GST in Commercial Real Estate (CRE)

GST in Commercial Real Estate (CRE)

Posted By : Admin | Date : 01 Mar 2019

GST: Goods and Service Tax: To maintain a fair dealing by builders and to offer property as promised to the buyer, GST was introduced to the Real Estate business as well. Earlier Real Estate was pressurized with various taxes like VAT, excise, registration fees, stamp duty, VAT and service tax. These provided opportunities to dishonest builders the chance to evade taxes, while duping buyers of their hard earned money. In order to remove tax evasion and hassled customers, GST was implemented in the Real Estate.

·         How much GST is applicable on CRE:

First thing is that there is No GST applicable on “Ready to Move” commercial property.

For “Under Construction” projects, 12% GST would be applicable. Under Construction property refers to any building, complex, structure intended to sell to a buyer for commercial purposes.  The GST on such properties would be charged at 12% with Full Input Tax Credit.

The actual GST on “Under Construction” commercial properties are 18%, but 1/3rd of the value is considered as value of land being provided to the buyer of the property. So GST is considered as 12% for Under Construction commercial properties with full input tax credit.

When would you not be charged GST:

·         If you buy a property after builder has obtained Completion Certificate, as then the property is considered as “Ready to move”.

·         If you made a payment in part or in full before GST was introduced in Real Estate. In that case a Service Tax of 4.5% would be applicable.

·         Resale of a “Ready to move” property does not attract GST.

How does GST benefit us?

Earlier builder would pay the various taxes and pass on the same thing to the buyers, be it duties or indirect taxes.  GST has rolled all taxes into one single tax, thus making real estate more affordable than earlier.  Buyers still find the 12% GST as high, but are gradually realizing the benefits in the tax uniformity that this GST has brought.

Any changes to GST rates for Commercial Property in Feb 2019:

No, there are no changes in GST rates for “Under Construction” commercial properties with the recent announcement. It remains at 12%. The changes have been announced only for Residential properties.

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