Impact of GST Rate on Home Loans EMIs in India


October 30, 2019

GST on Home Loans

One Hundred and First Amendment of the Constitution of India was passed by the Indian government recently. The Goods and Services Tax (GST) which came into effect from 1 July 2017 in India has eliminated various Central and State taxes like excise duty, VAT and service tax. At the time of implementation, GST rates were categorised in five different slabs – 0%, 5%, 12%, 18% and 28%. Still, there is a dilemma what is the impact of GST in the near future in the different industries like real estate, coaching, healthcare and more. One question which is bothering everyone’s mind is whether the citizens would get benefit from GST implementation or not.

“Housing for all campaign” has been launched by the Prime Minister Narendra Modi. Under this campaign, the Prime Minister will be offering roof/ house to all the citizens from below the poverty line and low-income families at low-interest rates. Due to slashes in home loans interest rates, it is a great opportunity for all the citizens to avail the facility of home loan as soon as possible.

While the prospect of owning a new house seems enticing, the effect of the goods and service tax on the real estate market might hold many customers back.

Major Impact of GST on the Real Estate Market (and Home Loan EMIs)

  • After the implementation of GST, people on EMIs of home loans for constructing a new house and also on lease/ rented (residential complex, industrial, commercial).
  • The taxpayers are entitled to pay the goods and service tax to construct a new house and also on lease/ rented (residential complex, industrial, commercial).
  • In respect of selling houses or buildings, taxpayers are no longer required to pay taxes on it.
  • From the constructors or builders point of view, GST is beneficial for them as the new regime has replaced the various taxes like service tax, VAT, etc, which leads to reduce the cost of constructions.

GST Rate on Home Loans

Home loan borrowers have to pay a standard 18% GST at the time of purchasing a new house.

Also Read: GST on Insurance Premium and Bank Charges

Effect of GST on Home Loan EMIs

Many people are applying for home loans these days due to the slashed home loan interest rates and home loans are available easily with fewer efforts. In the forthcoming months, the focus would be only on how GST influences the home loan EMIs.

Impact of GST on home loans EMIs are mentioned below:-

GST is being levied at 18% on home loans across India. VAT and Service Tax were eliminated after the implementation of GST in India but higher 18% GST rate on home loans is a little bit expensive for borrowers. Due to high-interest rates, banks and lenders will also be enhancing the interest rates on home loans.

Recommended: GST Effect on Banking Sector in India

The above-mentioned points are based on speculations and it will be interesting to know how the GST would influence home loan EMIs. What interest rates would be charged by the banks and lenders on home loans EMIs and how it would influence the real estate market.


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