GST On Flat Purchase: Under-Construction Vs. Ready-to-Move

Now that you are planning to buy a flat, you are probably also wondering about GST. What is the GST on flat purchase? How much GST do I have to pay in total? What is the GST on under-construction flats? Do I have to pay more GST for ready-to-move-in flats?

There are so many questions about GST that go on inside our heads.

Buying a home is one of life's most significant investments, and it is natural for us to want all the information beforehand. Understanding the tax implications is an important part of the decision-making process, as it can make a big difference to your budget.

So, what costs should you factor in before making a decision?

Don't worry-it's not as complicated as it seems! Let's simplify GST on flat purchases for you.

What is GST, and how does it apply to flats?

GST (Goods and Services Tax) is a unified tax that replaced multiple indirect taxes (VAT, excise, service tax) in India to make buying flats more transparent and affordable for home buyers.

GST on flat purchases has transformed the real estate industry, and for people looking forward to buying flats in Guwahati and other urban cities, this is a simplified taxation process.

For home buyers, it's essential to understand how GST on residential property is calculated and when it's applicable.

GST on flat purchases: Under-construction flats

GST is applicable when you buy a flat that's still under construction. Here's how it works:

Tax Rate

• The GST rate on under-construction flats is 5% of the total cost, excluding the value of the land.
• For affordable housing (flats priced below ?45 lakh with a carpet area of up to 60 sqm in metro cities like Guwahati or 90 sqm in non-metro cities), the GST rate is reduced to 1%.

When is GST Charged

• GST on under-construction property can only be charged if the property is still under construction at the time of purchase.

GST on flat purchases: Ready-to-Move-In Flats

Now, this is what most home buyers will be relieved to know. There is no GST for purchase of flats that are already completed and ready to move in.

No GST

• If the completion certificate has been issued before the sale, GST does not apply. Essentially, buying a ready-to-move flat is tax-free under GST laws!

What does this mean

• In comparison to under-construction flats, here you only have to pay stamp duty, registration charges, and other applicable fees. This can make a significant impact on your budget, too.

Which GST on flat purchase option is better for you?

Of course, no one likes to pay extra money when already paying a big chunk for the property itself. To top it off, the GST on residential property isn't really a small amount despite being simplified now in comparison to what it was before GST was introduced in 2017.

But the truth is, it really depends on your priorities whether or not you will be paying GST on flat purchase. Here's why:

Under-Construction Flats

If you aren't ready yet to pay the full amount, then selecting an under-construction property is suitable for you. Not many people have the money ready when they find the ideal property, so under-construction properties can work depending on your financial situation. It is also suitable if:

• You are okay with waiting for possession
• You want to explore lower base prices
• You want to explore flexible payment plans
• You are financially prepared for the additional GST on flat purchase

Ready-to-Move Flats

For all those home buyers who are financially ready and want to move in quickly, ready-to-move-in flats are the best option for you because it is:

• Perfect for those who want immediate possession
• Prefer to avoid GST altogether

But there is something you must note here. Even though you do not have to pay GST on flat purchases, these can often come with higher base prices than under-construction ones. Therefore, you must be prepared for this additional cost.

Click here to explore read-to-move Uttarayan properties.

GST in case of purchase cancellation

Just in case you change your mind or something unforeseen happens, and you have to cancel the purchase of your flat, once again, the GST status depends on the status of the flat. The status of GST changes based on whether the property is under construction or ready to move. Here's a breakdown:

GST on under-construction flats

In the case of an under-construction flat, if you cancel your booking before the project starts expanding, you can request a refund on the GST on flat purchase amount you paid during the booking.

If you cancel your purchase before the completion of the project and its possession, you can claim the GST paid on the advance amount. While you cannot claim a refund on the advance amount itself, you can claim on the GST amount as GST is paid on the transaction of sale, which isn't technically completed until the actual possession.

The developer is responsible for initiating the refund on GST for purchase of flat, but the actual refund amount depends on the terms of the agreement and the developer's policies.

GST on ready-to-move flats

Since GST is not applicable on ready-to-move flats (provided the completion certificate is issued), there is no question of GST on flat purchase refund in this case.

Key points to remember in case of cancellation

• Read the terms and conditions of your purchase agreement carefully to understand the refund and cancellation clauses.
• Most developers will specify a timeframe and conditions for processing refunds (including GST). Read this carefully.
• Keep all payment receipts, GST invoices, and correspondence with the developer. These are essential for claiming refunds.
• Your developer or builder might deduct a cancellation fee before processing the refund on the advance or booking amount. If the deduction is significant, it may affect and reduce the amount of GST refund you receive.
• If the developer refuses to refund GST on flat purchase or booking amounts, you can file a complaint with the consumer court.

Read this blog to learn more about how GST affects the cost of buying an apartment.

Breakdown of GST and additional costs

When deciding between an under-construction and a ready-to-move-in flat, it's not just about GST-you also need to consider the overall costs involved. Once you are aware of the complete cost breakdown, it helps you be prepared for the overall budget in either case.

Here is a quick checklist.

Under-construction flats

Here is a list of all potential costs that generally add to the total cost when purchasing an under-construction flat:

1. Base Price: Depending on the location, developer's brand value, and stage of construction, the base price might move up or down.

2. GST on flat purchase:

• 5% GST on the cost of the flat for most projects.
• 1% GST if the property qualifies as affordable housing (priced below ?45 lakh and meeting specific area criteria).

3. Stamp Duty and Registration Charges: These costs vary from state to state and apply to all types of properties, regardless of GST. For under-construction flats, this is an additional cost alongside the GST on flat purchases.

4. Maintenance and Other Charges: Some developers charge GST on additional services like parking, clubhouse membership, or common area maintenance. Make sure you check these and understand the actual costs.

Ready-to-move flats

Ready-to-move flats often come with a higher base price but fewer additional taxes. When going ahead with this, these are the following costs that you will have to take care of:

1. Base Price: Here, you generally have to pay a higher base price in comparison to under-construction flats, as these are completed properties with no waiting time.

2. No GST on flat purchase: If the completion certificate has been issued before the sale, GST does not apply. These types of properties are tax-free under GST laws.

3. Stamp Duty and Registration Charges: Like under-construction flats, these costs are state-specific and mandatory.

4. Other Fees: Any additional charges like maintenance deposits or parking fees are generally free from GST, as the flat is already considered complete.

Quick tips to keep in mind (GST for purchase of flat)

• Always confirm the Completion Certificate with your builder before making a purchase decision. This will clarify if GST is applicable.
• If you are opting for a flat under the affordable housing category, the GST rate is significantly lower. Understand the price breakup and the actual cost of your flat before signing the booking agreement.
• Check if the GST on flat purchase amount is already included in the price.
• Discuss GST-related questions with the developer during booking to avoid surprises later.