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  • Do we pay GST on home loan value or agreement value while purchasing apartment?

    Want to know more about GST norms and whether it is necessary to pay the GST on home loan value or agreement value? Looking out for detailed information online? Here, on this Ask Expert page you can find out all the information you want.

    Since GST introduced it has become additional pay to builders. Now GST to general apartment is 5% , mostly builders includes GST in your package. But they calculate GST amount based on agreement value. When it comes to paying GST then builder says that bank will pay them GST, now question is do we pay GST on home loan value or agreement value while purchasing apartment?
    Because if bank is paying GST above the loan then they will charge interest isn't it?
    Please explain this through example say 1 Crore is agreement value.
  • Answers

    5 Answers found.
  • GST is payable on the sale price of the apartment if it is new. The present rate of GST on a new apartment is 5%. There is no GST on the sale of old apartment. The buyer has to pay the GST to the builder (seller) and the builder will deposit it to Govt. The agreement value is same as the sale price and GST has to be paid on it. Earlier this rate was 12% but the builder was getting the Input Tax Credit (ITC) but now the rate is reduced to 5% and builder will not get any Input Tax Credit.

    We pay GST (5%) on the agreement value only and then builder deposits it to the Govt. The loan amount is directly paid to the builder by the Bank. Now this loan amount is to be returned by us in easy monthly instalments (EMI). We will have to give GST only on the interest part of this EMI to the bank and bank will deposit it to the Govt.

    In your case you have mentioned the agreement value as Rs 1 crore. It should be inclusive of 5% GST. It means that sale price is about Rs 96 lakh and GST is Rs 4 lakhs approximately. Now stamp duty will be levied on Rs 96 lakh only. Your bank will make a loan payment of Rs 1 crore directly to the builder. Suppose this loan is taken at 9% for a tenure of 15 years. So the EMI will be around Rs 105000 per month. Bank has calculated this EMI inclusive of GST on interest part.

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  • There is GST on new constructions. Now it is 5%.The GST is on the recorded cot of buying the house. If a person is availing housing loan from bank, then he has to first produce the agreement. The agreement value forms the cost . All other sale documents are made based on the agreement value.
    While sanctioning housing loan,banks (subject to the maximum eligibility and margin) can include the agreement value plus the actual statutory charges like stamp paper, registration and taxes for completing the sale process documentation as loan amount.
    Probably that is what the builder said 'that bank will pay them GST'.

    Irrespective of loan amount, the GST is on cost of purchase in the document ,which is also the agreement value.

    As bank s giving a total amount of loan including registration, stamp duty and GST, they do not show GST as a separate liability nor they calculate the interest portion of GST separate. It all includes in the total interest calculated on the total loan/ outstanding.

    Please verify the agreement as to whether the agreed cost includes stamp duty, registration and GST. Or whether it is only the amount the buyer pays seller and all other statutory charges to be borne by the buyer. Usually the agreement does not include the statutory charge. It is separately borne by the buyer, but can avail loan including that amount if eligible and bank permits that.

  • GST will be levied on new apartments and constructions only. If you purchase an old house there will not be any GST. The GST has to be paid on the total value of the building. Earlier it was 12% and the builder was getting the amount back the input tax credit. Now that system is scrapped. Now the applicable GST is 5%. There is no input tax credit these days. So the builder will include that in the cost of the building. If you are paying the original cost of 1 crore. The GST will be 5 Lakhs and the total cost will be 1.05 crores.
    If the bank is giving the full amount as loan and they will calculate GST also on that then decide on the EMI. It will not be shown separately. WHatever GST they are paying will be also added to your loan and then decide the EMI.

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  • GST is payable on under-construction property@5% but if the flat/unit is complete then there is no GST on same.

    Now there are various components in a flat and not just the basic cost of construction. For example if your total cost of apartment is Rs. 1 crore then 80% of it will be basic cost and the rest 20% as other cost like, IFMS, Car parking, LDC, EEC, etc.

    These 20% charges are collected by the builder at the time of final offer of possession and these charges attract different slab of GST and not 5%. These charges are usually at 18%.

    Now as you said that the builder will receive the GST from bank, that actually is right because you pay the complete cost including GST. So when you get a loan from bank to pay to builder then that loan will include GST part also and not just the net amount payable to builder.

    So, if you take a loan of Rs. 80 lakhs, then it will include the GST part also and builder will give the GST out of that amount to Government. So, builder is technically right in saying that he will receive the money from bank but, logically it is you who is paying the GST to builder by availing a loan for purchasing the apartment. Builder will receive the payment in form of loan availed by you and he will segregate the money in his own income and GST at his end, of which you should not even bother.

    Also to clarify, once payment is made to builder the total amount paid is converted to EMI which is paid by you. This EMI is composed of principal and interest only. The interest part of EMI is exempt from GST and there is no component of GST included in interest part of EMI.

    If again, GST is levied in EMI then, there will be double taxation as well as a huge burden on the end user/purchaser.

    Now when you will receive the final demand at the time of offer of possession then there will be more than one slab of GST. There will be few components on which GST will be levied @5% and other components on which 18% GST will be levied.

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