GST on Real Estate in India: Applicability Explained
The Indian real estate sector has undergone major tax reforms with the introduction of the Goods and Services Tax (GST). Whether you’re buying a flat, constructing a building, or leasing commercial property, it’s crucial to understand how the gst on real estate works. In this blog, we’ll break down the gst rate on real estate, exemptions, HSN codes , and how GST impacts the industry at large.
New GST Rate on Real Estate
The Government of India is updating GST rates effective after 22 Sep 2025. Below are the expected new GST rates for Real Estate (no compensation cess).
| Property Type | GST Rate |
|---|---|
| Affordable Housing | 1% |
| Other Residential Properties | 5% |
| Commercial Properties (Shops/Offices) | 5% |
Note: “Affordable housing” refers to homes with carpet area up to 60 sq. meters in metro cities (90 sq. meters in non-metros) and priced below ₹45 lakhs.
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GST Applicability on Real Estate Transactions
The gst for real estate depends on whether the property is:
| Property Type | GST Applicability |
|---|---|
| Under-construction residential property | Yes – GST applicable |
| Ready-to-move-in property (OC issued) | No – GST exempt |
| Commercial property (office, shop) | Yes – GST applicable |
| Land purchase or resale property | No – Outside GST scope |
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Old GST Rate on Real Estate
(Old GST Rates – Applicable Until 21st September)
The real estate gst rate was revised in April 2019 to make housing more affordable:
| Property Type | GST Rate | Input Tax Credit |
|---|---|---|
| Affordable Housing | 1% | No |
| Other Residential Properties | 5% | No |
| Commercial Properties (Shops/Offices) | 12% | Yes |
Note: “Affordable housing” refers to homes with carpet area up to 60 sq. meters in metro cities (90 sq. meters in non-metros) and priced below ₹45 lakhs.
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Input Tax Credit (ITC) Rules
- ITC is not allowed for residential real estate projects under the new GST structure (1% and 5% slabs).
- ITC is allowed for commercial real estate (e.g., office spaces, malls) taxed at 12%.
- Developers must reverse ITC if switching from old to new GST rates.
GST Impact on Buyers and Developers
For Homebuyers:
- Pay 1% or 5% GST on under-construction properties.
- No GST on completed or resale flats with Occupancy Certificate (OC).
For Developers:
- Need to classify projects accurately under affordable or non-affordable categories.
- Must segregate commercial and residential components.
- Maintain compliance with invoicing, ITC tracking, and GST filings .
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GST on Real Estate Sector Components
| Component | GST Rate |
|---|---|
| Cement | 28% |
| Steel | 18% |
| Tiles, Fixtures | 18% – 28% |
| Works Contract Services | 18% |
Though ITC is blocked for residential projects, developers still pay GST on materials and services, increasing construction cost.
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Final Thoughts
The gst on real estate in India is designed to make taxation more transparent for buyers and builders. While ready-to-move-in homes are exempt, under-construction properties attract either 1% or 5% GST. Developers of commercial spaces continue to benefit from input tax credit under the gst on real estate sector. Knowing the rules ensures you’re not caught off guard when making your next property decision.
As a Chartered Accountant with over 12 years of experience, I am not only skilled in my profession but also passionate about writing. I specialize in producing insightful content on topics like GST, accounts payable, and income tax, confidently delivering valuable information that engages and informs my audience.
Frequently Asked Questions
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Is GST applicable on ready-to-move-in flats?No, GST is not applicable if the builder has received the Occupancy Certificate.
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What is the gst rate on real estate for commercial properties?12% GST with input tax credit.
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Can builders claim GST input credit?Only for commercial projects or residential projects under the old regime.
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Does GST apply to resale property?No. Resale flats or independent homes sold by individuals are not covered under GST.
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How is gst on real estate sector impacting home prices?While GST simplified taxation, blocked ITC has increased developers' costs, which may reflect in pricing.