GST on Real Estate in India: Rates, Applicability, ITC, and 2026 Rules

When Does GST Apply to Real Estate?

GST treatment depends mainly on the construction status, timing of payment, and whether any services are supplied separately.

GST applies when:

• A buyer pays any amount for an under-construction residential or commercial unit before issuance of the completion certificate, where required, or before first occupation, whichever occurs earlier.
• A contractor provides taxable construction or works-contract services.
• Development or construction services are supplied separately from the sale of land.

GST does not apply when:

• The entire consideration is received after issuance of the completion certificate, where required, or after first occupation, whichever occurs earlier.
• A completed flat, house, or commercial unit is resold.
• Land, including developed land, is sold without a separately supplied taxable service.

CBIC has clarified that developed land continues to be treated as land. However, separately supplied land-development or construction services remain taxable under GST.

Note: A transaction outside GST is not the same as an exempt supply. The sale of land and the qualifying sale of a completed building fall under Schedule III of the CGST Act and are treated as neither a supply of goods nor a supply of services.

GST Rates on Real Estate at a Glance

The rates below are effective rates on the total amount charged, including the deemed value of land.

These rates arise from Notification No. 03/2019-Central Tax Rate , read with the valuation mechanism under Notification No. 11/2017-Central Tax Rate.

Note: “Completion” means issuance of the completion certificate, where required. The earlier of the completion certificate or first occupation is considered.

What Is an RREP?

A Residential Real Estate Project, or RREP, is a project in which the carpet area of commercial apartments does not exceed 15% of the total carpet area of all apartments. A Real Estate Project, or REP, that does not satisfy this condition is treated as a REP other than an RREP.

This classification determines the GST treatment of commercial apartments shown in the table above. A standalone office or shopping complex will normally be a REP other than an RREP, while a small commercial unit in a predominantly residential project may form part of an RREP.

Do not determine the GST rate from the description “shop”, “office,” or “commercial unit” alone. Ask the promoter to confirm the project’s REP or RREP classification.

What Qualifies as Affordable Housing Under GST?

An under-construction residential apartment qualifies for the effective 1% GST rate only when it meets both conditions below.

Specified Metropolitan Cities

The 60-square-metre limit applies in:

• Bengaluru
• Chennai
• Hyderabad
• Kolkata
• Delhi NCR, limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon and Faridabad
• Mumbai Metropolitan Region

What Is Included in the ₹45 Lakh Limit?

• Construction consideration
• Land or undivided share of land
• Preferential Location Charges
• Development charges
• Parking charges
• Common-facility charges
• Other mandatory promoter charges

Example: A flat advertised at ₹43 lakh will not qualify for the 1% rate if mandatory parking and development charges increase the gross amount beyond ₹45 lakh.

Both the carpet-area and value conditions must be met. If either limit is exceeded, the apartment does not qualify as affordable housing under GST .

How to Calculate GST on an Under-Construction Property

The most common calculation error is deducting the deemed land value twice. Notification No. 11/2017-Central Tax (Rate) deems one-third of the total amount charged to represent land. GST is applied to the remaining two-thirds. The commonly quoted 1%, 5%, and 12% rates are already the resulting effective rates on the total amount charged.

Correct Formula

GST payable = Total amount charged × Effective GST rate

Do not first reduce the property value to two-thirds and then apply 1%, 5%, or 12%.

Example 1: Non-Affordable Residential Apartment

Assume that the total amount charged before GST is ₹60 lakh.

The underlying statutory calculation gives the same result:

Value after the deemed one-third land deduction : ₹40 lakh

Underlying construction-service rate: 7.5%

GST payable: ₹40 lakh × 7.5% = ₹3 lakh

Example 2: Affordable Residential Apartment

Assume that a qualifying apartment has a gross amount of ₹38 lakh.

GST on Parking, PLC, and Other Builder Charges

Preferential Location Charges paid with the construction consideration before completion form part of the composite construction supply and are subject to the apartment’s GST rate. Mandatory parking, development, club, and amenity charges will normally receive the same treatment where they are naturally bundled with the property sale.

A genuinely optional or separately contracted service may require independent classification. The agreement, cost sheet, invoice, and commercial arrangement should be reviewed together.

GST on Property Rent

The tax treatment of rent depends on whether the property is residential or non-residential and on the GST registration status of the parties.

Commercial and Non-Residential Rent

Commercial or non-residential rent generally attracts 18% GST. Where a registered landlord supplies the service under forward charge, the landlord normally issues a tax invoice and collects GST from the tenant.

From 10 October 2024, where an unregistered person rents immovable property other than a residential dwelling to a regular GST-registered recipient, the recipient is generally liable to pay GST under the Reverse Charge Mechanism, or RCM .

Composition taxpayers were excluded from this RCM entry from 16 January 2025. The intervening period from 10 October 2024 to 15 January 2025 was regularised for composition taxpayers on an “as is where is” basis.

A registered tenant may claim eligible ITC on commercial rent where the property is used for taxable business activities, and the conditions under Sections 16 and 17 are satisfied.

Residential Dwelling Rent

Renting a residential dwelling for use as a residence is generally exempt. However, renting a residential dwelling to a GST-registered person can attract GST under RCM. An exception applies where:

• The registered person is the proprietor of a proprietorship concern.
• The property is rented in the proprietor’s personal capacity.
• It is used as the proprietor’s own residence.
• The renting is on the proprietor’s own account and not that of the proprietorship concern.

This exception has applied from 1 January 2023 under Notification No. 15/2022-Central Tax Rate .

GST on Housing Society Maintenance

A Resident Welfare Association, or RWA, must charge GST on taxable member contributions when both conditions below are met:

1. The monthly contribution exceeds ₹7,500 per member .
2. The RWA’s annual aggregate turnover exceeds ₹20 lakh.

A lower registration threshold may apply in specified states. Where both conditions are met, GST at 18% applies to the entire monthly contribution, not only to the amount above ₹7,500.

Example

Multiple Apartments Owned by One Person

The ₹7,500 threshold is applied separately to each apartment. For example, where a person owns two apartments and pays ₹7,500 for each, the contributions are tested on an apartment-by-apartment basis. They are not combined into a single contribution of ₹15,000.

RWA Input Tax Credit

A taxable RWA may claim eligible ITC on goods, capital goods and services used to provide taxable maintenance services. These may include:

• Generators
• Water pumps
• Taps and pipes
• Sanitary and hardware items
• Repair and maintenance services

The member-contribution exemption applies specifically to qualifying supplies by an RWA to its members. A promoter or an independent facility management company should not apply it automatically without first reviewing the service arrangement.

Input Tax Credit in Real Estate

The ITC position differs for promoters, property buyers, and tenants.

Note that the phrase “12% with ITC” refers mainly to the promoter’s rate structure. It does not mean that every business purchasing an under-construction office or shop can claim the GST charged on the purchase.

Section 17 (5)(d) generally blocks ITC on goods or services used to construct immovable property on the taxpayer’s own account, even when the property is used for business.

Safari Retreats after the Finance Act, 2025

In Chief Commissioner of CGST v. Safari Retreats Private Limited, decided on 3 October 2024, the Supreme Court examined the earlier wording “plant or machinery” in Section 17(5)(d).

The Court held that a building could be subject to examination under a functionality test based on its use. It did not automatically allow ITC for all malls, warehouses, or commercial buildings. Section 124 of the Finance Act, 2025, subsequently:

• Replaced “plant or machinery” with “plant and machinery”.
• Deemed the change effective from 1 July 2017.
• Added a clarification addressing contrary judgments, decrees, or orders.

The amendment came into force on 1 October 2025 through Notification No. 16/2025-Central Tax.

The 2024 judgment should therefore not be treated as a general, current route for claiming ITC on the construction of commercial buildings. Existing disputes and transaction-specific positions require professional legal and tax review.

Developer Compliance: The 80% Procurement Rule and RCM

Promoters paying GST at the reduced 1% or 5% rates must procure at least 80% of specified inputs and input services from GST-registered suppliers. The calculation is prepared separately for each project and financial year.

How the 80% Rule Works

Promoters should maintain records that clearly identify the project, supplier GSTIN, purchase value, and whether the supplier was registered on the transaction date.

When Does RCM Apply?

The cement rule applies separately. The promoter must pay RCM on unregistered cement even where the overall 80% procurement requirement has already been met.

Example of an 80% Procurement Shortfall

Assume the total value of purchases covered by the rule is ₹1 crore.

For comparison, purchasing ₹10 lakh of cement from an unregistered supplier would create a separate RCM liability of ₹1.8 lakh at the current 18% cement rate.

Operational Insight

Supplier GSTIN status should be verified when each purchase is recorded. Waiting until the financial year closes can result in unexpected RCM liability and incomplete project-wise records.

Other Construction-Material Rate Changes from September 2025

Notification No. 14/2025-Central Tax (Rate) prescribes 6% Central GST on fly ash bricks, fly ash aggregates, fly ash blocks, and specified building bricks, resulting in total GST of 12%.

Note that a reduction in the GST rate on construction materials does not guarantee an equivalent reduction in property prices. The impact depends on procurement contracts, existing stock, vendor pricing, project timing, and the promoter’s ITC position.

How BUSY Supports Real Estate Accounting

Trusted by 6 lakh+ businesses, BUSY accounting software helps real estate businesses maintain project-wise expenses, material purchases , contractor bills, vendor payments, customer instalments, GSTIN details, and RCM entries in one system.

These records can support project accounting and the promoter’s annual 80% procurement review.

Stamp Duty and Registration Charges

GST does not replace stamp duty or registration charges . These state levies may apply to:

• Under-construction properties
• Completed properties
• Resale properties
• Land transactions

Rates, valuation rules, concessions, and registration-fee limits vary by state. A buyer of an under-construction apartment may therefore pay:

• GST on the taxable construction supply
• Stamp duty under the relevant state law
• Registration fees
• Other applicable statutory charges

Practical Checklist

Conclusion

GST on real estate depends mainly on the timing of payment, completion status, project classification, and nature of the transaction. Buyers and promoters should verify the agreement, cost sheet, completion documents, and project records before applying a rate or claiming ITC.

Transaction-specific issues involving commercial-property ITC, development rights, Joint Development Agreements, or RCM should be reviewed with a qualified tax professional.