GST simplifies taxation for real estate transactions. It provides input tax credits, allowing developers to claim taxes paid on materials and construction against the output tax on completed properties. This lowers developers' tax burden and costs, allowing them to offer benefits to purchasers. For under-construction properties, GST is 12% of the property value, excluding other taxes and charges. Completed properties will be more expensive as GST for them is 18%. Rent on residential properties is not taxed, while commercial rent over Rs. 20 lakh annually faces an 18% tax.

1. Impact of GST on Real Estate
What is Input Tax
Credit?
Benefits to Purchasers
Benefits to Developers
Completed Properties
Will Cost More
Impact of GST on rent

2. What is Input Tax Credit?
nput tax credit simply put is that when paying tax on output
product/service you can subtract the output tax with the tax
already paid on inputs. This way output tax gets reduced.
For example- A builder may have paid taxes on land, materials and
construction in the process of constructing a property. These
taxes are input tax. Tax on the completed property is output tax.
But the whole output tax need not be paid. You need to subtract
the input taxes already paid from the output tax. Hence output tax
is reduced.

3. Benefits to Purchasers
GST simplifies the tax structure for purchasers. Thanks to input tax
credits builders obtain increased profit margins and have to transfer
the benefits of the same to purchasers. For purchasers GST makes
the taxation process more transparent than before. The former found
the previous taxation process very complicated.

4. Benefits to Developers
The GST is much simpler and easier to work with from the perspective of
developers. GST has not significantly changed the taxation on major
residential and commercial properties construction materials. However,
there is reduced tax on transportation as well as logistics which will result
in a lower overall cost. As developers can claim input tax credit it will lower
their tax burden. This will result in increased profit margins.
GST is 12% of the property value in the case of under-construction
properties. This excludes stamp duty and registration charges. GST makes
it mandatory to developers to pass the benefit of lower tax to customers.

5. Completed Properties Will Cost
More
How tax is calculated under GST for under construction properties
Under construction properties will have 9% SGST (State Goods &
Services Tax) and an additional 9% CGST(Central Goods & Services Tax)
to make the total tax rate 18%. A land value equal to one-third of the final
sales amount can be deducted which makes the final tax rate 12%.

6. Impact of GST on rent
There is no tax on rental income obtained on residential properties. In case
rental income exceeds Rs 20 lakh annually in the case of properties employed
for industrial or commercial uses there will be 18% tax levied. Note that
property prices are mainly determined by demand and supply dynamics and
taxes are not the only factor. As GST subsumes nearly a dozen indirect taxes
double taxation is eliminated. The result is improved tax