GST: Under construction properties attract 12% tax

The Goods and Services Tax (GST) rate of 12 percent is applicable on under-construction properties.

Under the new tax regime, under construction properties are taxed at 18%. This includes 9% State GST plus 9% Centre GST. With 1/3rd abatement of the land cost, the effective rate will be 12% which too, will be shared by the Centre and state in equal proportion.

The schedule of GST rates for services as approved by the GST Council said that the “construction of a complex, building, civil structure or a part thereof, intended for sale to a buyer, wholly or partly. The value of land is included in the amount charged from the service recipient.” These will be taxed at 12 percent with full input tax credit.

What this means is that, GST would be applicable on under construction properties at the rate of 12 percent but not on completed, ready-to-move-in apartments.

To buy or not to buy

For both investors and end users, the time is ripe to go for a ready to move-in property. Low home loan rates and tough market conditions have made the prices of ready to move-in properties more affordable than ever. Builders are looking to liquidate their unsold inventory and come out of completed projects. This gives the buyer an upper hand in negotiations.

If you do go in for an under-construction property, opt only for those projects that are RERA approved. You can check the RERA website of a state to know whether a particular project is registered or not.

With the implementation of RERA, unorganised players are expected to leave the industry, bringing back buoyancy in the sector.

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