Buying a residential apartment in Thane is a dream for most people in Mumbai city. This is a major financial commitment and one that requires careful budget planning. Along with property value and home loan costs, an important factor to consider when planning finances is taxation. Of the various taxes that may be levied, an important consideration is that of GST or the Goods and Services Tax. This tax was introduced in India on 1st July 2017 as a single, comprehensive tax system to replace various state and central taxes.

GST in Real Estate

GST is a value-added tax levied on the supply of goods and services in India. The aim of this tax was to simplify the financial process across industries including real estate by replacing several indirect taxes, such as VAT (Value Added Tax), Service Tax, and Excise Duty.

In real estate, GST applies to residential properties under construction. Completed properties such as a ready-to-move-in 2 BHK property in Thane, on the other hand, do not fall under GST, which affects both buyers and developers in different ways. Similarly, land purchase does not qualify for GST.

Factors Influencing GST Rate in Residential Properties

1. Type of Property

One of the primary factors affecting GST on residential properties is the type of property in question:

  • GST is applicable on under-construction properties since they involve services provided during the construction phase. For these properties, GST is charged at 5% for regular or luxury housing and 1% for affordable housing projects.
  • For completed properties that have received an Occupancy Certificate (OC), GST does not apply. Here, buyers only need to pay stamp duty and registration charges.
2. Property Value

The GST rate differs depending on whether a property qualifies as affordable housing or not. Affordable flats in Thane attract a lower GST rate of 1% while a luxury 2 BHK home in Thane that is under-construction will be subject to 5% GST rate. However, it is important to note that in affordable housing other factors such as property size and value can impact GST and overall expense.

3. Location of the Property

The state and city in which a property is located can influence the total cost, although GST rates are uniform across India. However, local taxes, and charges like stamp duty can impact the overall expense.

4. Developer Registration

Only registered real estate developers and projects are required to charge GST on their services. If a builder or developer is not registered under GST, they cannot legally charge GST on residential properties. Opting for a registered developer such as Ace Realty ensures you are legally compliant and purchase a property that is constructed in line with all the building codes and safety regulations.

Note: Differing government policies or state regulations could cause changes in the GST rate that is applicable. It is recommended to consult a tax professional to ensure you are legally compliant in all your payments.

Conclusion

GST is a mandatory payment on under-construction projects. For a layperson, this calculation may seem challenging and confusing. To ensure you meet your financial and legal obligations accurately and timely, it is recommended to consult a tax professional. This can also help you purchase a home that best suits your budget.