It is like a dream come true to be able to buy one’s own house. But owing a piece of property like a house comes with attendant costs such as tax. To make taxation laws simpler, the government introduced the Goods and Services Tax (GST) in July 2017. The real estate sector also came under it.
Thus, before investing in your dream home, you should have a clear the picture of the new taxation regime (different GST rates on properties). For instance, if you are looking to buy a house in Pune’s Pinnacle Neelanchal or Riverwalk Keshav Nagar, knowing the applicable GST rates and the absorbed costs will make the concept clear to you.
What is GST?
GST is an indirect tax on the manufacturing, sale, and consumption of goods and services. The implementation of GST has put an end to all indirect taxes, making the system of taxation simpler.
For example, before GST came to be effective, a buyer had to pay different taxes such as service tax, VAT, customs duty, and excise duty. But with the introduction of GST, a buyer needs only to pay the applicable GST on that product or service. GST includes all indirect taxes, doing away with the need to calculate a multitude of taxes.
Different rates of GST on real estate
The real estate sector invites 12% (after excluding one-third of 18% as value of the land from taxation) GST on the property value. According to the GST council, the tax is applicable to any under-construction property for sale, including a complex, civil structure, building, apartment, etc.
But the GST rate will depend on the various stages of the under-construction property. These are as follows:
- Buying a property after completion certificate is issued by the builder: In this case, there will be no GST, as it is considered a ready-to-move-in property. As there is no supply of goods or services, completed properties are exempt from GST. So, if you are searching for a home loan for a ready-to-move-in 2-BHK flat in Pune, you need not have to worry about GST.
- Part or full payment made to the builder before the roll-out of GST: This situation too will not attract GST as payment (part/full) is made before the introduction of GST. It will attract service tax, though. So, if you are planning to settle in a city like Pune and have already paid for your apartment in Riverwalk Keshav Nagar before July 2017, you do not have to pay GST.
- GST under CLSS: The central government’s credit-linked subsidy scheme (CLSS) is aimed at providing affordable housing for different sections of the society. Here, the GST rate is 8%, not 12%.
- GST on the resale of property: A property that is up for resale is considered a ready-to-move-in property and thus attracts no GST. So, with an affordable home loan, anyone can buy an apartment in projects like Pinnacle Neelanchal in Pune.
GST is no rocket science. It does not even apply to certain types of property. As home loans are affordable these days, you can buy a flat in complexes like Pinnacle Neelanchal and Riverwalk Keshav Nagar in Pune. Nowadays, there are loans to suit every pocket. Non-banking financial company (NBFC) Bajaj Housing Finance offers maximum home loans of up to Rs.3.5 crore with tenors up to 20 years.