GST in Real Estate: What Developers and Buyers Need to Know

SAMRUDDHI REALWISE CONSULTING LLP

7/5/20252 min read

GST in Real Estate: What Developers and Buyers Need to Know

The Goods and Services Tax (GST) has significantly transformed the real estate sector in India, bringing clarity and uniformity to an industry often plagued by complex tax structures. Whether you're a developer or a buyer, understanding the nuances of GST on real estate in 2024 and the applicable tax rules is essential for navigating this dynamic market. This guide provides a comprehensive overview of how GST impacts real estate transactions and what both parties need to consider.

What is GST and Its Role in Real Estate?

GST is a unified indirect tax system introduced to simplify the tax landscape by replacing multiple state and central taxes. In real estate, GST aims to bring transparency, reduce cascading taxes, and streamline project costs.

Key Objectives of GST in Real Estate:

  • Simplify tax compliance.

  • Ensure transparency in property transactions.

  • Standardize tax rates across states.

GST on Real Estate in 2024: Updated Rates and Applicability

The GST rate on real estate varies depending on the type of property and its completion status. Below are the latest GST rates applicable in 2024:

1. Under-Construction Properties:

  • Affordable Housing: 1% (without input tax credit)

  • Non-Affordable Housing: 5% (without input tax credit)

2. Ready-to-Move-In Properties:

  • No GST is applicable if the completion certificate has been issued before the sale.

3. Commercial Properties:

  • 12% (with input tax credit)

4. Land Transactions:

  • GST is not applicable on the sale of land unless it is part of a composite supply.


Input Tax Credit (ITC) in Real Estate

Input Tax Credit allows developers to claim a refund for GST paid on inputs such as raw materials and services used in construction. However, with the revised GST structure:

  • ITC is not available for residential projects under the 1% or 5% schemes.

  • Developers opting for commercial projects or older tax schemes can avail of ITC.

Benefits of ITC for Developers:

  • Reduces construction costs.

  • Improves project profitability.

Tax Rules for Real Estate Developers in 2024

To ensure GST compliance, developers must:

  1. Register Under GST:

    • All developers with a turnover exceeding the prescribed threshold must register under GST.

  2. Maintain Accurate Records:

    • Keep detailed records of purchases, sales, and GST paid.

  3. File GST Returns Timely:

    • File monthly and annual GST returns to avoid penalties.

  4. Comply with Anti-Profiteering Measures:

    • Pass on the benefit of reduced tax rates or ITC to buyers.

Impact of GST on Buyers

For buyers, GST has simplified the tax structure but also increased the cost of under-construction properties. Here’s what buyers need to keep in mind:

  1. Affordability:

    • GST on affordable housing is capped at 1%, making it a cost-effective option.

  2. Transparency:

    • Developers are required to provide clear details about GST charges, eliminating hidden costs.

  3. Exemptions:

    • No GST is payable on ready-to-move-in properties with a completion certificate.

Advantages of GST in Real Estate

  • For Developers:

    • Easier compliance with a unified tax regime.

    • Reduced construction costs due to ITC (where applicable).

  • For Buyers:

    • Transparent pricing with reduced tax cascading.

    • Simpler understanding of tax implications.

Challenges and Solutions

Challenges:

  • Limited availability of ITC in residential projects.

  • Complexity in calculating GST for composite supplies.

Solutions:

  • Developers should seek professional tax advice to optimize compliance.

  • Buyers should request detailed tax breakdowns to understand their financial obligations.

Conclusion

GST has undoubtedly brought significant changes to the real estate sector, benefiting developers and buyers by fostering transparency and uniformity. Understanding the latest GST rates and tax rules for real estate in 2024 is crucial for making informed decisions.

For developers, GST compliance ensures smoother operations and better market reputation. For buyers, knowing when and how GST applies can lead to cost savings and a hassle-free property purchase.

Stay updated on GST regulations and consult professionals to ensure seamless compliance and transactions in real estate. Ready to leverage the benefits of GST in 2024?