How is GST charged on residential property ? | Hello Homes

For tax purposes, the process of buying an under-construction property was seen as paying for a service from the builder of a project. Earlier, this attracted service tax. But since GST got implemented, it replaced service tax in these transactions. A completely built property has been kept out of the GST regime and a buyer need not pay any GST for it.

At present, if a non-affordable under-construction property is bought, the transaction attracts GST at 18% on two-thirds of its value, which effectively comes to 12% GST (on total value) with full input tax credit (ITC). ITC helps a business reduce the GST amount it has paid on inputs or raw material from the amount of GST it has to deposit on the output. This credit is passed on to the buyers. Similarly, in case of affordable under-construction property, GST is charged at 12% on two-thirds of its value , which effectively means 8% with full ITC. One-third of the value is considered to be the cost of land and, thus, not considered for GST.

Besides GST, the buyer has to pay stamp duty and registration fee on a property. Stamp duty is levied by respective state governments and usually varies between 5% and 8% across the country. This means that you have to pay an additional about 20% of the property value in GST and other fees when buying a house.

Homebuyers as well as developers have been asking the government to reduce GST on residential properties.