 1, 2019 | 5% without ITC |
| Under-construction projects, except for the affordable residential projects as of April 1, 2019 | 5% without ITC |
| Development projects with less than 15% of the total carpet area devoted to commercial space | 1% without ITC |
Conditions To Meet to Qualify for The Above-Mentioned GST Rates:
- Buyers cannot claim the input tax credit (ITC).
- A minimum of 80% of the total value of the raw materials must be purchased from a registered dealer.
Services Excluded from This Calculation:
- Long-term land lease
- Electricity value
- Natural gas and motor spirit
- Grant of developmental rights
- Floor space index
- High-speed diesel value
What is the revised GST on rental income?
Under CGST Act Section 2(83), rental income is incorporated within the term “outward supply”. Moreover, the CGST Act Section 7 also covers rental income under the segment “scope of supply.” Plus, the CGST Act Schedule II, which outlines the transactions or operations to be covered as the supply of services or supply of goods, especially mentions, and covers these rent types:
- Letting out of a building (whether residential, commercial, or industrial complex) for commerce or business.
- Any license, lease, tenancy, or easement to occupy and claim the land.
GST on Rent: For Commercial Properties
When someone rents any commercial property in India, they will be liable to pay GST charges. Currently, the GST on rental income from commercial properties is 18%.
GST on Rent: For Residential Properties
There is no GST on rent from residential units. No GST is applicable on income generated from renting a residential building for residential purposes. However, there won’t be any exceptions for renting residential property for commercial reasons.
What are the GST rates on commercial properties in India?
The GST on a commercial property is comparatively higher than the GST rate on a residential unit. Here is a table representing the most updated GST rates on commercial real estate projects in 2022:
| Applicable GST Rate | Type of Commercial Property |
|---|---|
| 5% | Commercial properties are constructed within real estate residential projects with less than 15% of the total carpet area. |
| 12% | Standalone commercial properties within the real estate residential projects with space of more than 15% of the total carpet area. |
How to calculate GST on commercial property?
Here is an example that represents how to calculate GST on commercial property in India:
| Valuation of the property (per sq. ft) | INR 6000 |
| GST applicable | 5% |
| GST valuation for every Square Feet | INR 300 |
| Cost of the property after GST charges (per sq. ft) | INR 6300 |
| The total carpet area of the commercial property | 400 sq. ft |
| The total cost of the property after GST | INR 25,20,000 |
When working with Piramal Realty, clients can relax knowing that their property purchases and rental revenue are not subject to the new GST. To guarantee a smooth and trouble-free experience for the buyer, we make sure that all our projects are conceived and produced in accordance with the most recent RERA criteria.
Disclaimer- This article is based on the information publicly available for general use and from the reference link mentioned herein. We do not claim any responsibility regarding the genuineness of the same. The information provided herein does not, and is not intended to, constitute legal advice; instead, it is for general informational purposes only. We expressly disclaim/disown any liability, which may arise due to any decision taken by any person/s basis the article hereof. Readers should obtain separate advice with respect to any particular information provided herein.
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