Of the many taxes that home buyers have to pay to the government is the Goods and Services Tax (GST). In the last few years, there have been changes made to the GST regime with respect to the real estate sector. As this forms an integral part of the property pricing, homebuyers should be aware about the implications of GST on real estate. Read this article to know details on this subject.
What is GST on real estate?
Under Section 2(119) of the Central Goods and Services Tax (CGST) Act, 2017, the GST impacts construction of complexes, buildings, civil structures, etc. Basically, the GST is paid on under-construction properties by homebuyers and investors. Prior to the implementation of the GST, homebuyers had to pay taxes including VAT, stamp duty, service tax, registration charges, etc. With implementation of the GST on flat purchase, one has to pay it only on under-construction properties.
When is GST applicable on residential properties?
While investing in a residential property, you would want to ensure if GST is applicable on the property that you are investing in. As GST is a big component that has to be paid, knowing about when it is levied helps plan your budget.
- GST is applicable on under-construction properties. This also includes properties that are booked just before completion.
- GST is applicable on rental income that is received from residential properties that is used for commercial purposes.
- GST is applicable on services such as parking, club house membership, maintenance charges etc. if clubbed with the property. In case of parking, GST is applicable if it is sold with the housing unit. All residential properties that charge maintenance of more than Rs 7,500 per month attracts a GST of 18%. In case of club house facilities, these also attract GST if it is mentioned in the sale deed.
When is GST not applicable on residential properties?
- Properties that are ready-to-move does not ask for GST. Also, properties where completion certificate is issued does not call for GST.
- Residential properties that are rented only for personal use does not have GST applicability.
- Resale properties do not call for GST as the taxes for these properties are covered in stamp duty and registration charges.
When is GST exempted on rental properties?
- All residential properties that are on rent but for personal use don’t attract any GST.
- If the rental income generated from a property is less than Rs 20 lakh and Rs 10 lakh for special category states, then there is an exemption from GST registration and compliance.
What is the GST to be paid when a property is sold?
This GST is paid only in the case of under-construction properties, and that too at the time of sale. All resale properties, ready-to-move-in properties, and properties with a completion certificate don’t have to pay GST.
GST charged on different types of property in 2025
| Type of property | GST charged |
| Affordable housing | 1% |
| Residential | 5% without ITC |
| Commercial | 12% |
What are the GST taxation rates on real estate sector?
| GST on | Tax rate | Input Tax credit |
| Ready to move properties | Not applicable as this is treated as a transaction and not as supply of goods or services | Not available |
| Resale | Not applicable | Not available |
| Land purchase and sale | Not applicable because the sale of land is neither a supply of goods nor services according to Schedule III | Not available |
| Under construction properties (housing bought under CLSS) | Applicable on basis of supply of services – 8% applicable | Available |
| On under-construction properties (affordable housing by promoter in residential realty project) | Applicable on basis of supply of services- 1.5% applicable | Not available except as mentioned in Annexure I in case of REP and in Annexure II in case of RREP |
| On under-construction properties (non-affordable housing by a promoter in residential realty project) on or after April 1, 2019 | Applicable on basis of supply of services- 7.5% applicable | Not available except as mentioned in Annexure I in case of REP and in Annexure II in case of RREP |
| Under-construction properties | 12% | Available |
| Works contract | 18% applicable | Available |
| Composite supply of works | 18% applicable | Available |
| Composite supply of works to Govt Authority | 12% applicable | Available |
| Composite supply of use for the general public | 12% applicable | Available |
| Composite supply of works contract for affordable housing | 12% applicable | Available |
Impact of GST on real estate in 2025
Mentioned below are impact of GST on real estate on homebuyers, developers and other stakeholders.
On homebuyers
In the past, while buying under-construction properties, homebuyers had to pay various taxes such as service tax, VAT, stamp duty and registration charges. The last 3 are state levies and vary among states leading to differences in property prices. With GST, a 12% tax has to be paid on under-construction properties and no GST has to be paid on complete or ready-to-move in properties that help the buyer.
On developers
Pre GST, developers had to pay the excise duty, VAT, customs duty, octroi etc. on raw materials/inputs. They also had to pay service tax on input services such as architect fee, approval charges, labour charges, legal fees etc. Note that since input tax credit (ITC) was not available for things such as customs duty, octroi etc. real estate prices were impacted and this would be passed on to the home buyer who was the most affected.
With the implementation of GST, the costs to developers have significantly reduced because of combining many taxes, and availability of ITC helps developers maintain margins even while not impacting buyers. The GST also helps in transparency as previously, expenditures done by developers were not recorded in books. But with ITC available, under recording of developer expenditure has minimised.
Impact of GST on affordable real estate projects
| Affordable housing | GST on affordable housing before April 1, 2019 | GST on affordable housing after April 1, 2019 |
| Property cost per sq ft | Rs 3,500 | Rs 3,500 |
| GST rate on flat purchase | 8% | 1% |
| GST | Rs 280 | Rs 35 |
| ITC benefit for material cost of Rs 1,500 at 18% | Rs 270 | Not applicable |
| Total | Rs 3,510 | Rs 3,553 |
Impact of GST on government housing schemes
GST rate on government housing will be 1%. Some of the government housing schemes include the Jawaharlal Nehru National Urban Renewal Mission, the Rajiv Awas Yojana, the Pradhan Mantri Awas Yojana and housing schemes of the different state governments.
Impact of GST on luxury housing
| Luxury housing | Before April 1, 2019 | After April 1, 2019 |
| Property cost per sq ft | Rs 7,000 | Rs 7,000 |
| GST rate on flat purchase | 12% | 5% |
| GST | Rs 840 | Rs 350 |
| ITC benefit for material cost of Rs 13,000 at an average of 15% | Rs 126 | Not applicable |
| Total | Rs 7,714 | Rs 7,350 |
Luxury residential properties attract a GST of 5% without ITC. Some of the things to know include:
- The added costs include those of the clubhouse, parking, and access to premium features of the property. All these services command GST of 12-18%.
- Any bespoke or customized designs used in your property will attract GST, which will increase the total cost of the property.
Impact of GST on FSI
Media reports mentioned that the government has proposed to charge 18% GST on floor space index (FSI) and additional FSI charges that have to be paid by developers to local authorities for the real estate projects. According to the PIB, in the 55th GST council meeting, the issue of whether charges collected by municipalities for granting FSI including additional FSI, chargeable to GST on reverse charge basis was brought up in the Council. The matter was deferred for further examination on the behest of the central government on the ground that this amount relates to Municipalities or local authority.
Impact of GST on stamp duty and registration charges
While the GST has subsumed many taxes at the state and central level, the stamp duty and registration charges tax is still being levied. The stamp duty for a property ranges between 5-10% and the registration charges are between 0.5 and 1%.
How to calculate GST on real estate?
GST on real estate can be determined by considering property cost, applicable GST rate and other charges. Calculate below, the GST on property in Maharashtra or GST on flat purchase in Kolkata or GST on flat purchase in Bihar using the below mentioned formula. Total GST is the addition of the state GST and the central GST.
Under-construction property value: Rs 1,000
Now, GST gives 33% of contract amount reduction as land value. Thus, land value will be Rs 330.
GST will be calculated on Rs 670 by using the applicable rates.
Eligibility to claim ITC on GST
- The developer should have a tax invoice and should have paid invoice within 6 months (180 days) from invoice date.
- The developer should have received the goods/services for which he is claiming the ITC.
- Recipient files the GSTR-3B and this should match details appearing in GSTR-2B.
- Supplier of the good/ services have paid tax to the government (he is GST registered)
- ITC will not be granted if depreciation has been claimed on tax of capital goods
ITC should be claimed within the following mentioned time frame- whichever is earlier
- November 30 of the year that follows the financial year in which the document was issued.
- Annual returns filing date
What are the advantages of GST?
- Same tax all over the country: With the presence of GST, there is a single tax rate in India, and taxes don’t vary from state to state.
- No double taxation: GST replaces all previously levied taxes except stamp duty and registration charges, making it simpler.
- GST applicability is transparent: Buyers are made aware of what types of properties GST is levied on, so homebuyers can plan accordingly.
- Simple legal work: GST provides simple tax slabs, resulting in simplified compliance and documentation. This plays an important role.
- Enhanced Transparency: GST outlines clear applicability on various property types, ensuring buyers understand their financial obligations.
6 tips to ensure compliance of GST on flat purchase
Check out the steps to follow to ensure compliance of GST on flat purchases.
- Check the status of the property: Identify the type of property you are investing in as GST is applicable only on under-construction properties and not on ready-to-move in or resale property.
- Check if property has received completion certificate: In case property has received completion certificate, the project cannot levy GST as it’s not an under-construction property.
- Which category you should pay GST for? Based on the category of the property-affordable (1%), luxury (5%) etc. calculate the GST charges that will be applicable.
- GST on added costs: Check the GST on additional costs such as parking, maintenance and other amenities etc.
- ITC benefits: See that the developer has passed on ITC benefits that will help in reduction of total value of the property.
- Legal advice: Before paying, understand finer details regarding GST by checking details from a lawyer.
Real estate taxes before GST implementation
| Type of property | VAT | Service Tax | Stamp duty | Registration |
| Under-construction properties | 1 -4% | 4.5% | 5-7% | 0.5-1% |
Note that VAT, stamp duty and registration charges varied from state to state.
What are the differences between pre-GST and post- GST on real estate?
| Pre GST | Post GST |
| Many taxes such as VAT, service tax, registration fees etc. | One single tax in addition to stamp duty and registration charges |
| No uniformity in the taxes levied across different states in India | Developers can avail the input tax credit (ITC) for the construction materials that will reduce the total costs |
| Extremely tedious compliance process | Easy tax calculations because GST on under construction property only is levied. |
What are the misconceptions people have with respect to GST in real estate?
Mentioned below are the common misconceptions associated with levy of GST in real estate.
- GST is levied on resale properties
Clarification: GST is not levied on resale properties. The tax on these is taken care of by the stamp duty and registration charges instead.
- GST is levied on ready-to-move-in properties
Clarification: These properties get the completion certificate and are thus exempted from paying GST. Such home buyers only pay stamp duty and registration charges.
- Homebuyers are taxed twice
Clarification: This is a misconception because GST was introduced to replace the many different taxes that were levied. If GST is charged, buyers don’t have to pay VAT, service tax, Octroi, excise duty, etc.
What are the challenges faced by people because of GST implementation in realty?
The implementation of GST has streamlined taxation, but stakeholders in Indian real estate still face challenges and ambiguities that require attention for seamless operations.
Applicability of GST on property: People are unable to differentiate between under-construction, ready-to-move, resale etc. when it comes to GST implementation.
Additional costs: Some services such as club house membership, parking etc. levy additional charges that are ambiguous that does not help in final cost calculations.
Extensive ITC calculations: A pain point for the developer is to do extensive calculations to arrive at ITC and in many cases, ITC can be passed only on to the final states of a realty project.
RCM: Developers are also impacted by the Reverse Charge Mechanism (RCM). Under this, if goods or services from someone who doesn’t have a GST registration are procured, then the developer having a GST registration has to pay GST on all the supplies based on a reverse charge basis. This GST has to be paid by cash or through the bank. Payments made under RCM cannot be adjusted with input tax credit and impacts developers negatively as he incurs additional costs.
Housing.com POV
Before GST was implemented, there were many individual taxes that were imposed on real estate in India. This resulted in harsh taxation rates and rules for the sector that is the second-largest employment generating sector in the country after agriculture. With the GST, an added level of transparency has been added with under-recording becoming very less. While GST on affordable housing is welcome, GST on luxury housing being 5% and additional GST of 18% for any bespoke design used ups the luxury property cost in a big way, that may in some way hit the market. However, the implementation of the GST has boosted the real estate sector in a big way, its short-term impact notwithstanding.
FAQs
When was the GST implemented in India?
The GST was implemented on July 1, 2017 and is known as one of the biggest tax reforms in India after independence.
What are the central taxes that GST subsumed?
GST subsumed central taxes including excise duty, customs duty, special additional duty of customs, service tax, central sales tax and central surcharge and cess on supply of goods and services.
What are the state taxes that GST subsumed?
GST subsumed state taxes including state value added tax, entertainment tax, luxury tax, state excise duty, state surcharge and cess on supply of goods and services, taxes on advertisement, purchase tax, taxes on lotteries, gambling and betting.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
