Calculate GST on Under Construction Flats | Kotak Mahindra Bank - Home Loan Stories

30 JUNE, 2021

GST, also known as the Goods and Services Tax, is a comprehensive taxation system that has replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc. The Goods and Service Tax Act that was launched on 1st July 2017 has brought transparency to the taxation process. However, numerous homebuyers often have queries about the impact of GST on real estate and how to compute GST on under-construction properties.

Impact of GST on Real Estate

The impact of GST on real estate sector is that the real estate developers can now claim the Input Tax Credit (ITC) on construction inputs such as labour, cement, bricks, etc. under the GST regime. Under ITC, the tax charged on GST will be credited back to the developers. This, in turn, will motivate developers to pass on the credit benefits to new homebuyers by ensuring fair property prices.

Furthermore, these changes also protect the interests of homebuyers by removing the stamp duty, which burdened buyers under the former tax regime. As a result, affordable housing has gained popularity in recent years.

GST on Under-Construction Properties

  • Government has recently offered relief for under-construction property buyers. A tax of 18% is levied on under-construction flats, out of which homebuyers are required to pay only two-thirds, i.e., only 12% tax. A deduction of 6% is made because it is assumed that this is the value of the land being transferred.
  • Moreover, after the 33rd Amendment made by the GST Council, the tax rate for under-construction properties slashed from 12% to 5%. For affordable homes (under-construction properties priced up to Rs 45 lakhs), the tax rate would be 1%. However, this is only applicable for a property without Input Tax Credit (ITC).
  • Although the cap on affordable housing price is Rs 45 lakhs for metro as well as non-metro projects, the carpet area requirements may vary. Only those affordable under-construction flats that have a carpet area of 60 square metre in metros (Delhi-NCR, Mumbai-MMR, Bengaluru, Chennai, Hyderabad, and Kolkata), and 90 square metre in non-metros will qualify for 1% GST rate.

With the help of the above information, you can quickly get acquainted with the process of GST calculation. You can use an online GST calculator to check the GST you would have to pay on the purchase of under-construction flats.

How to Finance Under-Construction Property Purchase?

To purchase an under-construction property, you can apply for a home loan with us at Kotak Mahindra Bank. If you have a good credit score, you can avail a higher loan amount at a reasonable home loan interest rate.

With us, you can avail a home loan for a long repayment tenure of up to 20 years. However, if you have a good repayment capacity, you should consider closing your loan sooner by opting for a shorter tenure. This will bring down the overall cost of borrowing by reducing the interest outgo. To close your loan sooner you can consider prepaying your loan. Make sure to read and understand the home loan prepayment clauses to avoid any inconvenience later. Also, do not forget to get an estimate of your home loan EMIs by making use of our online home loan EMI calculator. This will help you settle for an affordable EMI and reduce the chances of default. So, why wait? Opt for a home loan with us, now!

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.