Understand GST Calculation in India before Investing in the Property


The roll-out of Goods and Services Tax has not only brought an indispensable turn for the overall revenue collection but also swung almost every business of the nation that is liable to pay tax. One such business sector that people are most concerned about is property and real estate. The growing population of the nation and an enormous increase in the urbanization has led the government to take some crucial steps in order to eradicate the hassle in the process of sale/purchase of the property.

But still being aware of the norms and procedures of the newly implemented taxation regime cuts the struggle of both the parties, the seller and the purchaser. Here is a brief contrast between the pre and post GST calculation in India and its effects on the property sector:


The builder and property developers, before the implementation of Goods and Services Tax, were required to pay the service tax and variable VAT all around the states of India. The service tax at the rate of 4.5 % and VAT almost about composition rate of one percent to five percent. Although the governmental schemes like Pradhan Mantri Awas Yojana and other low budget housing plans were kept away from the effect of the service tax.

Although the overall taxation was easy the builders have not entitled the benefit to claim the CENVAT tax which comprises excise duty as well as service tax paid on the input of a product. And similarly, they were not having the authority to claim the VAT either. The entire cost of service tax, VAT, and excise duty paid on the construction was the cost on the builder/developer only. Hence, the builders, shaking their shoulders off, passed the whole tax burden on the buyers which resulted in the complicated taxation and excessive rates of the property and homes.

Post GST

After the implementation of Goods and Services Tax, the tax percentage is levied at the rate of 18% but after the deduction of one-third amount that is charged as the cost of land, the effective rate becomes 12%.  The tax percentage is levied on the under-construction properties as the government treats such entities as the supply of services. But after the modification in the GST regime, the implementation of a concessional tax rate of 12% will only occur if the house is bough under the CLSS scheme.

The major benefit that the builders enjoy under GST Act is that they have full liberty to claim the overall input tax credit that they spend consumables, capital goods etc. And ultimately it becomes the responsibility of the buyer to discuss the benefit that the builder is receiving and must re-negotiate the prices on which the property is being made available. It is very important to note the overall cost reduction in the construction of the buildings because of the full claiming authority provided to the builders by the government which also makes the tricky GST calculation in India easy.

But sadly, the benefit is not passed on to the buyers in the market. Thus the government is trying to assure that the aforesaid benefits of the input tax credit reach the end buyer. The builders are supposed to answer the government under the scrutiny process that brings into the light the rates and schemes under which the builders/developers are selling the property.

The mutual benefit

Since the government has made up the decision to cut the GST rates on the property and provides   the input tax creditclaiming benefits, , the rise in the revenue collections is expected to rise with a significant amount. And this benefit is very crucial as it does not only benefits the builders/developers but also the buyers. Ultimately, such developments in the Goods and Services Tax regime strengthen the system through its core and also advances the thought process of the people towards the taxation.


With a seamless passage of GST benefits from the government to the people, the opportunity for the people to buy affordable homes will increase. And the end motive of the implementation of GST, that is growth in GDP and tax evasion, will be achieved.

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