How to calculate GST on under construction property with examples.

The GST system which was introduced by the Government of India has a considerable impact on the real estate industry. A property which has not yet been given a Completion Certificate will be termed as under construction property, thus GST has to be paid on it. Now let us look at how to calculate GST on Under construction property with examples in this answer.

Given below is the table indicating GST Rates for under construction residential and commercial properties.

To understand GST on under construction property better, I will give you an example.

Suppose you buy an under construction residential property which doesn’t fall in the ambit of an affordable housing scheme worth Rs. 5000000 from a builder. The land value in that property is Rs. 1000000. So the GST on construction would apply only on the remaining Rs. 4000000.

The GST on under construction property will be as follows: 

4000000 x 5% = Rs. 200000

You might want to know that although GST has had a positive impact on the real estate market, developers are impacted negatively. This is because if they acquire the raw material from a vendor who doesn’t come under GST rules then the taxes will have to be paid by the buyer, i.e. he will bear the cost of the transaction alone. 

Anyway, I hope you have understood how to calculate GST on under construction property with examples.

Wondering

how to calculate GST for under construction property.

Calculating GST on under-construction property in India involves understanding the applicable rates, abatements, and the value on which GST is to be levied.

How to Calculate GST on Under Construction House?

Here's a detailed explanation with examples.

Applicable GST rates, as of the latest regulations:

• 1% GST is applicable on affordable housing projects.

• 5% GST is applicable on non-affordable housing projects.

These rates are without the benefit of input tax credit (ITC).

Affordable Housing: Residential units with a carpet area up to 60 sq. meters in metropolitan cities and 90 sq. meters in non-metropolitan cities, with a value cap as specified by the government.

Non-Affordable Housing: Residential units exceeding the above criteria.

Calculation Method

GST is calculated on the transaction value, which is the price paid by the buyer to the developer excluding stamp duty and registration charges.

Example 1: Affordable Housing

• Property Value: Rs. 50,00,000

• GST Rate: 1%

• Calculation: GST = 1% of Rs. 50,00,000 = Rs. 50,000

Example 2: Non-Affordable Housing

• Property Value: Rs. 1,00,00,000

• GST Rate: 5%

• Calculation: GST = 5% of Rs. 1,00,00,000 = Rs. 5,00,000

Important Points

• Exclusion of Stamp Duty and Registration Charges: GST is calculated only on the construction value, excluding stamp duty and registration charges.

• GST on Ready-to-Move-In Properties: Properties that have received a Completion Certificate or are ready-to-move-in do not attract GST.

• Advances Paid: GST is applicable on advances paid for under-construction properties.

• Payment of GST: The developer is responsible for collecting and remitting the GST to the government.

Detailed Example:

Suppose you purchase an under-construction apartment in a non-metropolitan city:

• Property Value: Rs. 70,00,000

• GST Rate: 1% (assuming it qualifies as affordable housing)

Step-by-Step Calculation:

• Calculate GST: 1% of Rs. 70,00,000 = Rs. 70,000

• Total Cost to Buyer: Rs. 70,00,000 (property value) + Rs. 70,000 (GST) = Rs. 70,70,000

In another case, if the property does not qualify as affordable housing: GST Rate: 5%

Step-by-Step Calculation:

• Calculate GST: 5% of Rs. 70,00,000 = Rs. 3,50,000

• Total Cost to Buyer: Rs. 70,00,000 (property value) + Rs. 3,50,000 (GST) = Rs. 73,50,000

Calculating GST on under-construction property involves determining the applicable GST rate based on the type of housing and applying it to the transaction value. 

By understanding these calculations, buyers can accurately estimate the total cost of purchasing an under-construction property in India. This is all about how to calculate GST on under construction property

.

Read more

If you are into real estate or are interested in buying properties, make sure you know how much GST on house purchase. Paying taxes on time is very important or else, in the future, you have to pay a really huge sum of money. If you do not know anything about it, you can learn everything here. In India, the buyers of under-construction properties pay 1% GST for affordable properties and 5% GST for non-affordable properties. 

How to calculate gst on under construction flat?

The GST that is levied by the government on an under-construction flat was 8% with ITC till March 2019 but was revised to 1% without ITC in April 2019. Similarly, the GST on luxury flats was 12% with ITC and was changed to 5% without ITC from April 2019 onwards. So following these percentages, you can do the GST calculation for under construction property yourself. 

Do learn that you cannot avoid GST on under-construction property purchases at any cost. The GST is paid by the home buyer and it is his/her responsibility to remit the amount to the government of India.

Read More:

Hey,

As Akarshit mentioned, the GST on under construction commercial property is 12% with Input Tax Credit.

Let me tell you about the GST for under construction property in laymen's terms. If the property is under construction, then you’ll be required to pay 18% on two-thirds of the property value. But, why 2/3

rd

? It’s assumed that the remaining 1/3

rd

is the land’s value and there is not any GST on the transfer of land. That’s why you’re required to pay 12% GST on the property value. Please remember that a property is deemed to be constructed only if it has received the Completion Certificate.

Will you get the 2/3

rd

benefit even if you sell under-construction buildings without selling the land attached to them?

No, you will get the 2/3

rd

benefit only if you sell the under-construction building with the land attached to it. Only the transfer of attached land gets the benefit. Also, note that under the GST, the complete input tax credit is available for the 12 percent paid above.

I hope now you know about the GST rate on under construction property.

I am sharing 2 examples for better understanding:

1.

Let’s say you purchase a property for Rs. 60,00,000 after the introduction of GST. The builder has received the Completion Certificate. The building value is Rs. 50,00,0000 and the land is Rs. 10,00,0000. How much GST will you have to pay in this case?

Well, in this case, you won’t have to pay any GST since it is a Completed Property. Only Under Construction properties are chargeable to tax.

2.

Let’s say you have bought a property for Rs. 60,00,000 after the introduction of GST. The builder hasn’t received the Completion Certificate. The building’s value is Rs. 50,00,0000 and the land’s value is Rs. 10,00,0000. How much GST will you have to pay in this case?

The amount of GST is determined only on the value of the building being transferred, and not on the land’s value. Thus, the value calculated is 2/3

rd

of Rs. 60,00,000 multiplied by 18%, i.e., 12% on Rs. 60,00,000. Please note that this was a single transaction for Rs. 60,00,000. Even though the land’s value is measurable, the amount of GST is on the whole amount.

Read more:

I hope you find all these answers on GST on under construction commercial property helpful.

I have recently bought an under-construction apartment and I was confused when the builder asked me to pay the GST under construction property. I called my CA friend for better clarity on this topic. He told me that GST is one of the many taxes that homebuyers have to pay on property purchases.

If you are buying a property in under-construction projects in the mega cities of India, then you will have to pay GST. I also want you to know that you won’t have to pay GST on completed projects. A completed project is one that has received a completion certificate from the concerned authority.

You have to pay a GST on the purchase of under-construction properties, such as apartments, flats, and bungalows at the rate of 5 percent for non-affordable housing and 1 percent for affordable housing.

• The GST rate on the ready-to-move-in apartments or under-construction property, where the completion certificate isn’t issued at the time of sale is 12 percent with full ITC (Input Tax Credit). The existing tax rate is 8 percent for affordable homes.

• On 24-02-2019, GST Council decided that after the removal of ITC, the rates will be 1 percent for affordable housing projects and 5 percent for normal housing projects.

• A residential property, with a carpet area of up to 60 square meters in metro cities (Delhi-NCR, Mumbai-MMR, Kolkata, Hyderabad, Chennai, and Bangalore) and 90 square meters in non-metropolitan cities with a value up to Rs. 45 lacs would come under the affordable housing category.

• Effective from 01-04-2019, the GST for affordable homes is charged at 1 percent without ITC.

Now you know everything about the GST on construction work of properties.

The land sale doesn’t fall under the GST on construction services. As the land cost is an important factor that determines the price of the property, GST offers a standard abatement of 33 percent of the total contract value, towards the land value for taxable real estate transactions.

Example:

Let’s say you buy an under-construction flat worth Rs. 100 from a builder. For the calculation of the GST on building, Rs. 33 will be considered as the land value and you will have to pay GST on construction on the remaining Rs. 77.

Read more:

This is all on GST under construction property.