In India, the liability to pay Goods and Services Tax (GST) on the purchase of a property depends on the type of property, its stage of construction, and specific regulations under the GST framework.

 Below is a detailed explanation of whether the home buyer or the developer is liable to pay GST, along with the nuances of the system:

1. GST Applicability on Property Transactions:-

GST is applicable on the sale of under-construction properties or  ready-to-move-in properties  where the completion certificate has not yet been issued. However, GST does not apply to the sale of completed properties (Ex. properties with a completion certificate or occupancy certificate issued by the competent authority).

 A. Under-construction properties : These include flats, apartments, or houses that are still in the development phase or where the completion certificate is yet to be issued. GST is levied on such transactions.

B. Completed properties: Once a completion certificate is issued, the property is considered a "completed" property, and its sale is treated as a sale of immovable property, which is outside the purview of GST. Instead, stamp duty and registration charges may apply.

 3. Who is Liable to Pay GST?

The developer or builder is primarily responsible for collecting and remitting GST  to the government. However, in practice, the home buyer bears the cost of GST as it is included in the property price quoted by the developer.

 - Developer's Role :-

  - The developer is registered under GST and is responsible for charging GST on the sale of under-construction properties.

  - The developer collects GST from the home buyer as part of the payment for the property and deposits it with the government.

  - The developer issues a GST invoice to the home buyer, reflecting the GST component.

 -  Home Buyer's Role :-

  - The home buyer does not directly pay GST to the government. Instead, they pay the GST-inclusive price to the developer.

  - The GST amount is embedded in the total cost of the property, and the buyer indirectly bears the tax burden. 

4. GST Rates on Residential Properties:-

The GST rates for residential properties were simplified in 2019 by the GST Council to make housing more affordable. The applicable rates (as of the latest updates) are:

 - Affordable Housing:-

  - Definition: Residential properties with a carpet area of up to 60 square meters in metro cities (Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad) or 90 square meters in non-metro cities, and a value of up to ₹45 lakh.

  - GST Rate:  1%  (without Input Tax Credit, ITC, for developers). 

- Non-Affordable Housing :-

  - Definition: Properties that do not fall under the affordable housing category (e.g., higher value or larger carpet area).

  - GST Rate:  5% (without ITC for developers).

 - Commercial Properties :-

  - GST Rate:  12%  (with ITC, depending on the project).

  Note : The rates mentioned above are for projects that opted for the new tax scheme introduced in April 2019. For ongoing projects that opted to continue under the old scheme, higher rates (e.g., 12% with ITC) may apply.

 4. Key Points on GST Payment:-

- No ITC for Developers : For residential properties (affordable and non-affordable) under the new scheme, developers cannot claim Input Tax Credit (ITC) on the GST paid on raw materials, services, or other inputs used in construction. This was done to keep GST rates low for home buyers.

- GST on Advance Payments : If a home buyer makes an advance payment to the developer for an under-construction property, GST is applicable on the advance amount at the time of payment.

-  No GST on Land : GST is not levied on the land component of the property. However, to calculate GST, the value of the land is typically deemed to be one-third of the total property value, and GST is applied only on the remaining two-thirds (construction value).

  5. Example of GST Calculation:-

Suppose a home buyer purchases an under-construction flat worth ₹60 lakh (excluding GST):

 -  Step 1 : Deduct the land value (assumed to be one-third of the property value).

  - Land value = ₹60 lakh × 1/3 = ₹20 lakh.

  - Taxable value (construction cost) = ₹60 lakh - ₹20 lakh = ₹40 lakh.

 -  Step 2 : Apply the GST rate.

  - If the flat is non-affordable (5% GST):

    - GST = ₹40 lakh × 5% = ₹2 lakh.

  - If the flat qualifies as affordable housing (1% GST):

    - GST = ₹40 lakh × 1% = ₹40,000.

- Step 3 : Total cost to the buyer.

  - Non-affordable: ₹60 lakh + ₹2 lakh = ₹62 lakh.

  - Affordable: ₹60 lakh + ₹40,000 = ₹60.4 lakh. 

The developer collects the total amount (including GST) from the buyer and remits the GST portion (₹2 lakh or ₹40,000) to the government.

 5. Exemptions and Special Cases:-

-  Resale of Properties : GST does not apply to the resale of properties (whether under-construction or completed) by individuals, as it is not considered a supply of goods or services under GST law.

-  Government Housing Schemes : Certain government-backed affordable housing schemes (e.g., Pradhan Mantri Awas Yojana) may have additional exemptions or subsidies, reducing the effective GST burden.

-  Works Contract Services : If a buyer directly engages a contractor for construction (e.g., building a house on their own land), GST applies to the works contract at 18%. In such cases, the contractor charges GST, and the buyer bears the cost.

  6. Other Taxes and Charges :-

In addition to GST, home buyers are liable to pay:

- Stamp Duty: - Levied by state governments on the property’s value (typically 5-7% of the property value, varying by state).

- Registration Charges: - A fee for registering the property (usually 1% of the property value or a fixed amount, depending on the state).

- These are separate from GST and are paid directly to the state government.

 7. Key Considerations for Home Buyers :-

- Check Completion Status: -  If the property has a completion certificate, no GST is applicable, which can reduce the overall cost.

- Verify GST Inclusion: - Ensure the developer clearly mentions the GST component in the agreement and provides a GST invoice.

- Affordable Housing Benefits: -If the property qualifies as affordable housing, the lower GST rate (1%) can significantly reduce costs.

- Transparency: - Home buyers should confirm whether the quoted price is inclusive or exclusive of GST to avoid surprises.

  8. Developer’s Responsibility:-

- GST Registration :- Developers with an annual turnover exceeding ₹20 lakh (or ₹10 lakh in special category states) must register for GST.

- Compliance :- Developers must file GST returns and deposit the collected GST with the government.

- No Hidden Charges : -Developers cannot charge GST over and above the prescribed rates or include it in a manner that misleads buyers.

 Brief Conclusion:-

In summary, while the developer  is legally responsible for collecting and remitting GST to the government, the  home buyer  effectively bears the GST cost as it is included in the property price.

 GST applies only to under-construction properties or properties without a completion certificate, at rates of 1% (affordable housing) or 5% (non-affordable housing) without ITC for developers.

Home buyers should carefully review the agreement, ensure transparency in pricing, and verify the property’s status to understand their tax obligations. For completed properties, buyers are exempt from GST but must pay stamp duty and registration charges.

If you have a specific scenario or need further clarification, please contact with  any expert consultant  to more details.