The Goods and Services Tax (GST) has been a transformative reform in India's taxation landscape, particularly impacting the real estate sector. Since its inception in 2017, GST has aimed to bring transparency, reduce the cascading effect of taxes, and streamline the tax structure across various industries, including real estate. However, the sector has faced numerous challenges and adjustments in adapting to this new regime. As we move into 2024, the GST framework continues to evolve, bringing in new updates and regulations that affect the real estate industry. This blog delves into the latest GST updates in real estate, their implications, and what stakeholders should be aware of.

1. Overview of GST in Real Estate

Before diving into the latest updates, it is essential to understand the basics of how GST applies to the real estate sector. Under the GST regime, real estate transactions are primarily divided into two categories:

  • Under Construction Property: GST is applicable on the sale of under-construction properties. Initially, the GST rate was 12% with the benefit of Input Tax Credit (ITC). However, this rate was later reduced to 5% for residential properties and 1% for affordable housing, but without the benefit of ITC.
  • Ready-to-Move-In Property: No GST is applicable on properties where the construction is completed, and the completion certificate is issued. These properties are considered immovable and are exempt from GST.

2. Latest GST Rates and Amendments for 2024

In 2024, several updates have been introduced to the GST framework affecting real estate transactions. Some of the significant changes include:

a. Revised GST Rates for Commercial Properties

One of the critical updates in 2024 is the revision of GST rates for commercial properties. The government has proposed a rate reduction from 18% to 15% for under-construction commercial properties. This change is expected to boost investment in the commercial real estate sector, making it more attractive for businesses and investors.

b. Rationalization of ITC Provisions

The government has been actively working to address the issues surrounding the Input Tax Credit (ITC) in the real estate sector. In 2024, new provisions have been introduced to streamline the ITC claims process. Developers can now claim ITC more efficiently, provided they maintain proper documentation and meet specific compliance requirements. This change is expected to reduce the cost of construction and benefit both developers and buyers.

c. Introduction of E-Invoicing for Real Estate Transactions

E-invoicing has been a significant reform in the GST framework, aimed at reducing tax evasion and increasing transparency. In 2024, the scope of e-invoicing has been expanded to include real estate transactions. All transactions related to the sale of under-construction properties must now be reported through the e-invoicing system. This update will help in tracking transactions more efficiently and ensure better compliance with GST laws.

3. Impact of GST on Affordable Housing in 2024

Affordable housing has always been a priority for the Indian government, and the GST framework has been designed to support this segment. In 2024, there are several updates related to affordable housing:

a. Extension of the CLSS Scheme

The Credit Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana (PMAY) has been extended until March 2025. This extension is expected to boost the affordable housing sector by providing subsidies on home loans for eligible buyers. Additionally, the GST rate of 1% for affordable housing remains unchanged, ensuring that the sector continues to benefit from a lower tax burden.

b. Clarification on the Definition of Affordable Housing

One of the critical updates in 2024 is the clarification of the definition of affordable housing. The government has revised the carpet area and price limits for properties to qualify as affordable housing. For metro cities, the carpet area limit has been increased from 60 square meters to 75 square meters, and the price limit has been raised to ₹50 lakhs. For non-metro cities, the carpet area limit has been increased to 90 square meters, and the price limit has been raised to ₹45 lakhs. These changes aim to make more properties eligible for the lower GST rate of 1%.