The Indian real estate sector has undergone significant transformations since the implementation of the Goods and Services Tax (GST). With effect from 1 April 2019, construction of under-construction residential apartments by a promoter attracts 1.5% GST for affordable residential apartments and 7.5% for other residential apartments, without input tax credit (Notification No. 3/2019-Central Tax (Rate); SAC 9954). Because one-third of the consideration is deemed to be the value of land under paragraph 2 of Notification No. 11/2017-CT(R), the effective rates are 1% and 5% of consideration. The pre-April 2019 structure — 18% on other residential and 8% on affordable housing, each reduced by the one-third land deduction to an effective 12% and 5%, with ITC — no longer applies, except to ongoing projects whose promoters opted for the old rates. SAC 9972 ("real estate services", heading 9972) is the heading under which transfer of development rights or FSI is taxed at 18% with ITC; it is not the code for a promoter's sale of under-construction apartments.
To calculate the GST amount, you can use our GST calculator widget below. Simply enter the base price of the property to see the total GST amount.
For example, if the base price of the property is ₹1,00,00,000, the total GST amount would be ₹12,00,000 (12% of ₹1,00,00,000).
The code depends on the supply: SAC 9954 for construction services (including a promoter's supply of under-construction apartments) and SAC 9972 for other real-estate services such as transfer of development rights or FSI. The GST rate for these services is 18%, but with a deduction of one-third of the value of land, the effective rate becomes 12%.
| HSN/SAC Code | Service Description | GST Rate (%) |
|---|---|---|
| 9954 | Construction of under-construction residential apartments by a promoter | 1.5% affordable / 7.5% other residential (no ITC); effective 1% / 5% |
| 9972 | Real estate services, including transfer of development rights or FSI | 18% (with ITC) |
Prior to the implementation of GST, the real estate sector was subject to multiple taxes, including service tax, value-added tax (VAT), and stamp duty. The pre-GST tax regime was complex and resulted in a higher tax burden for homebuyers.
The following table compares the pre-GST tax regime with the current GST regime:
| Tax Type | Pre-GST Rate (%) | GST Rate (%) |
|---|---|---|
| Service Tax | 4.5% | 18% (12% effective) |
| VAT | 1-5% | 0% (subsumed under GST) |
| Stamp Duty | 5-7% | 5-7% (exempt from GST) |
Certain real estate services are exempt from GST, including:
Additionally, the GST rate for affordable housing is 8%, with a deduction of one-third of the value of land, resulting in an effective rate of 5%.
Here are some frequently asked questions regarding input tax credit and compliance in the real estate sector:
Q: Can a developer claim input tax credit (ITC) on the GST paid on inputs and input services?
A: Yes, a developer can claim ITC on the GST paid on inputs and input services used in the construction of a property.
Q: How can a developer claim ITC on the GST paid on inputs and input services?
A: A developer can claim ITC by filing Form GSTR-2, which is the return for input tax credit.
To avoid common billing mistakes and ensure compliance with GST regulations, follow these tips:
By following these tips and understanding the GST regulations, real estate developers and homebuyers can ensure compliance and avoid common billing mistakes.
In conclusion, the GST regime has simplified the tax structure for the real estate sector in India. The GST rate for under-construction properties is 18%, but with a deduction of one-third of the value of land, the effective rate becomes 12%. The GST rate for affordable housing is 8%, with a deduction of one-third of the value of land, resulting in an effective rate of 5%.
It is essential for real estate developers and homebuyers to understand the GST regulations and comply with the requirements to avoid penalties and interest. By using our GST calculator widget and following the compliance tips, you can ensure that you are in compliance with the GST regulations and avoid common billing mistakes.
12%
18% with a deduction of one-third of the value of land
5%
8% with a deduction of one-third of the value of land
July 1, 2017
