GST on Property: Flat Purchase & Commercial Rates & Rules

Learn how GST applies to property in India, including under-construction and ready-to-move flats, commercial spaces, tax exemptions, input tax credit, and buyer implications

GST on Property, including flat purchases and commercial spaces, is levied at 1% for affordable housing and 5% for other residential properties under construction. Commercial properties generally attract 12% GST.

This unified tax system replaces earlier indirect taxes like VAT and service tax, making real estate transactions more transparent. With India’s real estate market projected to grow to ₹65 lakh crore by 2030, understanding GST rules is essential for buyers and investors.

What is the GST Rate on Property in India?

The GST rate on property in India is 1% for affordable housing and 5% for standard residential properties, applicable only to under-construction properties. Commercial properties attract 12% GST. Completed properties with an Occupancy Certificate (OC) are exempt from GST.

GST on Flat Purchase in 2025

In 2025, GST on flat purchases continues to apply only to under-construction properties, while ready-to-move-in flats with an Occupancy Certificate (OC) remain exempt from GST. The current GST rates for flat purchases are as follows:

• 1% GST: For affordable housing projects where the flat price is up to ₹45 lakh and the carpet area does not exceed 60 sqm in metros or 90 sqm in non-metro cities.
• 5% GST: For other residential properties under construction.
• 12% GST: For commercial properties under construction.

Policy Changes Impacting GST on Flat Purchases in 2025

There are no major legislative changes in GST rates as of now. However, discussions about introducing additional incentives for affordable housing under the Housing for All by 2025 initiative could potentially result in further exemptions or benefits for buyers in this segment.

Implications of GST on Home Buying in 2025

1. Affordability for Buyers: The reduced GST rates of 1% and 5%, introduced in 2019, continue to make under-construction properties more affordable compared to earlier higher rates (12%).
2. Preference for Ready-to-Move-In Flats: Since flats with an OC are GST-exempt, many buyers prefer completed properties to avoid paying GST entirely.
3. Transparency in Taxation: GST has replaced complex taxes like VAT and service tax, ensuring clarity in flat purchase costs for buyers.

Overall, GST in 2025 plays a critical role in influencing home-buying decisions by balancing affordability and promoting transparency in the real estate sector.

GST on Under-Construction Flats

GST applies to under-construction flats, making them subject to a 5% GST rate (without Input Tax Credit or ITC). For flats classified as affordable housing, a reduced GST rate of 1% is applicable. Ready-to-move-in flats with an Occupancy Certificate (OC) are GST exempt, providing relief for buyers opting for completed properties.

GST Application During Construction vs. Final Purchase

1. Payments During Construction: GST is charged on each installment paid by the buyer during the construction phase. The applicable rate (5% or 1%) is calculated on the total value of the installment.
2. Final Purchase: For the final payment, GST is applied on the balance amount as long as the property remains under construction. However, if the Occupancy Certificate is issued before the final payment, no GST is charged on that amount.

Benefits of GST for Developers

Developers can claim Input Tax Credit (ITC) on GST paid for raw materials and services used in construction (e.g., cement, steel, labor costs). This reduces their overall project cost, allowing them to offer competitive pricing to buyers.

Implications for Buyers

• Buyers benefit from simplified taxation, as GST replaced complex taxes like VAT, service tax, and local levies.
• Under-construction flats with 5% GST may be less attractive compared to GST-exempt ready-to-move-in flats, especially for budget-conscious buyers.

GST on under-construction flats simplifies taxation and promotes transparency in the real estate sector. While it provides cost-saving benefits for developers, buyers should evaluate the total cost and timeline to make an informed decision.

GST on Ready-to-Move Flats

GST is not applicable on ready-to-move flats, as these properties are considered completed projects and are classified as immovable assets. Once a flat has been issued an Occupancy Certificate (OC), it falls outside the scope of GST. Buyers purchasing such homes benefit from this exemption, which eliminates an additional tax burden compared to under-construction properties.

Exceptions to GST Exemption

1. GST on Earlier Payments: If a buyer has made payments during the construction phase of the flat under a payment-linked plan, GST would have already been charged on those installments. No GST is applicable on the remaining payment once the flat is ready-to-move with an OC.
2. GST on Other Charges: While GST does not apply to the flat itself, certain additional services may attract GST, such as:
   • Maintenance charges exceeding ₹7,500 per month (taxed at 18% GST).
   • Clubhouse, parking, or other amenities provided by the builder (taxed separately under applicable GST rates).

Conditions Where GST May Apply

• Group Booking Schemes: If the flat was purchased as part of a pre-launch or group scheme where payments were made before obtaining an OC, GST would have applied to those amounts.
• Unregistered Builders: In rare cases, builders may charge GST unlawfully; buyers should verify the property’s GST applicability before finalizing the purchase.

Ready-to-move flats offer a GST-free advantage, making them more appealing for buyers seeking clarity on costs. However, buyers should remain cautious of additional charges where GST might still apply and confirm the OC status to avoid unnecessary tax liabilities.

GST on New Flats

GST is applicable to newly constructed flats that are still under construction at the time of purchase. The applicable GST rates depend on the category of the flat:

• 1% GST: For affordable housing, where the flat price is up to ₹45 lakh, and the carpet area does not exceed 60 sqm in metro cities or 90 sqm in non-metro cities.
• 5% GST: For standard residential properties that do not fall under the affordable housing category.

New flats with an Occupancy Certificate (OC) are exempt from GST, making them a more attractive option for buyers who want to avoid additional taxes.

Pricing Model for New Flats

Affordable Housing: (1% GST)

• Flat price: ₹40,00,000
• GST: 1% of ₹40,00,000 = ₹40,000
• Total Price = ₹40,00,000 + ₹40,000 = ₹40,40,000

Luxury Housing: Flat priced at ₹80 lakh (5% GST).

• Flat price: ₹80,00,000
• GST: 5% of ₹80,00,000 = ₹4,00,000
• Total Price = ₹80,00,000 + ₹4,00,000 = ₹84,00,000

Input Tax Credit (ITC)

Builders and developers cannot claim ITC under the current GST rules for residential properties. This means the GST paid on construction materials like cement and steel cannot be offset, which may result in higher costs for developers and, indirectly, buyers.

How to Calculate GST on Flat Purchase?

To calculate GST on a flat purchase, follow these steps:

1. Determine the Category of the Property:
   • Affordable Housing: GST rate is 1%.
   • Other Residential Properties: GST rate is 5%.
2. Identify the Base Price of the Flat:
   • Exclude charges for amenities like parking, maintenance, or clubhouse fees, as these may have separate GST rates.
3. Calculate the GST Amount:
   • GST = Base Price × Applicable GST Rate.
4. Add Additional Charges (If Applicable):
   • Charges like registration fees and stamp duty are not subject to GST but should be included in the total cost.

Example of GST Calculation on Flat Purchase in India

Scenario:
A buyer purchases a flat priced at ₹50,00,000 in the non-affordable housing category (5% GST). Additional charges for parking and registration are ₹5,00,000.

Property Rates Before & After GST

The implementation of GST simplified the tax structure for real estate, replacing multiple indirect taxes like VAT, service tax, and entry tax. Below is a comparison of property rates before and after GST:

Aspect	Before GST	After GST
Applicable Taxes	VAT (1–5%), Service Tax (4.5%), Entry Tax, and other levies.	Single GST: 1% for affordable housing, 5% for other residential properties.
Affordable Housing Tax Rate	6–8% (cumulative from various taxes).	1% GST.
Standard Residential Tax Rate	10–12% (cumulative).	5% GST.
Ready-to-Move Properties	Exempt from taxes if an OC was issued.	Still exempt from GST if an OC is issued.
Commercial Properties	11–15% (cumulative taxes).	12% GST.

Changes Post-GST Implementation

1. Simplified Taxation:
   Before GST, buyers faced multiple taxes with different rates depending on the state. With GST, a uniform structure (1%, 5%, or 12%) replaced the fragmented system.
2. Impact on Affordable Housing:
   Affordable housing saw a significant reduction in tax rates from 6–8% to just 1%, boosting demand and making homes more affordable.
3. Shift in Demand:
   The exemption of GST for ready-to-move-in flats continues to make these properties more attractive, shifting buyer preference away from under-construction projects subject to GST.
4. Commercial Properties:
   GST streamlined commercial property transactions by setting a 12% tax rate for all under-construction commercial projects, which previously faced varied cumulative taxes.

Market Trends Due to GST

• Increase in Transparency: GST has reduced hidden costs, making pricing clearer for buyers.
• Regional Variations Minimized: Uniform GST rates have reduced price disparities across states.
• Boost for Affordable Housing: Developers and buyers are drawn to affordable housing projects due to the lower 1% GST rate.

GST has brought clarity, reduced the tax burden in some segments, and increased transparency, though higher rates for under-construction properties have slightly impacted demand in that category.

Common Misconceptions About GST on Residential Property Purchase

Many buyers are confused about how GST applies to property purchases. Here are some common myths and the facts to clear them up:

1. GST Applies to All Home Purchases

• Myth: GST is charged on every home purchase.
• Fact: GST is only charged on under-construction properties. Flats with an Occupancy Certificate (OC), also called ready-to-move-in flats, are exempt from GST.

2. GST Is the Only Cost You Pay

• Myth: Buying a property only involves GST as a tax.
• Fact: Along with GST, buyers need to pay stamp duty and registration fees, which vary by state. These additional charges can increase the total cost by 5–10%.

3. Developers Pass ITC Savings to Buyers

• Myth: Developers use Input Tax Credit (ITC) to lower property prices.
• Fact: Developers cannot claim ITC under the current GST rules for residential properties. Reduced GST rates (1% and 5%) already account for this.

4. GST Is the Same for All Properties

• Myth: A single GST rate applies to all types of properties.
• Fact: GST rates vary:
  • 1% for affordable housing.
  • 5% for other under-construction homes.
  • 12% for under-construction commercial properties.
  • No GST for ready-to-move homes with an OC.

Understanding GST rules helps buyers save money and avoid confusion. For instance, knowing that ready-to-move flats don’t attract GST can help you budget better. Clarity on stamp duty and registration fees ensures there are no hidden surprises in your final bill. Accurate knowledge = smarter home buying

FAQs About GST on Property

Who pays GST on property, buyer or seller?

The buyer pays GST on under-construction properties at the applicable rate (1% or 5%). The seller (builder or developer) collects the GST from the buyer and deposits it with the government.

What is the GST rate on luxury housing projects?

The GST rate on luxury housing projects is 5% for under-construction properties. However, no GST applies to ready-to-move-in flats with an Occupancy Certificate (OC).

What is affordable housing?

Affordable housing refers to residential units priced up to ₹45 lakh, with a carpet area of up to 60 sqm in metro cities and 90 sqm in non-metro cities. These projects attract a reduced GST rate of 1%.

What is input tax credit?

Input Tax Credit (ITC) allows businesses to reduce their GST liability by claiming credit for the GST paid on inputs (raw materials, services). For residential properties, ITC is not available under the 1% and 5% GST rates.