In India, the acquisition of an under-construction flat extends beyond the quoted sale price: the applicable Goods and Services Tax (GST) plays a pivotal role in determining the ultimate expenditure.
Since the introduction of a unified GST regime in 2017, residential developments have been subject to standardized rates: 1% on qualifying affordable housing, 5% on non-affordable units, and full exemption for ready-to-move-in properties.
GST on Property Purchase 2025
Below is a quick overview of the standard GST rates you’ll encounter when buying major categories of property in 2025:
| Property Type | GST Rate | ITC Eligibility |
|---|---|---|
| Affordable housing | 1% | No |
| Regular residential | 5% | No |
| Commercial premises | 12% | No |
Who Can Claim Input Tax Credit (ITC)?
Developers (not end-users) may recover GST on construction inputs if they meet these conditions:
- Valid Tax Invoice received and paid within 180 days.
- Goods/Services Delivered and used in the project.
- Accurate GSTR Filings: Purchases must appear in GSTR-2B and match GSTR-3B submissions.
- Supplier Compliance: The vendor must have remitted the GST to the government.
- No Depreciation Claimed on the same capital goods.
You must claim all eligible ITC by either November 30 following the financial year of invoice issue or by your annual-return filing date—whichever comes first.
Suggested Read: Importance of Building GST Registration for Credit Score
GST on Related Property Transactions
Real estate isn’t just about buying walls and windows. Several other supplies and services carry their own GST treatment:
| Supply or Service | GST Rate | ITC Eligibility |
|---|---|---|
| Ready-to-move-in homes | N/A | Not available |
| Resale transactions | N/A | Not available |
| Land sales | N/A | Not available |
| Under-construction (CLSS-backed affordable projects) | 8% | Yes |
| Under-construction (promoter-led affordable housing) | 1.5% | Very limited (see project annexures) |
| Under-construction (non-affordable, post-April 2019) | 7.5% | Very limited (see project annexures) |
| General under-construction units (standard classification) | 12% | Yes |
| Works contracts | 18% | Yes |
| Composite supply of construction work | 18% | Yes |
| Composite supply to government authorities | 12% | Yes |
| Composite supply for public utilities | 12% | Yes |
| Composite works contracts for affordable housing | 12% | Yes |
CLSS-backed projects (Credit-Linked Subsidy Scheme) still enjoy an 8% rate with full ITC.
Promoter-led affordable segments and post-2019 non-affordable under-construction flats carry slightly different slabs (1.5% and 7.5% respectively), but GST paid here rarely generates an ITC benefit except under specific project conditions.
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When Does GST Applies to Your New Home?
You’ll encounter GST in three main scenarios:
- Under-Construction Flats: Any property still awaiting its completion certificate carries GST, even if you book it just before handing over the keys.
- Commercial Use of Residential Units: If you’re renting out a home for business purposes, the rental income attracts GST.
- Bundled Services: Amenities sold alongside your flat—think reserved parking bays, clubhouse memberships, or maintenance contracts—are liable to GST. In particular, societies charging over ₹7,500 per member per month for upkeep must apply an 18% GST rate on those fees.
Suggested Read: What is a Builder Buyer Agreement?
Where Does GST Not Apply?
Not all property dealings fall under the GST umbrella. You can breathe easy in these cases:
- Ready-to-Move-In Homes: Once a project secures its completion certificate, GST no longer applies—only state levies like stamp duty and registration charges remain.
- Personal-Use Rentals: Leasing out your own residence for private use is exempt from GST.
- Resale Transactions: Second-hand flat sales skip GST entirely; those buyers pay only stamp duty and registration fees.
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Rental Income GST Exemptions
Even when you rent out property commercially, there are two key exemptions from GST registration and compliance:
- Annual Rental Receipts Under ₹20 Lakh: Across most states, if your total rental income stays below ₹20 lakh in a year, you’re off the hook.
- Special Category States Exception: In designated “special category” regions, the threshold drops to ₹10 lakh.
Above these limits, or if you opt in voluntarily, you’ll need to register for GST and account for tax on your lease receipts.
Suggested Read: Is Rental Real Estate Investment Still Good in 2025?
GST Charges on the Sale of New Properties
When you purchase an under-construction flat—one that hasn’t yet received its completion certificate—you’re required to pay GST immediately at the point of sale. The key points are:
- Who pays? Buyers of under-construction residential units and investors in unfinished projects.
- When is it charged? At each payment milestone (booking, construction-linked instalments, final handover), based on the amount due at that stage.
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Exemptions from GST on Property Sales
You do not pay GST when acquiring any of the following:
- Resale Apartments: Second-hand flats change hands under stamp duty and registration only.
- Ready-to-Move-In Homes: Projects with a valid completion certificate fall outside the GST net.
Suggested Read: Legal Clearances to Check Before Buying a House
GST Effects on Affordable Housing
Consider an affordable project charging ₹3,500 per sq. ft.:
- Before April 2019: GST was 8%, adding ₹280 to the base cost. Developers could claim ITC on materials (e.g., ₹270 on ₹1,500 of inputs at 18%), bringing the net to ₹3,510.
- After April 2019: GST dropped to 1%, tacking on just ₹35—but no ITC benefit. The effective price climbs slightly to ₹3,553 because the credit is no longer available, even though the headline tax rate is lower.
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GST Concessions under Government Housing Schemes
Major public programs like PMAY, JNNURM, and Rajiv Awas enjoy a flat 1% GST on under-construction units, regardless of carpet area or overall project cost. This preferential slab aims to make state-backed affordable homes genuinely pocket-friendly.
GST Impact on Luxury Properties
High-end flats tell a different story. At ₹7,000 per sq. ft.:
- Pre-April 2019: A 12% GST added ₹840, offset slightly by ITC (≈₹126 on ₹13,000 of materials), yielding ₹7,714.
- Post-April 2019: The rate is 5%, so GST is ₹350—but without any ITC, the total comes to ₹7,350.
Bear in mind that clubhouse fees, reserved parking, or bespoke interiors carry their own GST (12–18%), which further affects your final bill.
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GST & Floor Space Index (FSI) Fees
- As of mid-2025, an 18% reverse-charge GST on municipal levies for additional FSI is under consideration.
- This GST would be borne by developers (reverse-charge) when paying extra FSI fees to local authorities.
- Developers would likely pass this GST cost on to buyers, increasing overall project pricing.
- Final implementation details and timelines remain pending government review.
Suggested Read: How to Access the Value of Rental Property?
GST Impact on Stamp Duty and Registration
- GST does not replace stamp duty or registration charges—those remain separate.
- Stamp Duty: Typically ranges from 5% to 10% of the property value, varying by state.
- Registration Charges: Usually 0.5% to 1% of the transaction value.
- Both fees are payable at the time of sale deed execution, in addition to any GST liability.
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How to Calculate GST for Flats
- Determine Land Value
Subtract 33% from the contract sum, this portion is GST-exempt.
- Identify Taxable Amount
The remaining 67% is your GST base.
- Apply the Correct Rate
1%, 5%, or 12% depending on the property category.
- Add Service Charges
Include GST-able extras (parking, maintenance, etc.) at their applicable rates.
- Total Up
Sum base price, GST on base, and GST on add-ons for your final payable amount.
How to Ensure Compliance of GST on Flat Purchase?
| Compliance Check | Action Required |
|---|---|
| Property Status | Confirm it’s under-construction (GST applies) vs ready/resale (exempt) |
| Completion Certificate | Ensure no GST if CC is issued |
| Property Category | Classify as affordable (1%) or non-affordable (5%) |
| Ancillary Charges | Identify GST on parking, maintenance, clubhouse, etc. |
| ITC Pass-Through | Verify developer has factored any available ITC benefits |
| Professional Counsel | Consult a tax/legal advisor before final payment |
Pre GST vs. Post GST Regime
| Aspect | Pre-GST Regime | Post-GST Regime |
|---|---|---|
| Number of Taxes | Multiple levies (VAT, service tax, excise, octroi, etc.) | Single unified tax (CGST + SGST) alongside stamp duty and registration fees |
| Uniformity Across States | Highly variable rates and rules by state | Consistent national slabs, with clear definitions for property types |
| Compliance Complexity | Tedious filings for each separate tax | Streamlined return process; GST only on under-construction properties |
| Input Tax Credit (ITC) | Limited or no credits on construction inputs | Developers can claim ITC on eligible materials and services |
Suggested Read: How to Identify Illegally Constructed Residential Buildings?
Conclusion
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Frequently Asked Questions
For under-construction flats, GST is 5% for standard residential properties and 1% for affordable housing, both without Input Tax Credit (ITC). Completed flats with a Completion Certificate are exempt from GST.
Yes, under-construction flats priced below ₹45 lakhs qualify as affordable housing and attract 1% GST without ITC. Completed flats with a Completion Certificate are exempt from GST.
Affordable housing refers to residential units with a carpet area up to 60 square meters in metropolitan cities and 90 square meters in non-metropolitan cities, with a value up to ₹45 lakhs.
No, GST is not applicable on the resale of flats, as they are considered completed properties.
Under the new GST rates effective from April 1, 2019, builders are not allowed to claim ITC for residential projects.
GST increases the cost of purchasing an under-construction flat by 5% or 1%, depending on the property’s classification. However, for completed properties with a CC, there is no GST, potentially reducing the overall cost.
No, GST is not applicable on stamp duty and registration charges. These are state levies and are paid separately by the buyer.
Currently, there are no specific GST exemptions for first-time homebuyers. However, purchasing a completed property with a CC exempts the buyer from GST.
GST is calculated on the transaction value of the property. For under-construction flats, it’s 5% (or 1% for affordable housing) of the property’s value, excluding stamp duty and registration charges.
The GST rates were revised on April 1, 2019. Since then, there have been no further changes to the GST rates on residential properties.
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