Understanding GST Applicability on Ready to Move In Apartments: A Comprehensive Guide

Are you planning to buy a ready to move in apartment, but concerned about GST (Goods and Services Tax)? This article aims to demystify the concept of GST applicability on completed properties and provide a clear understanding of when GST is and isn't applicable. We will cover the key points and address common queries related to GST and its impact on property transactions in India.

What Is GST and How Does It Apply to Immovable Property?

Is GST Applicable on 'Ready to Move In' Apartments?

No, according to the GST Act, GST is exempt on the sale of immovable property. However, if a real estate company receives advance payments from clients before the completion of construction, they are required to pay GST at 12 percent on such receipts. This implies that GST is only applicable to under-construction properties, not to completed properties like 'ready to move in' apartments.

Defining an Under-Construction Property

Under-construction property is one where a completion certificate has not been obtained from the relevant civic body. A 'ready to move in' apartment, on the other hand, carries a completion certificate. This document signifies that the construction work has been completed, and the property is safe for immediate occupancy.

Impact of Completion Certificate on GST

The criterion for determining whether GST is applicable is the issuance of a completion certificate by the local authority. If a property is issued such a certificate, it is considered 'ready to move' and GST is not levied on the sale of this completed apartment. Even if the property is not entirely 'ready to move in' but does carry a completion certificate, no GST is applicable.

Exemption from GST on Ready to Move In Apartments

A ready to move in apartment is not classified as a commodity, and hence, GST is not applicable on it. This is because the purchase of such an apartment involves paying for completed work, rather than for a service.

Other Considerations for Property Transactions

Property purchases often involve paying stamp duty and registration charges to the sub-registrar office. The amounts for these vary by state in India, as do other taxes and levies. These charges are not related to GST, as GST is not levied on completed properties.

Key Insights into GST on Property Transactions

The basic principle is that if a builder charges an amount before the issuance of a completion certificate, that payment is subject to GST. Conversely, if the entire payment is made after receiving the completion certificate, GST is not payable.

As a buyer, you will not directly pay GST on a ready-to-occupy apartment, but the price you pay may include taxes on the builder's inputs. These taxes become part of the builder's cost, but they do not include tax on the value addition.

In summary, for purchasing a ready to move in apartment, you don't incur GST. The purchase is exempt because it is a form of immovable property, and the service aspect is complete, with the certificate of completion.

Keywords: GST, Ready to Move In, Completion Certificate