Applicability of GST on Under Construction Flats in India


July 18, 2019

GST on Under Construction Flats

The government has recently revised GST applicability and rates on both under-construction properties and ready-to-move-in flats. The new rates will be applicable from April 1, 2019.

GST (Goods & Services Tax) is an indirect tax system which was implemented in India on 1st July 2017 thereby replacing all the existing indirect taxes on the supply of goods and services. Here we will discuss the important points about GST on under construction flats.

GST on Under Construction Flats (Properties)

Before April 2019, the GST rate on the supply of under construction flats was 12% with ITC (input tax credit) available.

According to the new rules, the new GST rate on under construction flats with price above Rs 45 lakhs is 5%, but ITC will not be available on the same.

The same GST rates and rules will also be applicable to the supply of ready-to-move-in flats, given that the completion certificate is not issued by the time of sale.

On the other hand, properties whose construction is completed and the certificate is issued will not attract the GST and are only liable for stamp duty.

Recommended: GST Rate on Completed Flats in India

GST on Affordable Homes (Under construction)

GST rate on the sale of affordable homes is 1% with no ITC. Previously, it was 8% with ITC availability.

However, there are certain conditions.

For one, only the under-construction properties with a valuation of Rs 45 lakhs or less will be considered under the affordable housing scheme. The sale of such properties will attract 1% tax with no ITC.

Another condition for a property to be eligible for affordable housing scheme is that the carpet area of the property should be less than 650 sq ft (in metro cities) and less than 960 sq ft in non-metros, while the price must be below Rs 45 lakhs.

On the other hand, the sale of under-construction properties whose value is above Rs 45 lakhs will attack 5% GST and no ITC will be available on it.

The recent changes in the GST rates for under-construction flats, especially in the affordable housing scheme, are expected to help the real estate industry under GST, giving a boost to the sale of under-construction properties in both metro and non-metro regions.

Another important point to note here is that the new, revised GST rates on under-construction properties are optional, as the builders/developers can continue to choose to levy the old GST rate of 12% on under construction flats (and 8% on affordable housing) if they wish to avail ITC. However, this is only applicable to the ongoing projects whose construction started before April 1 or did not finish by March 31, 2019.

New construction projects, starting from April 1, will mandatorily attract GST as per the new rules, i.e. 5% GST on under construction flats with value above Rs 45 lakhs and 1% on flats with value below Rs 45 lakhs.


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