home lThe implementation of Goods and Services Tax (GST) took place on 1st July 2017. It subsumed all other tax such as VAT, services tax, etc. GST also impacts housing loan in several aspects as discussed below.

1. You are required to pay GST at a rate of 18% on your -

  • Penal charges.
  • Part-prepayment charges.
  • Foreclosure fees.

For instance, suppose you avail a housing loan of Rs. 50 Lakh and the processing fee is Rs. 50,000 (1%). You have to pay an additional Rs. 7,500 on the processing fee as 15% service tax prior to implementation of GST. Hence, the total processing fee would have been Rs. 57,500.
Presently, you have to pay an additional Rs. 9,000 on the processing fee as 18% GST is applicable on the same. Hence, the total processing that you now have to pay is Rs. 59,000.

2. The GST rate of a ready-to-move-in flat will be different from under-construction one. The rate for the former is 0% while for the later the GST rate is 5%.

3. While you purchase a self-owned house, you do not have to pay any GST.

Additionally, any housing loan availed at a floating interest rate does not bear any GST. On the other hand, home loans availed at a fixed interest rate was taxed at 2%-3% of loan amount along with a services tax of up to 15%. After the implementation of GST, home loans with fixed interest rates with bear an 18% GST.