GST (goods and Service Tax) is an indirect tax which applies to all supply of goods and services. When it comes to buying a home, GST is applicable but only on under-construction properties because here construction refers to the supply of service.
How is GST Applicable to Completed Flats?
When we talk about the fully constructed apartment or home, there is no GST rate on completed flats.
This is because a completed project – ready-to-move apartment or villa is neither a good nor a service. When the property is under construction, the developer is giving a service to the buyer by building or constructing the project and so the GST is imposed. But in a completed project, there is an absence of service and so no GST is applicable. It is a property on which stamp duty is paid.
Under the GST regime, under-construction and completed projects are treated differently when it comes to taxation. Here, we will throw light on GST rate applicability to completed flats.
Ready-to-move apartment is out of GST ambit. GST is applicable when the service is received and the payment is done for the construction services. When it comes to fully-constructed buildings, where construction has already been done, no GST would be applicable to the purchase of such projects because of the absence of construction services.
And the same is with the used apartment when you buy a ready to move in apartment in the resale offer or an apartment which is already used by someone, you are under no duty to pay GST on it.
Also Read: GST Impact on Property
Let us further dive into the applicability of GST on the immovable property or buildings. Basically, it depends on the issuance of completion certificate. When the completion certificate for a specific property is procured before making any payment to the seller, it would be referred as a sale of the ready-to-move-in property and would not be considered as supply of goods or services. Hence, the sale of completed flats will be exempted from GST i.e. no GST on completed flats.
However, the Goods and Services Tax (GST) will be applicable on sale of ready-to-move-in flats as well as under-construction property where the completion certificate is not issued at the time of sale.
In short, GST will not be charged from the buyers of real estate properties, for which the completion certificate is issued during the time of sale.
Ready-to-move apartments do not attract GST and only the developers will get input credits on the construction costs.
Developers will collect and pay GST on the project’s cost.
The premium charged for ready to shift apartments may nullify the benefits under the GST.
GST on Completed Flats or Apartments Purchased Under CLSS
The (CLSS) (Credit-Linked Subsidy Scheme) has been brought in with the aim to provide homes to the weaker, lower or middle-class sections of the society at affordable prices. The eligibility for the scheme has been set as – the highest annual income of up to Rs 18 lakh. Under the scheme, the GST on these affordable houses will be 8% instead of 12%.
Section 171 of the CGST Act defines that if there is a cutback in GST rate on the supply of goods or services then the benefit of the input tax credit, which has to be given to the buyer, would also be curtailed in the same proportion as GST. In case, when the seller fails to lessen the prices after a contraction in GST rates, the matter will be taken to the Anti-Profiteering Authorities.