What is the GST Applicable on Home Loans?

The Goods and Services Tax, popularly referred to as GST, was introduced on 1 July 2017. It functions as a singular tax format, subsuming various other indirect taxation charges such as excise duty, service tax and VAT – consolidating the total tax payable on any goods or services into one. This tax reform intends to bring transparency and ease of business into the Indian tax policies concerning any sale or purchase. GST is designed to be the solitary domestic indirect tax law for the entire country.

Any loan, including a Home Loan, is a financial aid service extended to borrowers who require funding assistance. Earlier, borrowers had to pay almost 15% of the loan amount as service tax on a Home Loan however, this charge is no longer valid in the presence of GST.

Home Loan borrowers now pay varying amounts as GST on Home Loans, initially capped at 12%* for under-construction homes and 18%* for ready-to-move-in homes. Interested buyers should also note that the rate of GST applicable on categorized affordable and non-affordable housing is different. The GST levied on Affordable Housing is 1%, and 5% on Non-Affordable Housing.

The GST is not paid on the Home Loan amount but on the processing fees and charges included in the cost of borrowing the Home Loan.

Here are the positive impacts of applying GST to Home Loans:

• A decrease in the construction costs of building a property, which is a benefit that is passed on to home buyers. Reduced property rates encourage more buyers to avail of Home Loans to buy a property in this economy.
• A decrease in the total cost of borrowing a Home Loan, with the introduction of a single tax, instead of several tax points such as Service Tax and VAT. Almost 16 additional indirect tax payouts have been eliminated since the GST.
• An increase on demand for under-construction properties, as it enjoys more GST rebates.

Now that you have a clearer understanding of the implications of GST on a Home Loan and how it makes buying a property under the current market scenario more favourable, consider borrowing the Housing Loan to fund your home buying venture. Our interest rates are competitive, and we offer a loan sanction as high as Rs.5 Crore* or higher, based on your eligibility.

Apply online today to get your Home Loan amount in just a few days.

*Terms and conditions apply.