by Sekhar Pal 
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G1-G9 filing ASP/GSP solution
Elevate processes with AI automation and vendor delight
Streamline vendor management and collaboration in one unified portal
Optimise ITC for profitability
Bulk invoicing within any ERP
e-TDS return filing solution
Maximise EBITDA with early vendor payments
Instant working capital financing
Automated secretarial compliance
Connected finance ecosystem for process automation, greater control, higher savings and productivity
GST and direct tax compliance
Complete supply chain solution for ultimate control, effortless collaboration, and assured compliance
File ITR in 3 minutes
For Personal Tax and business compliances
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Updated on: Feb 5th, 2025
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6 min read
Over 1.73 lakhs of residential units were sold in India in just the first half of the year 2024. But owning a home comes with many challenges. Out of them, figuring out the right GST on flat purchases would probably rank in the top five.
Whether you’re a real estate developer or an aspiring homeowner, understanding how GST works on property transactions in India could save you from costly penalties in the due course of time.
As an aspiring future house owner, if you want to see yourself there, use this comprehensive guide to quickly understand the GST rates on flat purchases and the concerned guidelines in the easiest possible manner. Let’s get started.
Thanks to the 2017 tax reforms, GST applies to under-construction properties awaiting a completion certificate or ready for occupancy. Just like buyers, GST benefits developers as well. Before GST, developers were bogged down by a series of taxes–VATs, central excise, entry tax, you name it. To make things worse, they couldn’t claim refunds for their development costs.
Guess who ended up paying the price? The buyers!
However, with GST in place, things are more straightforward. It has brought transparency into the process by specifying the applicable GST rate to provide transparency for everyone involved.
Let’s see how GST works on flat purchases.
Before the GST was introduced in India, an aspiring flat owner used to pay several separate taxes, each with its own rules and rates, as shown in the table below.
When it comes to paying GST, all residential properties can be grouped into the following two categories:
In India, you have to pay GST for under-construction properties, not for ready-to-move-in flats, with a completion certificate.
Here’s a breakdown of the old and the new GST regimes on different types of residential properties:
Under construction (non-affordable housing)
Under Section 17(5)(d) of the CGST Act, taxpayers generally cannot claim ITC on GST paid for constructing immovable property for their own use (both commercial and residential). However, recent judgements have introduced some exceptions.
The Supreme Court of India has ruled that if the construction of a property is essential for providing rental or leasing services, it could be considered a “plant.” This exception allows developers to claim ITC for GST paid on construction materials and services. The Court emphasized that this should be assessed case by case using a “functionality test.”
For residential properties, ITC cannot typically be claimed for flats intended for personal use. However, if the property is meant for rental purposes and qualifies under the plant exception, developers may claim ITC.
For commercial properties like malls or offices, claiming ITC is generally easier to justify if explicitly built for rental income.
Did you know that even your flat’s maintenance fees could come with a GST tag? Yes, those seemingly small monthly charges for upkeep and services aren’t exempt from taxes!
The applicability of GST on maintenance depends on two factors:
Also, please note that if the maintenance charge is Rs 10,000, GST will be applied to the entire amount instead of the excess of Rs 2,500.
Now, let’s understand a straightforward way to calculate GST on flats.
Here’s a straightforward way to understand GST on buying a flat:
GST isn’t all about added costs—the core aim is to simplify taxes and boost transparency. Here’s how:
1% GST: Under major government schemes like Pradhan Mantri Awas Yojana and Rajiv Awas Yojana, the government has reduced the GST rate to 1% to ease the financial burden on homebuyers.
With low GST on these affordable projects, the government supports its goal to make it easier for people to buy homes.
Read more:
GST on House Rent and Commercial Property Rent
GST Impact on Land and Sale of Developed Plots
FAQs on the Real Estate Sector under GST
Yes, you have to pay GST for new flats. But, it is not applicable to ready-to-move-in flats.
Yes, flats below 45 lakhs attract GST @ 1% for qualifying under the affordable housing scheme.
GST is calculated as 5% on under-construction flats and 1% on affordable housing, based on the base price and additional costs.
Yes, GST is applied to each instalment based on the payment schedule.
No, GST does not apply to resale flats.
A Chartered Accountant by profession and a content writer by passion, I've dedicated my career to unraveling the complexities of GST. With a firm belief that learning is a lifelong journey, I've honed my skills in simplifying intricate legal jargon into easily understandable content. The satisfaction of transforming complex tax laws into relatable narratives is what drives me. Read more
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