An Alumnus of IIM and DU with almost a decade of experience in the banking and finance sectors. I had the opportunity to work with all types of institutions in BFSI ecosystem like Bank, NBFC, Fintech, Consulting and Auditor. I started my professional journey at KPMG and subsequently worked in leading names of the BFSI sector including Ujjivan Bank, Vistaar Finance. Currently building a fintech startup ( PICE) by handling alliances, compliance and creation of GTM strategy for payments and credit product.
17 Dec 24
6 mins
Share
GST on Resale Flats: Is GST Applicable on the Resale of Flats?
No GST on resale flats as they are ready-to-move-in properties.
Under-construction flats attract GST: 1% for affordable, 5% for non-affordable housing.
GST costs may be indirectly included in resale flat prices.
Stamp duty and registration fees apply to resale property purchases.
Resale flats are exempt from GST as they donāt fall under work contracts.
The real estate sector is one of the major contributors to the Indian economy. After 2019, home buyers only need to pay GST on purchasing under-construction flats, rather than a bunch of indirect taxes as was the case in previous tax regimes.
However, residential projects that have received a completion certificate, do not attract any GST as they cannot be classified as services. Hence, the GST on resale flats is not applicable. However, the sale of these flats is still subject to the payment of stamp duty and registration charges, as they are a major source of revenue for the government.
Below, you will find further detailed information about GST on resale flats.
What Is the Goods and Services Tax (GST)?
GST is a tax system that has helped replace many indirect tax forms like service tax, VAT, excise duty and others in India. However, it does not affect exports or direct taxes like income tax, corporate tax, or capital gains tax. This new taxation structure was originally passed by Parliament on March 29, 2017, and its understated provisions were subsequently enforced from July 1, 2017.
New tax rates were introduced in the residential real estate market at the 33rd GST Council meeting on February 24, 2019. Since then, a 5% GST has been levied on non-affordable or luxury residential properties without the benefit of an Input Tax Credit (ITC) for the property developer.
Contrarily, a 1% GST rate applies to affordable housing projects, where you, as a buyer, only have to pay GST if the flat does not have a Certificate of Completion. Besides this, under-construction properties attract a flat GST rate of 12% throughout India.
What Is a Resale Flat?
Resale flats are properties that were previously owned but are now put up for sale by their present owners. These apartments are ready to move into, unlike under-construction projects. However, these listed properties could still be in use by their current owner who regularly pays property tax.
A resale real estate transaction takes place when someone sells their personal house to another person who has shown interest in buying it.
What Are the Updated GST Rates for the Construction of Residential Apartments?
Within the residential real estate segment, the revised GST rules were made applicable from April 1, 2019. As per the new rules, affordable houses would attract a 1% GST during transfer of ownership, while non-affordable, unfinished houses would incur a 5% GST.
Besides fixed square meters, it is important to meet several other conditions to enforce the tax breaks:
The developer will not be eligible to claim ITC.
A minimum of 80% of the net value of construction supplies has to be procured through government-registered suppliers.
However, the below-mentioned services involved in residential property constructions are not taken into account while determining the total value of inputs:
Lease of land over a long period
Floor space index
Developmental rights grants
High-speed Diesel value
Electricity costs
Motor spirit or natural gas
If the promoter purchases more than 20% of business input supplies from businesses that are not GST-registered, they need to pay 18% GST. This percentage is uniform across most building materials except for cement which attracts a 28% GST.
Is GST Applicable on Resale Property?
?feature=shared
Under the latest GST provisions for property acquisition, buyers intending to purchase resale properties do not have to pay GST. Unlike unfinished or under-constructed properties, a resale flat which is a ready-to-move-in apartment does not come under a work contract. For this reason, no seller can charge GST to a buyer while selling their used flat.
Do We Need to Pay GST on the Purchase of Resale Flats?
The GST will most likely be included in the overall cost if you purchase a resale home from a builder who already paid taxes while constructing the house. This implies that the buyers of resale properties will ultimately be liable for paying GST on the acquisition of a resale flat, even if no invoice is issued and no reference to GST is made in property transactions.
Conclusion
While a seller may not explicitly charge you GST on resale homes, these costs are often indirectly included in the final price. Therefore, industry experts advise being mindful of the potential GST on resale flats, which varies based on the housing category (affordable housing projects or non-affordable housing projects).
Additionally, buyers need to account for stamp duty and registration fees, which must be paid out of pocket, adding to the overall costs of property acquisition.
š”If you want to streamline your payment and make GST payments, consider using the PICE App. Explore the PICE App today and take your export business to new heights.
FAQs
Is GST applicable on resale flats?
No, GST is not applicable on resale flats since they are ready-to-move-in properties and do not qualify as services under GST law. Unlike under-construction flats, resale flats are already completed, and GST only applies to unfinished projects or new properties without a completion certificate.
Why donāt resale flats attract GST under the current laws?
Resale flats are treated as immovable properties and are not categorized as services under the GST framework. GST primarily applies to under-construction properties, which are considered a work contract. Since resale flats are fully constructed, they are exempt from GST.
Do buyers still have to pay any other taxes on resale flats?
Yes, buyers of resale flats are required to pay stamp duty and registration charges during property transfer. These charges are separate from GST and are a significant source of revenue for state governments, often adding to the overall cost of purchase.
Can GST costs be indirectly included in the resale flat price?
Yes, sellers who paid GST during the propertyās initial construction may factor those costs into the resale price. While GST is not explicitly charged in resale transactions, buyers should be aware that it may influence the overall price indirectly.
What is the difference in GST treatment for resale and under-construction flats?
Under-construction flats attract GST at 1% for affordable housing and 5% for non-affordable housing without Input Tax Credit (ITC). Resale flats, being completed properties with a completion certificate, are exempt from GST, making them more cost-effective in terms of tax.
An Alumnus of IIM and DU with almost a decade of experience in the banking and finance sectors. I had the opportunity to work with all types of institutions in BFSI ecosystem like Bank, NBFC, Fintech, Consulting and Auditor. I started my professional journey at KPMG and subsequently worked in leading names of the BFSI sector including Ujjivan Bank, Vistaar Finance. Currently building a fintech startup ( PICE) by handling alliances, compliance and creation of GTM strategy for payments and credit product.
0
Instant Transfer
Lowest Rates
Credit on all transaction