GST-Rate-for-Real-Estate-Agent

SAC Code and GST Rate for Real Estate Agents and Real Estate Services

SAC Code and GST Rate for Real Estate Agents and Real Estate Services

GST rate for services is based on the Services Accounting Code (SAC), classifies the services as developed by the Service Tax Department in India. The GST rate for goods, on the other hand, is based on the HSN code, an international classification system for goods adopted by over 200 countries in the course of international trade. GST rate for services fall under five slabs namely 0%, 5%, 12%, 18% and 28%. In this article, we look at the GST rate for real estate agents and real estate services.

Read about the GST Rate for Construction Services.

SAC Code for Real Estate Agents

The services provided by real estate agents fall under the real estate services on a fee/commission basis or contract basis heading of the SAC code. The following are the SAC code relevant for real estate agents:

SAC Code 997221 – Property management services on a fee/commission basis or contract basis
SAC Code 997222 – Building sales on a fee/commission basis or contract basis
SAC Code 997223 – Land sales on a fee/commission basis or contract basis
SAC Code 997224 – Real estate appraisal services on a fee/commission basis or contract basis

The GST rate applicable for all services rendered under the heading real estate services on a fee/commission basis or contract basis is 18%.

SAC Code for Real Estate Services involving Owned or Leased Property

Real estate services involving owned or leased property are classified under the SAC code as follows:

SAC Code 997211 – Rental or leasing services involving own or leased residential property
SAC Code 997212 – Rental or leasing services involving own or leased non-residential property
SAC Code 997213 – Trade services of buildings
SAC Code 997214 – Trade services of time-share properties
SAC Code 997215 – Trade services of vacant and subdivided land

Services by way of renting of residential dwelling for use as residence is exempt from GST. Other rental services would attract GST at 18%.

GST on Developers

Prior to GST, a developer had to pay multiple duties and taxes for materials procurement such as customs duty, entry tax, sales tax etc. Therefore, the value of multiple taxations became liable to the seller which lead to an increase in the prices of the housing units. But after the implementation of GST, the prices may come down leading to decreased value in the housing units because the GST compresses all the tax into one tax with less paperwork.

This would boost home sales by bringing in more liquidity in the market. Developers would also be able to enjoy higher margins on their sales.

Moreover, the increase in tax is not substantial for major inputs like steel and cement. The indirect taxes taxed steel around 17 per cent and 18 per cent under GST. Similarly for cement, the taxes totalled to nearly 24 per cent which now ruled at 28 per cent under GST. Reinforcements and iron bars will be taxed at the rate of 18% which is marginally lesser than the current rate of over 19%. However, the tax rate on bricks used for construction will be 28% whereas currently, a rate of around 25% is levied inclusive of all indirect charges.

Transportation and logistics of raw materials like steel, iron and cement are going to cost much lesser due to the streamlining of existing taxes. Currently, logistics companies try to avoid multi-tax scenario by creating a stock transfer between inventory stocking points within states. The overall cost of logistics goes up due to the presence of many small warehouses at different locations. This reduces efficiency while increasing the cost. This need to have multi-point warehouses will reduce due to a single point of taxation and thus the overall tax burden would decrease. Moreover, input tax credit on raw materials would immensely help the developers. The GST rate for work contracts has also been fixed at 12 per cent. The current GST rates mentioned above indicate that the overall gross cost of construction would remain the same across the sector.

Know more about GST rate for construction and building materials.

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