GST On Property

GST on Property

When GST is Applicable on Property Sale: GST is applicable only on under-construction properties or properties sold before receipt of the completion certificate (CC) or occupancy certificate (OC).

Table of GST Applicability on Residential Property

Type of Residential Property	GST Applicability	GST Rate	ITC
Under-construction	Yes	5%	No
Affordable housing	Yes	1%	No
Ready-to-move-in with OC	No	NA	NA
Resale property (after OC)	No	NA	NA
Plot or land	No	NA	NA
Under-construction properties under old regime till 31.03.2019	Yes	12%	Yes
Under-construction Affordable housing properties under old regime till 31.03.2019	Yes	8%	Yes

GST on Government Housing Schemes

The government has clarified that government-led mega housing projects meant for the common man will attract only 1% GST under the new regime. These housing schemes include the Jawaharlal Nehru National Urban Renewal Mission, Rajiv Awas Yojana, Pradhan Mantri Awas Yojana, and housing schemes of state governments.

GST on Commercial Property

Type of Commercial Property	GST Applicability	GST Rate	ITC
Under-construction commercial space	Yes	12%	No
Ready-to-move-in commercial space with OC	No	NA	NA
Resale commercial space (after OC)	No	NA	NA
Renting of commercial property (Landlord GST-registered)	Yes	18%	Yes
Lease of commercial property (Landlord not GST-registered, turnover ≤ Rs 20 lakh)	No	NA	NA

Input Tax Credit (ITC)

• No ITC is available to buyers under the current scheme (since April 1, 2019).
• Builders/developers cannot claim ITC on property sales under the new GST regime.
• ITC was available under the old regime (up to 31.03.2019) at higher tax rates (12%-18%).

GST on Construction by Developers

Developers pay GST on goods and services used in construction.

How to Check GST on Your Property

• Check if the property has an OC or CC.
• Verify builder's GST registration number (in the agreement).
• Check invoice breakup for GST inclusion.

No GST in These Cases

• Sale of ready-to-move-in property with OC
• Sale of land/plot
• Sale of resale property
• Property inherited or gifted

What is Affordable Housing?

Residential units under construction costing up to Rs 45 lakhs and carpet area up to 60 sq.m. in metro cities like Mumbai qualify for 1% GST if both conditions are met.

GST on Maintenance Charges

18% GST applicable if monthly maintenance per flat > Rs 7,500 and Residents Welfare Association (RWA) turnover exceeds Rs 20 lakhs. Tax applies on full amount, not just excess. RWAs are entitled to claim ITC on tax paid by them on capital goods (generators, water pumps, lawn furniture, etc.), goods (taps, pipes, other sanitary/hardware fittings, etc.) and input services such as repair and maintenance services.

GST on One-Time Maintenance Deposit

The GST is applicable to the one-time maintenance deposit that builders collect from home buyers, the Gujarat bench of the Authority for Advance Rulings (AAR) has said. According to the authority, this charge falls in the category of supply of services and is non-returnable in nature. The AAR, however, added that the GST will be deducted from the maintenance amount when this money is actually spent in carrying out maintenance works in future.

Recall here that most real estate developers collect a one-time maintenance deposit from home buyers, before the formation of the residents’ welfare associations or cooperative housing societies that take over the responsibility of maintenance from the builder. After the formation of the RWA and CHS, they become solely responsible for the maintenance work and can come up with their own set of rules for calculating maintenance charges. The builder would no longer be able to have a say in the matter.

This individual liability of home buyers is calculated on the basis of the size of the property – a certain per sq ft rate has to be paid by the home buyers. The entire amount collected from buyers as a one-time maintenance charge is then deposited into a common fund and is used for its intended purposes as and when required.

Since there has been an absolute lack of clarity on laws governing collection of this levy, there have been various instances, where disputes have arisen between buyers and developers on the applicability of GST on the one-time maintenance charge.

It has been a common practice among developers to deduct GST at the rate of 18%, right after the collection and then deposit the remaining amount into the common fund. After the AAR ruling, developers will have to deposit all the amount without any GST deduction.

Also note that builders were not liable to pay service tax on such maintenance deposits before the GST regime became applicable in 2017.

With the AAR’s ruling, RWAs and CHSs can now collect the GST from society members as and when the time to utilize this amount comes, since the builder would charge this levy initially. In essence, it is only a deferral of the payment, as far as home buyers are concerned.

GST Refund on Flat Cancellation

Changes are likely to be made in the GST law to allow homebuyers claim GST refund in case they cancel home purchase for which they have already paid the tax. So far, there is no procedure in the new tax regime that allows unregistered entities ─ including homebuyers ─ to claim GST refund. In the 48th GST Council meeting held on December 17, 2022, the Council recommended an amendment in the CGST Rules, 2017, along with issuance of a circular, to prescribe the procedure for filing application of refund by the unregistered buyers in such cases.

GST on Renting of a Property

• In the 48th GST Council meeting, the Council clarified that no GST is payable where a residential dwelling is rented to a registered person if the same is rented it in their personal capacity and for use as their own residence.
• This means that where a registered person is a proprietor of a proprietorship firm and they have rented out a residential property in their personal/own capacity (and not that of the proprietorship) and the property is for use as their own residence, then no GST will be applicable.
• It needs to be noted that, even if a residential property is used as guest house for residential purposes, it cannot be said that the rent that is received is that from the residential property if the property is given to a company for their use as guest house. How they use the said property is not the deciding factor.

GST on Rental Income

• - Landlords: 18% GST if residential property rented for business use.
• - Tenants: 18% GST if GST-registered and renting for business.

GST on Developable Plots

While the sale of plots is also outside the purview of the GST regime, any small construction on the plot would attract GST. In case of the sale of such a plot, one-third of the value of the plot will be excluded and GST will be levied on the remaining two-third value of the land.

How to Check Place of Supply for Charging CGST, SGST or IGST

The landlord or owner of the property can be registered in a state different from the state in which the property is situated. It is left to the option of the landlord. They must identify place of supply to decide if CGST and SGST is charged or IGST applies. Following are some of the cases compiled for you.

• Scenario 1:One case has the taxpayer located in a state different from the state in which the rented property in situated.The place of supply shall be the place of property. Accordingly, it is interstate supply and IGST shall be charged. For example, If Mr. ABC, registered under GST in Bangalore, has given a commercial property on rent in Haryana, then an IGST at 18% would be charged. He doesn’t have to also register under GST in Haryana.
• Scenario 2:Both the landlord and tenant are registered in the same State in which the property is situated. If the landlord and tenant is registered under GST in the same state in which the property is situated, then both CGST and SGST at 9% each would be charged. For instance, If Mrs XYZ who is registered in Maharashtra gives her commercial property in Mumbai on rent to a tenant having GST registration of Maharashtra, then CGST and SGST of 9% each would be charged.
• Scenario 3:Landlord is registered under GST in the same state where the property is located but the tenant is registered in another state If the landlord has taken GST registration in the same state in which the property is situated, then it is a case of intrastate transaction. So, both CGST and SGST would be charged irrespective of the location of GST registration of the tenant. In such cases, the tenant cannot take the input tax credit of CGST and SGST if he is not registered in the same state where the property is situated. For instance, Mr. PQR from Kochi travels to Bhopal for a client meeting and stays in ABC Hotel. He books a room and pays rent of Rs. 15,000. The owners of ABC Hotel are registered in Bhopal and the hotel is also located the same city. So, both CGST and SGST would be charged in this case. However, In such cases, the tenant cannot take the input tax credit of CGST and SGST paid by him if he is not registered in the same state where the property is situated. • For all commercial spaces that are on rent, GST will be applicable at 18% on the taxable value and rent would be treated as a taxable supply of service. • If a registered charitable trust or a religious trust owns and manages a religious place meant for the public, it is exempt from GST. This can happen only if- • The rent of these rooms is less than Rs. 1,000 per day • The rent of shops and other spaces for business is less than Rs 10,000 per month • The rent of community halls or any open area is less than Rs 10,000 per day

What are the ITC Provisions When GST is Charged on Rent?

The person paying GST on rent can usually take credit for the tax paid to pay his other tax dues. In other words, If all the provisions to claim Input tax credit are fulfilled, ITC on GST paid on rent can be claimed.

Is ITC on Repairs and Renovation of Property given on Rent Allowed?

GST paid for carrying out the repairs and maintenance expenditure, brokerage etc of the property given on rent is allowed as input tax credit, only to the extent it is not capitalized. The Section 17(5) of the CGST Act disallows a taxpayer from claiming ITC on amount spent on a few expenses

Any purchase of goods or services used for constructing an immovable property on own account, including for furtherance of business by a taxable person is one such expenditure where ITC is ineligible for claims. Rest of them such as repairs and brokerage on rental property is allowed for ITC claims, if it is not capitalized in the books of the landlord.