When embarking on the journey of building your dream home, there are many factuality to keep in mind and comprehend the intricacies of taxation is very essential. Goods and Services Tax (GST) plays a vital role in home construction, shaping costs and financial planning. 

GST, a value-added tax, is applied to various aspects of home construction. The primary goal of GST is to simplify taxation, bring transparency, and ensure that taxes are paid at each stage of the supply chain.

So, now let us talk about what are the process or the contrivances needed to amass a Home Construction:-

·       Building

·       Construction

·       Fabrication

·       Installation

·       Fitting Out

·       Improvement

·       Modification

·       Repair

·       Maintenance

·       Renovation

·       Alteration or commissioning of any immovable property (transfer of Property)

Research Tax Rates Thoroughly

Your first step should be to research and understand the GST rates that apply to construction services and property transactions in your specific area. Having a clear understanding of these rates will enable you to estimate your tax liability accurately

To make it more simple for you let us depict a chart to understand the approx. percentile of GST applicable on material used during construction.

MATERIALGST Rates
Sand🟌 Oil shale/Bituminous, Asphaltic rocks,
Natural Asphaltites, Tar Sand, Asphalt – 18%
🟌 Natural sand- 5%

Steel and Iron
18%

Brick
5% – 28% (depending on the type)

Cement
28%

Crushed stones, pebbles, gravel
5%
Granite and Marble🟌 Blocks – 12%
🟌 Not in blocks – 28%

Steel and Iron
18%

Mica
12%

Building Stones
5%

Tiles
5% – 28% (depending on the material)

Wallpaper
18%

Varnish Paint
28%
Bathroom Interiors and Appliances🟌 Pipes and Tube fitting – 18%
🟌 Other items- 28%

➤  Electric Appliances
18% – 28%

So, this is just for general idea, to get an in-depth idea we’re here to help you.

*The GST rates might vary depending on the economy (this is an analysis till November, 2023).

GST Rates in Home Construction:

  • CONSTRUCTION SERVICES:  In most cases, construction services attract a GST rate that varies from country to country. These rates typically range from 5% to 18%, with variations based on the nature of the project and the location.
  • UNDER- CONSTRUCTION PROPERTIES:  When purchasing an under-construction property or flat, you’ll be liable to pay GST on the transaction. The applicable rate may depend on factors like the property’s value and whether it qualifies for any special concessions.
  • FULLY CONSTRUCTED PROPERTIES:  Properties fully constructed and ready for sale are often exempt from GST. However, it’s essential to verify the specific tax laws in your region.

GST Planning for Home Construction:

  • Leverage Input Tax Credit (ITC): If you are a builder or involved in the construction business, you can potentially benefit from Input Tax Credit (ITC). This mechanism allows you to offset the GST you’ve paid on raw materials and services against the GST you collect from your customers. Utilizing ITC effectively can significantly reduce your overall tax burden.
  • Affordable Housing Benefits: (Affordable housing are the houses which are affordable to a certain section of the society who comes under the category of middle class with a humble income. Home that comes under the value of 45 lakhs comes under the category of affordable housing in both metro and non-metro cities). Investigating whether your construction project qualifies for concessional GST rates for affordable housing. These lower rates can have a substantial impact on your project’s overall costs and budget.
  • Explore Exemptions and Concessions: Check if there are any exemptions or concessions available for your construction project. Governments often provide such benefits to promote specific housing types, such as social housing initiatives.
  • Compiled GST: When planning to construct your house it’s better to opt for a consolidated GST. For this handing over the whole project to a contractor is advantageous. It makes the calculation and payment of GST on the building material much easy, it reduces the extra burden of taxing and managing each article separately. Consolidating GST helps in overall financial planning, overview the costing and attain some significant cost savings.

GST is a critical factor in home construction, with significant implications for your project’s costs and financial viability. By gaining a deep understanding of applicable GST rates, strategically utilizing Input Tax Credits, exploring available concessions, and seeking professional advice, you can make informed decisions and plan your home construction project effectively. Remember that tax laws can change, so staying updated and consulting with experts will ensure a seamless and financially sound construction journey.

At LiveUp Homes, where dreams take shape through home construction and interior design, we value transparency and informed decision-making. In this comprehensive blog, we will unravel the intricate web of GST in the context of home construction in India, with a focus on construction materials, design services, and the construction process itself.

Some frequently asked questions, when it comes to Home Constructions GST :

  • What are the GST rule under construction Property?

So till March 2019 GST rate of Under Construction Flat (Affordable Housing) used to be 8% with ITC but it was revised and it became 1% without ITC from April 2019. GST on luxurious flats used to be 12% with ITC but it was brought down to 5% without ITC from April 2019.

  • What is the GST rate for House Construction?

The GST rate for Construction Services is generally 18% but it also varies depending on the Construction Sector.

  • Who should pay the GST, buyer or the builder?

Under the GST mechanism, the buyer is supposed to pay the GST on Under construction Properties. The builder takes the TAX amount from the buyer and subsequently hand over it to the government.

  • How is GST calculated?

            A simple formula to calculate GST;-
            GST amount = (Original cost * GST rate percentage / 100).
            Net Price = Original cost + GST Amount

  • Can builder take GST input?

A builder who sells under constructed property is supposed to pay GST on the sale of the property. The builder can claim Input Tax Credit for the GST paid on the inputs during the construction of the property. The ITC can only be claimed after the builder has received the Completion Certificate for the property.

Regardless of any state of affairs or knowledge regarding Home Constructions LiveUp Homes stands as your dedicated companion in turning your dreams into reality.

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