The Impact of GST On Real Estate & Exploring the Purchase of New Flats
Purchasing a home is a significant milestone that requires careful consideration of various financial aspects. One crucial element that demands attention is the effects of Goods and Services Tax (GST) on the real estate sector. In this blog, we will delve into the impact of GST on real estate sector, specifically focusing on the purchase of new flats.
Let’s begin with the basics. The Goods and Services Tax is a comprehensive tax levied on the supply of goods and services. It was enacted by the Parliament on 29th March 2017 and came into effect on 1st July 2017. In the context of real estate, GST is applicable when buying a new or under-construction property.
GST on Residential Property Purchase
If you are considering the purchase of a new home, it’s crucial to understand the impact of GST on real estate.
The implementation of GST aimed to streamline the complex taxation system prevalent before its introduction. Prior to GST, buyers had to navigate multiple taxes such as value-added tax, service tax, and central excise duty, resulting in a convoluted taxation framework. The GST rates may vary based on government policies and regulations. Currently, for ongoing projects, the GST on the purchase of an under-construction flat stands at 1% without Input Tax Credit (ITC) for affordable housing and 5% for non-affordable housing. Before March 2019, the rates were 8% with ITC for affordable housing and 12% for non-affordable housing.
How the Introduction of GST Benefits Homebuyers
Before the introduction of GST on residential property purchases, builders had to bear the burden of various taxes at different stages of project development. This increased the cost of project development, which was eventually passed on to homebuyers in the form of higher property prices.
The implementation of GST brought about a unified tax regime for taxpayers. Homebuyers today enjoy the advantage of the reduced 1% and 5% rates for affordable and luxury housing, respectively. While ready-to-move-in homes are exempt from GST, exploring the benefits of purchasing a property during the pre-launch phase is worth considering. If you are interested in understanding the impact of GST on real estate, it’s likely that you are also in search of a new home.
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