Joint research done by the JLL and the CREDAI (Confederation of Real Estate Developers’ Associations of India) found that Indians have invested an estimated Rs. 59,000 crores in the housing sector alone since 2014. This is about 47% of all real estate investments, and there are projections that it will grow even more in the coming years. It goes without saying that Indians favour real estate as their preferred investment, particularly residential property. Taxation plays a very important role in real estate. It is very important to learn the facts if you are looking to Buy Villas in Hyderabad.
Fundamentally, GST is paid by investors and home buyers while investing in under-construction properties. Before the implementation of GST, several taxes including VAT, stamp duty, service tax, registration charges, etc. had to be paid by home buyers. The current GST fees for residential property have been in force since April 2019. These rates had been decided at the 33rd GST council assembly which was held in February of the same year. In case you are either planning to buy or construct your property, it is better to understand the GST rates beforehand. The percentage of tax is a major factor in the exchange of money across the two parties. The transaction value is indirectly proportional to the tax value. We have recently shared these updates with a customer who is keen on Buy Villas in Vizag, and this has helped them make a clear decision on their investment.
Change in GST – before and after April 2019 :
- With an input tax credit (ITC) for affordable housing-related residential properties, the current GST rates are 8%. Without the ITC, the updated GST stands at 1%.
- There was a 12% GST with ITC on residential properties that do not fall under the affordable housing category. Without an ITC, the new GST rate for this segment is 5%.
- GST rates for commercial properties stay unaltered. As was previously mentioned, it is anticipated that this will alter in the future.
Things to keep in mind about the GST on Real Estate :
- Under the GST, residential property will be treated as residential property if it contains only a maximum of 15% commercial space.
- On a commercial unit, 12% GST applies.
- Only if the tenant is a business, then the landowner must pay a GST.
- Services like legal fees and processing fees etc. on home loans are subject to GST.
- Under-construction houses are less expensive than ready-to-move-in projects even after GST is added.