GST and Real Estate: How Has the Implementation of GST Affected the Real Estate Sector?

The sector of real estate has a very important role to play in the overall development of the Indian economy and it is the second-largest sector in India in terms of employment generation (after agriculture).

The real estate sector is considered one of the most important pillars of the Indian economy because it contributes around 6% – 8% to the GDP (Gross Domestic Product) of India. Thus, investors get attracted to investing in the real estate sector of India.

Now, before deciding to invest in real estate you should have a clear idea about Goods and Services Tax (GST) on real estate to avoid any financial loss. Before the application of GST, there were several taxes in real estate like VAT, stamp duty charges, registration charges, service tax, etc. each of which had different rates and also varied from one state to another.

But after the implication of GST, the problem of multiple taxes does not exist. Although it was assumed that the introduction of GST will bring comfort to the real estate investor as well as developers or builders and boost the sector, however, after the implementation of GST several issues have cropped up.

GST on Real Estate for Under-construction Real Estate Properties

The Indian buyers or investors in the real estate sector are required to pay GST on the purchase of various under-construction real estate properties like flats, apartments, etc. at a rate of 1% for the affordable housing sector and 5% for the non-affordable housing sector. GST is also applicable to the purchase of developable plots in the real estate sector.

GST on Flat Purchase

Those buying flats and apartments in under-construction projects in India’s megacities are also liable to pay GST on flat purchases in 2022.

Note that GST on flat purchases is not applied to completed projects. A completed project is that which has received a completion certificate from a competent authority.

Taxes Before and After GST Implementation

The tax structure in the real estate sector has witnessed a massive change after the implementation of GST. Before the introduction of GST, there were several state and central taxes on real estate.

These rates also changed with the change in the state. The name of some major taxes that the developers are required to pay before GST in real estate include:

Value Added Tax (VAT),
Central Excise,
Entry Tax,
LBT,
Service Tax, etc.

After the implementation of GST, various indirect taxes are subsumed and it offers a uniform regime to the Indian taxpayers throughout all states and all economic sectors and the sector of real estate is not an exception. The main focus of GST is ‘one nation one tax’.

Types of Central and State Taxes That GST Subsumed

The names of the central and state taxes in the real estate sector that are subsumed due to the introduction of GST are mentioned below:

Central Taxes

Excise Duty
Customs Duty
Special Additional Duty of Customs
Service Tax
Central Sales Tax
Central surcharge and cess on supply of goods and services

State Taxes

State Value Added Tax
Entertainment Tax
Luxury Tax
State Excise Duty
State surcharge and cess on supply of goods and services
Taxes on advertisement
Purchase tax
Taxes on lotteries, gambling, and betting

Reduction of GST Rate on Real Estate in 2022

Due to the adverse impact of GST on the overall growth of real estate the government has reduced the rate of GST on real estate several times and this may lower the overall pay-out of the investor by around 4 % – 6%.

GST Rate on Flat Purchase 2022
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GST Calculation on Affordable Property $C:\Users\HP\Desktop\2.JPG$

GST on Government Housing Schemes $C:\Users\HP\Desktop\3.JPG$

According to the new regime, the government housing schemes which are meant for common people have only 1% GST.

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GST on maintenance charges for housing societies

If the flat owners pay at least Rs 7,500 per month to their housing society then in this situation the flat owner is liable to pay 18% GST.

Important facts about GST: Did you know?

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In Summary

It seems that the implementation of GST has a positive role in boosting the real estate sector of India. But after the implementation of GST the real estate sector of India has experienced a slow growth rate because of several factors.

Thus, the rate of GST in real estate is reduced several times after its implication. Alright, this is all for today. I hope that this article has served its purpose. Still, if you face any problems, feel free to drop your concern at info@roodland.com.

Our expert team will guide you in the best possible manner and all your doubts will get resolved. Till then, keep sharing this article with your friends and dear ones.

You may also visit The Real Talks platform to read more informative articles related to real estate!

GST and Real Estate: How Has the Implementation of GST Affected the Real Estate Sector?