Table of Contents
1. Major real estate transactions on which GST implication is analysed
- Sale of Land
- Sale of immovable properties before completion.
- Sale of immovable properties after completion.
- Sale of development rights by the land owner
2. GST on sale of land
- Sale of land is exempted from GST as per Entry no 5 of Schedule 2 of the CGST Act, 2017.
3. Should I pay any tax while purchasing any immovable property?
- Like discussed in the previous FAQ, sale of land does not attract any GST. Therefore, there is no need to pay GST during purchase of Land.
- In the case of a building, it is taxable only when it is sold after issue of completion certificate. This means, if you buy a ready to move in apartment for which completion certificate is issued by a competent authority, no need to pay any GST.
- The same rule will apply, irrespective of the property being a commercial or residential property.
- We can conclude from the above points that sale of building before completion is taxable.
4. What do you mean by a completion certificate?
- Completion certificate is a legal document given by a competent authority, certifying that the building is constructed as per the construction norms after following the required rules and regulations.
- The completion certificate is generally issued after inspection of the premises by the competent authority. The authority will provide the completion certificate only if all the rules, norms and safety guidelines have been met by the developer.
5. Who are competent to issue to a completion certificate?
- The expression “competent authority” means the Government or any authority authorised to issue completion certificate under any law for the time being in force. Eg. CMDA (Chennai Metropolitan Development Authority).
6. What is the rate of GST applicable on construction of residential properties?
- Affordable residential apartments
- GST @ 1.5% (Effective rate 1% after deducting Land Cost) without ITC
- Residential apartments other than affordable residential apartments
- GST @ 7.5% (Effective rate 5% after deducting Land Cost) without ITC
- Commercial Properties
- GST @ 12% with ITC for commercial properties (other than specified ones which will attract GST @ 5%)
7. What are affordable residential apartments?
An affordable residential apartment is an apartment where the:
- Carpet area is up to 60 square meters for non-metropolitan cities/towns (90 square meters in the case of metropolitan cities/towns) and
- The value of which should does not exceed Rs.45 lakhs
Note: Carpet area refers to the actual usable floor space excluding the space covered by the common areas such as stairs, play area, lift etc.
8. Will maintenance charges be included to determine the threshold limit of 45 lakhs in case of affordable housing?
- For the purpose of determining the threshold limit of Rs.45 lakhs, all the amounts charged by the promoter from the buyer will be considered.
- This includes charges for preferential location, parking, development and charges for other specific facilities.
- However, stamp duty, maintenance charges and other charges incurred for the maintenance of common infrastructure will be excluded.
9. Can a builder pay tax at old rates of 8% & 12%?
- The builder or the promoter has a one-time option to pay tax at the old rates of 8% and 12% with ITC when such a project is an ongoing project
- However, it has to be noted that no such option will be made available for projects commencing on or after 01.04.2019 where the builders/promoters will be required to pay tax as specified under FAQ 6
10. Applicability of GST on rent
- A residential property rented out for residential purposes irrespective of the amount of rent will not attract any GST
- GST is applicable on properties rented for commercial purposes. However, registration under GST Law is mandatory only when the annual aggregate turnover exceeds Rs.20 lakhs in the case of normal states and 10 lakhs in the case of special category states. (i.e. Assuming the land lord has only rental income for the year, GST need not be paid if the annual rental income does not exceed Rs. 20/10 lakhs as the case maybe)
Note: Special Category states for the purpose of registration are Manipur, Mizoram, Nagaland, Tripura
11. Residential properties rented out for commercial purposes, will the same attract GST?
- Yes, residential properties rented out for any purpose other than for use as residence will not be exempted from the levy of GST.
12. What do you mean by Transfer of development rights (TDR)?
- Transfer of development rights is a voluntary mechanism by which the landowners sell the development rights of their land to a promoter for a consideration.
13. Applicability of GST on Transfer of development rights (TDR)?
- No GST will be levied on Transfer of development rights. However, exemption from the levy of GST will only be applicable when the units developed on the transferred property are sold before issuing the completion certificate.
14. What will happen to the exemption granted during transfer of development rights if the units are sold after issue of completion certificate?
- The landowner avails exemption during the transfer of development rights subject to the condition that the units built on his land will be sold before issue of completion certificate.
- However, if the units are sold after issue of completion certificate, the exemption granted to the landowner will be withdrawn.
- However, such withdrawal will be limited to 1% in case of affordable houses and 5% in case of other than affordable houses as per the existing GST law.
12. Should I charge GST when I sell the house that I reside in?
- No GST needs to be charged during the supply of ready to move in buildings in respect of which completion certificate is issued.
- Houses already in use are considered completed and hence considered as ready to move in after the sale. Hence no GST needs to be charged.