As a leading provider of tax and accounting services, CA ADDA has closely monitored the impact of the Goods and Services Tax (GST) on the real estate sector in India, including the Delhi market. In this blog, we delve into the key aspects of GST on real estate transactions in Delhi in 2024.

GST Rates on Residential Properties

The GST rates on residential properties in Delhi vary based on the type of property and its value:

• Under-construction properties: 5% GST without input tax credit (ITC)
• Affordable housing projects (properties up to ?45 lakh): 1% GST without ITC
• Ready-to-move-in properties: Exempt from GST

The lower GST rate of 1% on affordable housing has made homeownership more accessible for first-time buyers in Delhi. However, the lack of ITC for developers has led to a marginal increase in the overall cost for homebuyers.

GST on Commercial Properties

The GST rates on commercial properties in Delhi are as follows:

• Commercial properties within residential projects (up to 15% of the total carpet area): 5% GST
• Standalone commercial properties: 12% GST

The availability of ITC for commercial properties has helped developers offset some of the tax burden, leading to a relatively lower impact on rental and leasing costs for businesses.

Impact on Resale Transactions

Resale or secondary market transactions of residential and commercial properties in Delhi are exempt from GST, as they are considered a transfer of existing ownership rather than a fresh supply of goods or services.

GST on Construction Materials and Services

The GST on construction materials, such as cement, steel, and bricks, as well as services provided by architects, contractors, and other professionals, has had a ripple effect on the overall project costs for real estate developers in Delhi. However, the availability of ITC has helped mitigate some of this impact.

Compliance and Reporting Requirements

Real estate developers in Delhi must comply with the GST regulations, including the timely filing of returns, maintenance of proper books of accounts, and issuance of invoices. Failure to comply can result in penalties and other legal consequences.

Conclusion

The implementation of GST has brought about significant changes in the real estate sector in Delhi, affecting both homebuyers and developers. While the streamlined tax structure has improved transparency, the lack of ITC for under-construction residential properties and the increased compliance burden have posed some challenges. As the real estate market in Delhi continues to evolve, it is crucial for stakeholders to stay updated with the latest GST developments and adapt their strategies accordingly.

CA ADDA remains committed to providing comprehensive support and guidance to our clients in navigating the complexities of GST in the real estate sector.