GST i.e. the Goods and Service tax is a uniform tax system that gives freedom from multi-level tax payment. The Goods and Service tax includes VAT, Service tax and more. The GST system was introduced on 1st July 2017 by the Narendra Modi Government and the GST Council is formed to discuss and evaluate the entire process. The GST is applicable to the real estate market also and thus here are the basic FAQs about GST you all should know:
- What will be the effect of abolishment of ITC on property prices?
The developers have two options. The first option is to follow the old GST price that has an advantage of ITC on the ongoing projects. The second option is to go by the new GST rate that is without ITC. Hence, the developer has to take a call as the new GST rate is 5 percent on the under-construction property and the rate is 12 percent for the old GST. The new Goods and Service tax is applicable from 1st April 2019 and the old GST had a deadline of 20th May 2019 that passed by a few days ago. The homebuyer is liable to pay 5 percent GST in case the developer opts for new GST on the under-construction property post 1st April 2019.
- How much GST is applicable on the under-construction property in case the flat was booked prior to 1st April 2019?
Here are two scenarios till 29th May 2019 if the flat is book prior to 1st April 2019.
Firstly, the builder can charge 1 percent on the affordable housing segment that means on the property that values upto Rs. 45 lakhs while charging 5 percent tax on the under-construction property.
Secondly, the developer can levy 12 percent GST on the under-construction property and 8 percent on affordable homes while offering the ITC benefit to the homebuyer. Till, 20th May 2019, the developer could have continued with a one-time option in the prescribed form while submitting the same with the jurisdictional commissioner.
After 20th May 2019, the developer will be charged on the basis of revised GST rules.
- Is GST applicable in case of redevelopment in which the area has been extended?
The Goods and Service tax is applicable on redevelopment projects and 5 percent is imposed on the project in case of increased property area.
- Is woman property holder eligible for GST rebate?
The Good and Service tax is based on the motto One Country, One Tax. Hence, the woman property holders don’t get any GST rebate.
- What is the GST rate for Commercial properties?
A GST rate of 12 percent is applicable on the commercial properties all over India. However, the residential properties with a share of commercial establishments are imposed with GST of 15 percent. Here it should be noted that any commercial property imposed with 15 percent GST will be considered as a residential building and will attract 5 percent GST without the advantage of ITC with effect from 1st April 2019. Although, the developers who have opted for old GST rate can impose GST of 12 percent along with ITC advantage on the total value that is considered.
- Who is liable for the payment of GST amount on the resale of under-construction unit?
The new owner of the property is liable to pay the outstanding GST amount.
- When does the developer pay GST to the Government?
The developer has to deposit the GST amount to the Government on the day of project completion or on the first occupation of the project whichever happens first. Also, the developer has to pay the GST amount on a reverse charge basis that indicates towards the flats that are not booked at the time of receiving the project completion certificate.