Real Estate has historically been a preferred investment choice for many Indians and the sector has been driven to a large extent through investments made in the residential property segment. A joint report from JLL and CREDAI has estimated that housing sector investments in India since 2014 amounted to Rs. 59,000 crore and accounted for approximately 47% of the total investments in the sector with projections indicating further increase in the coming years.
During the pre-GST era of taxation, multiple taxes were applicable to real estate namely VAT, stamp duty charges, registration charges and service tax each of which featured different rates and also varied from one state to another. Implementation of GST on real estate has played a significant role in simplifying the taxation of Real Estate in India and can range from 5% to 18% depending upon some key factors. In the following sections, key aspects of GST on real estate are discussed.
Rate Comparison before and after 1st April, 2019.
As mentioned in an earlier section, GST on residential property has been slashed and the new rates have come into effect from the 1st of April 2019. The following is a comparison of the real estate GST rates as applicable before and after the 1st of April 2019:
GST is not applicable to the following construction-related transactions/activities
- Sale of ready to move in flats
- Resale of property
- Sale/purchase of land
Real Estate Project (REP) and Residential Real Estate Project (RREP)
The introduction of GST in real estate has brought upon changes by bifurcation into the Real Estate Project (REP) and Residential Real Estate Project (RREP).
RREP = REP in which carpet area of the Commercial Apartments is less than 15% of the total carpet area of all apartments in REP (Commercial + Residential)
REP is anything other than RREP.