On 1st July, PM Narendra Modi introduced the Goods and Service tax with the aim to offers relaxation from the multi-level tax payment. This tax procedure includes various taxes like VAT, Service tax and more. In fact, a GST Council is also structured to discuss and track the process. This tax system is also applicable on the Indian real estate market and thus people have various apprehensions about the same. Hence, we have listed down the FAQs [Frequently Asked Questions] about GST to make dealing in the property market easy:
1. How abolishment of ITC will effect on property prices?
In this case, the developers have two options. Firstly, they can follow the same old GST price that has ITC as a benefit on the ongoing projects. Secondly, the developers can opt for the new GST rate that is without ITC i.e Input Tax credit.
Presently, the revised GST rate is 5 percent for the under-construction property and 12 percent for the old GST. The new Goods and Service tax came into implementation since 1st April 2019 and the deadline to opt for the old GST rate ended on 20th May 2019. The prospects have to pay the Good and Service tax according to the option chosen by the developer.
2. What is the GST rate on the under-construction property if booked before 1st April 2019?
Here are multiple conditions. Firstly, the developer can charge 1 percent on the affordable housing segment in which the properties falls in the price bracket of Rs. 45 lakhs whereas 5 percent tax is applicable on the under-construction property.
In another scenario, the developer can impose 12 percent GST on the under-construction property and 8 percent on housing units that fall under the affordable homes segment while passing the ITC benefit to the homebuyers.
Post 20th May 2019, the developers will charge according to the revised GST rules.
3. Is GST applicable on extended area redevelopment?
Yes. GST is levied on all redevelopment projects and 5 percent GST is applicable on the projects with an increased property area.
4. Are female property holders eligible for GST rebate?
The GST tax system is introduced with the motive of One Country, One Tax. Thus, the homebuyers are not segregated on the basis of their gender. There is no provision of rebate for women under the same.
5. Is GST rate applicable on Commercial property?
Yes, a Goods and Service tax of 12 percent is applicable on the commercial properties across the country. Although, this rate increases from 12 to 15 percent in case the residential properties have a partial area for commercial properties.
6. Is the homebuyer liable for the payment of GST amount on the resale of under-construction unit?
Yes. The homebuyer who is the new owner of the property is liable to pay the GST amount.
7. Does a developer pay GST to the Government?
Yes, the developer has to submit the Goods and Service tax amount to the Government either on the day of project completion or on the first occupation of the project. This is not the choice but the happening of any event at the earliest makes the builder pay the taxable amount to the Government.
Apart from this, the developer also has to pay this amount on a reverse charge basis that denotes to the apartments that are not booked at the time of availing the project completion certificate.