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.

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    GST Rates

    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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    GST Rate on Real Estate

    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.

    Frequently Asked Questions (FAQs)

    • What is real estate accounting and billing software?
      Real estate accounting and billing software helps manage financial transactions related to properties. It tracks income, expenses, invoicing, and budgeting, ensuring accurate financial records and smooth billing processes.
    • How can real estate accounting software benefit property managers and agents?
      It helps property managers and agents track rental income, manage expenses, generate invoices, and ensure timely payments. This software saves time, reduces errors, and improves financial transparency, making property management more efficient.
    • Is this software suitable for small real estate businesses?
      Yes, real estate accounting software is designed to be user-friendly and scalable, making it suitable for small businesses. It simplifies accounting tasks, offering cost-effective solutions for efficient financial management.
    • Can the software handle both commercial and residential real estate transactions?
      Yes, the software can handle both commercial and residential transactions. It allows users to manage diverse properties, offering customised features for different property types.
    • Does the software integrate with other property management tools?
      Yes, most real estate accounting software integrates with other property management tools, such as CRM systems, tenant portals, and maintenance tracking software, providing a seamless workflow.
    • How does the software assist in tracking rental income and expenses?
      The software tracks rental payments, expenses related to property maintenance, taxes, and other operational costs. It automatically categorises and records these transactions, providing clear financial reports.
    • Can the software generate customised financial reports for properties?
      Yes, it can generate customised financial reports, including profit and loss statements, cash flow analysis, and tax reports. These reports help property managers make informed decisions and maintain transparency.
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