How to Avoid GST on Under Construction Property?

In the real estate industry, the GST rate has changed dramatically. Many buyers are perplexed by the GST's application to real estate. However, the GST Council has published guidance on the application of the GST on under-construction property and ready-to-move buildings.

Let's take a quick look at the new GST rate for under-construction and ready-to-move properties.

There will be no service portion in the transfer of a completed property to the buyer. As a result, GST will not be applicable in such sales. So, if you acquire a ready-to-move property, you may be able to avoid paying GST.

The proposed new GST rate for under-construction properties will be as follows:

• It is termed ready-to-move-in property if the builder received the completion certificate before you purchased it. As a result, there is no GST on such assets.

• In such transactions, GST is payable by the buyer if you paid the whole cost of the property after the GST implementation, i.e. on July 1, 2017.

The GST rate for under-construction property or ready-to-move-in flats if a completion certificate is not granted at the time of sale is currently 12% with full Input Tax Credit (ITC). The current tax rate for affordable housing is 8%.

While the GST on under-construction flats has slowed sales, some developers have discovered a way around it. They show the deposit as a loan from the buyer to a subsidiary firm, and once the building is completed and an occupation certificate is secured, the builder returns the deposit to the buyer with interest. This works because GST is not charged on completed projects with OC, but it is charged at a rate of 12% on under construction projects, while buyers in the cheap housing segment (homes with carpet areas of up to 60 sqm) pay 8% GST.

This concludes my answer regarding GST on under construction property.

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In India, while purchasing properties like flats, apartments, and bungalows that are still under construction buyers are subject to the Goods and Services Tax (GST). I did a lot of research on

GST on under construction flat

and discovered that India charges a 1% GST on properties for affordable housing and a 5% GST on properties that are not affordable. However, there are a few possible ways to avoid paying GST on real estate that is still under construction.

How to Avoid Under Construction Property GST?

I have read the responses provided previously on

GST in under construction property

. I thoroughly agree with Vaishali Kakkar’s explanation. Check out the tips to avoid GST:

• As Bhanu mentioned, GST is a governmental tax that must be paid and cannot be ignored. But, by acquiring a finished flat or a ready-to-move-in property, a homebuyer can avoid GST because these types of properties are exempted from the tax.

• When the project is finished and an occupation certificate is obtained, the builder returns the deposit to the buyer with interest. Developers depict the deposit as a loan from the buyer to a subsidiary corporation. This works because buyers in the low-cost housing market (homes with carpet areas of up to 60 sq m) pay 8% GST, whereas completed projects with OC are exempt from GST. 

• You don't have to pay GST again if you buy a property off the secondary market, which entails buying from a prior owner who has already paid GST. 

To ensure compliance with applicable laws and regulations while avoiding under construction GST property, consulting a legal expert can be very helpful.

I came to know this very recently that in India, an indirect tax known as GST (Goods and Services Tax) is imposed even on under-construction properties. Yes, in the real estate industry, properties that are still under development are also subject to GST. The current GST rate on under construction property is 18%. But don’t worry, there are certain ways how to avoid GST on under-construction property. I will tell you about it.

GST on flat purchase under-construction

As I already told you, there is an 18% GST charged on under-construction properties. But there are ways through which we can avoid GST for under construction flat.

How to avoid GST on immovable property under construction?

1. Buying a ready-to-move-in property is one way to get around paying GST on under-construction property. Properties that are ready for habitation are exempt from the Tax. This is so that the developer does not have to pay GST on the sale of the property since it is seen as a finished project.

2. Buying a house from a developer who has chosen the previous tax system is another option to avoid paying GST on under-construction property. Developers were not required to pay any GST on the sale of properties that were still under development under the previous tax system. While many developers have already switched to the new tax system, not all of them have access to this option. So, before making a purchase, it is crucial to consult the developer.

3. Purchasing a home from a developer who has previously gotten a Completion Certificate (CC) from the local authority is another approach to avoid paying GST on under-construction property. After the building is finished, the local government issues the CC, indicating that the property is ready for occupancy. The property is regarded as a finished project once the CC is granted, and the developer is exempt from paying GST on the sale of such property.

4. If you have already made a reservation for an unfinished home and would like to avoid paying GST, you might choose to cancel the reservation and choose a ready-to-move-in property instead. It is crucial to remember that cancelling the reservation could cost you money because developers typically take a specific percentage of the total price out as a cancellation charge. Hence, before selecting a choice, it is crucial to carefully assess the cost-benefit analysis.

5. Buying a ready-to-move-in property, buying a property from a developer who has chosen the previous tax system, or buying a property from a developer who has already gotten a Completion Certificate from the local authority are a few ways to avoid GST on under-construction property in India. Prior to choosing, it is crucial to thoroughly weigh the advantages and disadvantages of each option because it could have an impact on your finances. To ensure compliance with the relevant rules and regulations, it is also advisable to seek professional advice from a tax specialist.

I hope I was able to help you understand how to avoid GST on under-construction property.

The Goods and Service Tax (GST) is levied on everything be it food, service, buildings and more. We bought a ready made flat so we were not charged any extra money for GST for that does not mean that there is no GST on construction. In case of ready flats, a buyer is not required to pay the GST fee but for under construction buildings they are bound to pay the fee. Let me tell you the rates for the same here.

What is the GST on house construction?

Construction services are subject to GST whose rate is generally 18%. However this may vary in the construction sector with 1% for affordable housing.

What is the GST in Construction for under-construction  flats?

After the 33rd Amendment made by the GST Council the tax for under construction properties is 5%. For homes upto 45 lakhs that are under construction, the tax rate is 1%.

Any business whose income is over Rs 20 lakh INR is required to register for GST

Who pays GST on under construction property?

The developer must pay this GST on the balance ⅔rd of the property.

I would thereby suggest you that if you really want to avoid GST on construction, go for ready made flats always.

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