Learn about the GST rates on flat purchases in India. Get details on 1%, 5%, and exemptions for under-construction and ready-to-move-in flats in 2025.
In India, the Goods and Services Tax (GST) plays a significant role in determining the overall cost of purchasing a flat. As of 2025, the GST rates and exemptions on flat purchases have undergone several updates that every homebuyer should be aware of. Whether you’re buying an under-construction flat or a ready-to-move-in property, understanding the GST rates applicable to your purchase is crucial to budgeting effectively.
GST on flat purchases in India is subject to varying rates based on factors like the type of housing, the stage of construction, and the buyer’s eligibility for exemptions. In 2025, there are specific rates for standard flats, reduced GST rates for affordable housing projects, and potential exemptions for certain categories of buyers. Additionally, the ability to claim Input Tax Credit (ITC) can help reduce the overall tax burden for those purchasing under-construction flats.
In this blog, we will explore the financial implications of GST on flat purchases, including how to calculate GST, and delve into the benefits for developers and buyers alike.
What is the GST on Property?
The current GST rate for property purchases are 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.
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 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.
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
GST on Developable Land
As per the CBIC circular dated August 3, 2022, GST is not applicable on the sale of developable land, even if basic infrastructure like roads and sewage systems are in place. This exemption has been upheld by recent decisions in states like Karnataka, where the Authority of Advance Ruling (AAR) reinforced this interpretation.
In past rulings, however, some states like Madhya Pradesh and Gujarat have treated land sales with infrastructure differently. These states have applied an 18% GST on land sales where infrastructure is already in place, creating variations in how GST on land is applied across India. Additionally, stamp duty and registration fees are applicable to land sales, imposed by the state governments separately from GST. These fees vary depending on the state in which the property is located.
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.
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
- Affordability for Buyers: The reduced GST ratesof 1% and 5%, introduced in 2019, continue to make under-construction properties more affordable compared to earlier higher rates (12%).
- 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.
- 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 Housing Society Maintenance Fees
In India, flat owners are required to pay 18% GST on residential property maintenance fees if they contribute at least ₹7,500 to their housing society every month. The Housing societies or Resident Welfare Associations (RWAs) collecting these amounts must also pay an additional 18% tax on the total sum received.
However, if the housing society’s annual turnover is below ₹20 lakhs, GST is not required. For example, if a housing society charges ₹8,000 per month per member, GST applies to the entire amount of ₹8,000, not just the ₹500 exceeding the ₹7,500 threshold. It’s important to note that if multiple owners live in the same society, each owner’s maintenance fee is taxed separately under the applicable GST rules.
Affordable Housing GST Rate in 2025
In 2025, for affordable homes priced at ₹45 lakhs or less, the GST rate will be 1% without the option to claim Input Tax Credit (ITC). This low rate is aimed at making affordable housing more accessible to a broader population, reducing the tax burden for homebuyers.
It’s crucial to understand that GST rates can vary based on property type, location, and other factors. To ensure compliance and up-to-date information, prospective homebuyers should always consult a tax professional or refer to the relevant authorities before proceeding with any property purchases.
GST Application During Construction vs. Final Purchase
- 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.
- 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.
Exceptions to GST Exemption
- 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.
- 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.
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:
- Determine the Category of the Property:
- Affordable Housing: GST rate is 1%.
- Other Residential Properties: GST rate is 5%.
- Identify the Base Price of the Flat:
- Exclude charges for amenities like parking, maintenance, or clubhouse fees, as these may have separate GST rates.
- Calculate the GST Amount:
- GST = Base Price × Applicable GST Rate.
- 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
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.
Step 1: Calculate GST on the Base Price. Step 2: Include Additional Charges. Step 3: Calculate the Total Cost.
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
- 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. - 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. - 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. - 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:
-
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.
-
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%.
-
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.
-
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
GST on Government Housing Schemes
Under key government housing schemes like Pradhan Mantri Awas Yojana (PMAY) and Rajiv Awas Yojana, the government has significantly reduced the GST rate to 1%. This reduction is designed to ease the financial burden on homebuyers, particularly in the affordable housing sector.
By keeping the GST low for these schemes, the government is supporting its objective of making homeownership more accessible. This move ensures that more people can afford to buy homes under government-supported initiatives, contributing to the overall growth of affordable housing in India.
Conclusion
In conclusion, GST plays a crucial role in determining the cost of flat purchases in India. As of 2025, under-construction properties are subject to GST rates of 1% for affordable housing and 5% for standard residential flats, while commercial properties attract a 12% GST. Ready-to-move-in flats with an Occupancy Certificate (OC) remain exempt from GST, offering significant savings for buyers who opt for completed properties.
The introduction of GST has replaced complex taxes like VAT and service tax, making property purchases clearer and more affordable. For affordable housing schemes, such as PMAY, the reduced GST rate further eases the financial burden. Buyers should stay informed about the applicable rates and exemptions to make well-informed decisions when purchasing flats.
FAQs About GST on Property
What is the GST rate for flat purchases in India?
In 2025, the GST rate on flat purchases is 1% for affordable housing and 5% for standard under-construction properties. Commercial properties attract a 12% GST.
Are ready-to-move-in flats subject to GST?
No, ready-to-move-in flats with an Occupancy Certificate (OC) are exempt from GST, as they are considered completed properties.
Can I claim Input Tax Credit (ITC) on GST for flat purchases?
No, Input Tax Credit (ITC) cannot be claimed for residential flat purchases under GST, even for under-construction properties.
What are the GST implications for under-construction flats?
Under-construction flats are subject to a 5% GST (for standard properties) or 1% for affordable housing, without the option of claiming ITC.
Do builders charge GST on flat purchases?
Yes, builders collect GST on under-construction flats based on the applicable rate of 1% or 5%, depending on the property’s classification.
What is the GST rate for affordable housing projects in 2025?
Affordable housing projects attract a reduced GST rate of 1%, provided the flat price is up to ₹45 lakh and meets area criteria.
Is stamp duty included in GST on flat purchases?
No, stamp duty is separate from GST and is not included in the GST calculation for flat purchases.
