Who Will Pay GST Builder or Buyer?

When I was buying a property, I was confused about who had to pay the GST. So, I asked a property lawyer about it. He explained that , in a normal purchase of an under-construction property, the buyer usually pays the GST amount to the builder as part of the property payment. However, the builder/promoter is generally responsible for collecting that GST and remitting it to the government. 

Does GST Apply to Every Property Purchase? 

1. He also told me that GST does not apply to every property purchase. 

2. For example, GST is generally not charged on the sale of a completed property where the entire consideration is received.

3. After the completion certificate has been issued or after first occupation, whichever is earlier. GST generally applies to qualifying under-construction property transactions. 

4. The lawyer also advised me to check the builder’s GSTIN.

5. The GST amount shown in the demand letter or agreement, and the tax invoice before making payment. 

6. This helps me keep proper records and avoid paying an incorrect or unsupported GST amount. 

The exact treatment can vary depending on the type and stage of the property transaction, so I would have a lawyer or tax professional check the agreement before making a large payment. So, the buyer usually pays the GST amount to the builder, while the builder is responsible for depositing the applicable GST with the government. 

Last year, my friend was planning to buy an under-construction flat. The builder quoted the flat price at Rs. 50 lakh but informed him that GST would be charged separately. My friend was confused and asked whether GST should already be included in the Rs. 50 lakh price, or can the builder charge it separately. I checked the details and explained the situation to him. Below, I have shared the details for your better understanding. 

Can a Builder Charge GST Separately on the Flat Price? 

1. A builder can generally show GST separately from the basic flat price, provided the GST is applicable to the transaction, and the pricing, agreement, and invoices clearly disclose the applicable tax. 

2. GST does not necessarily have to be included in the advertised base price. For example, if a flat is quoted at Rs. 50 lakh and GST is applicable at 5%, the buyer may have to pay Rs. 2.5 lakh as GST, making the total Rs. 52.5 lakh. 

3. CBIC states that GST is applicable at an effective rate of 5% for residential properties outside the affordable housing segment and 1% for qualifying affordable housing.

4. However, buyers should carefully check the sale agreement, cost sheet, and payment schedule to understand whether the quoted amount is inclusive or exclusive of GST. The builder should not misrepresent the final price or charge tax incorrectly.

So, GST does not always have to be built into the quoted flat price. It can be mentioned as a separate charge, but the buyer should be clearly informed about the GST amount and the total amount payable before making the purchase.

I was aware of the fact that consumers pay Goods and Service Tax (GST) while purchasing goods or services. However, it was my best friend, who is a CA, who explained that the companies that are giving you such goods and services will pay the GST to the government. I know this sounds confusing and you might be wondering now ‘who will pay GST builder or buyer?’. Let me explain this to you.

The ultimate price that the buyer must pay will include GST, which the seller will subsequently transfer to the government. Since this system is used throughout the entire nation, just one tax rate is used. GST was implemented in India with the intention of doing away with the tax on tax (double taxation).

In the prior tax system that was used, taxes were paid on products and profits at every stage of the manufacturing process. This resulted in a bigger tax burden placed on the end-user, who ultimately ended up paying higher prices for the goods or services.

So, the obligation was transferred from the Builder to the Buyer because GST is an example of an indirect tax. Because of this, the builder is required to collect GST from the buyer and pay it to the government. When purchasing under-construction homes in India, such as flats, apartments, and bungalows, buyers must pay a Goods and Services Tax (GST) at a rate of 1% for affordable housing and 5% for non-affordable property. The GST is also applicable to the purchase of developable plots in real estate.

Who will pay GST in real estate buyer or builder?

In India, those purchasing apartments and flats in ongoing construction projects would be required to pay GST on their purchases starting in 2022. Keep in mind that if you purchase a home in an already finished project, GST on a flat acquisition is not payable. A project is considered to be finished legally after it has been granted a completion certificate by an appropriate body.

GST rate on flat purchase 2022

What is affordable housing as per GST?

Housing units priced up to Rs 45 lakhs are considered affordable housing as per the government's definition. To be considered affordable housing, the unit must also meet several requirements. If a dwelling unit in a major city costs up to Rs. 45 lakhs and is 60 square metres or less, it is considered to be an inexpensive home. Such cities include metropolitan cities; Delhi-National Capital Region, Bengaluru, Chennai, Hyderabad, Mumbai-Mumbai Metropolitan Region, Kolkata, and Chennai. A dwelling unit in any Indian city, outside the ones already mentioned, that costs up to Rs 45 lakhs and contains up to 90 square metres of carpeting qualifies as an affordable house.

So, if you are wondering

‘

who will pay GST builder or buyer?’, you have your answer.