GST: 12 per cent tax on under construction properties, developers to benefit

Eliminating the multi-tax regime, the Goods and Services Tax (GST) will impose a 12 per cent tax with full input tax credit on the under-construction properties.

The service tax exemptions on services through labour contracts of construction, erection, commissioning, installation, repair, maintenance, renovation, or alteration of any civil structure or other original works related to the beneficiary-led individual house construction or expansion under the Prime Minister’s Housing for All (Urban) by 2022 Mission, will be continued as according to the directives of the GST Council.

Completed and ready-to-move-in apartments will also be exempted from the new taxes. However, stamp duty and property taxes will most likely be applicable to immovable properties.

Earlier, under construction properties used to attract a reduced service tax rate of 6 per cent under a special scheme, VAT, mostly varying between 1 to 5 per cent in different states. However, under the earlier tax regime, the developers were liable to pay a separate VAT imposed by the states and could also not avail a deduction of the input tax unlike under the GST regime.