GST Rules for Homebuyers: How Ready-to-Move and Under-Construction Properties Impact Your Total Cost
GST Rules for Homebuyers: How Ready-to-Move and Under-Construction Properties Impact Your Total Cost
Buying a home is a significant financial decision, and understanding the tax implications can help buyers make informed choices. One key factor to consider is the Goods and Services Tax (GST), which applies differently to ready-to-move and under-construction properties.
GST on Ready-to-Move Properties
Ready-to-move flats are fully constructed and have received a completion certificate. These properties are exempt from GST, meaning buyers only need to pay stamp duty and registration fees, which typically range from 5% to 10% of the property’s value, depending on the state. This makes them a cost-effective option, as there are no additional GST charges on the purchase price.
GST on Under-Construction Properties
Under-construction properties, however, attract GST, which increases the overall cost of the property. The applicable rates are:
- Affordable housing:Â 1% GST (without input tax credit)
- Non-affordable housing:Â 5% GST (without input tax credit)
For example, if a buyer purchases an under-construction flat worth ₹50 lakh, they will need to pay 5% GST (₹2.5 lakh) in addition to stamp duty and registration charges. This makes under-construction homes more expensive upfront compared to ready-to-move flats.
Impact of GST on Developers
The introduction of GST streamlined taxation in the real estate sector, replacing multiple taxes like VAT and service tax. However, the removal of input tax credit (ITC) has increased construction costs, which may lead to higher property prices for buyers.
Which Option is Better?
While ready-to-move flats offer the advantage of no GST, under-construction properties might provide flexible payment options and lower base prices. Buyers should consider:
- Total cost, including GST, stamp duty, and registration fees
- Location and possession timelines
- Developer’s reputation and project approvals
Homebuyers should carefully assess the financial impact of GST before making a decision. Consulting a financial expert can help in evaluating the best option based on budget and long-term financial goals.
