The real estate sector is one of the largest contributors to the Indian economy. However, it has traditionally been complex in terms of taxation, involving various taxes like VAT, Service Tax, Stamp Duty, and Registration Charges. With the implementation of the Goods and Services Tax (GST) in July 2017, there has been a significant change in how taxes apply to real estate transactions.
In this blog, we’ll break down how GST affects real estate, which transactions are taxable, what rates apply, and how it impacts buyers, builders, and investors.
1. 🧾 Taxes Before GST in Real Estate
Before GST, buyers had to pay multiple taxes:
- Service Tax on under-construction properties
- VAT (Value Added Tax) by the state governments
- Stamp Duty & Registration Charges
- No uniformity; different states had different rules
This system was complex and often led to confusion and hidden costs.
2. 🏗️ GST on Under-Construction Properties
Under the GST regime, under-construction properties are subject to GST. Here’s how it works:
✅ Applicable GST Rates (as of 2025):
| Property Type | GST Rate | Input Tax Credit (ITC) |
|---|---|---|
| Affordable Housing (under-construction) | 1% | Not Available |
| Non-Affordable Housing (under-construction) | 5% | Not Available |
Note: “Affordable housing” is defined based on carpet area and property value. For metro cities, carpet area up to 60 sq. meters and value up to ₹45 lakh is considered affordable.
❌ No GST on:
- Ready-to-move-in properties (with Completion Certificate)
- Resale properties (second-hand)
🧮 Example:
If you buy a flat under construction worth ₹50 lakh (non-affordable), GST @5% = ₹2.5 lakh. This GST is payable in addition to stamp duty and registration charges.
3. 🚫 No GST on Ready-to-Move-in or Resale Properties
If a Completion Certificate (CC) has been issued by the competent authority, then no GST is applicable.
Likewise, if you are buying a resale (second-hand) flat from an individual or previous owner, GST does not apply. Only stamp duty and registration charges are payable.
4. 🔨 GST on Works Contract and Developer Services
Builders and developers incur various expenses while constructing buildings — raw materials, labor contracts, consultant fees, etc. GST applies to:
- Construction Services: If a builder is developing a property for sale before completion, GST applies.
- Works Contract: GST @18% applies when contractors are hired for government or private construction.
- Input Services: No ITC is available under the current scheme for residential properties.
This increases the cost for builders, which may be indirectly passed on to the buyer.
5. 👷 GST for Real Estate Agents and Consultants
Property agents, brokers, and consultants who earn commission on sale or lease of property are considered service providers under GST.
- GST @18% applies on commission/income from real estate services.
- Agents must register for GST if their annual turnover exceeds ₹20 lakh (₹10 lakh for special category states).
- They must raise GST-compliant invoices and file regular returns.
6. 🏢 GST on Commercial Real Estate
GST also applies to commercial properties:
- Under-construction commercial properties attract 12% GST (with ITC).
- Commercial lease/rent (like renting an office space) is also subject to 18% GST.
- Businesses can claim ITC on such transactions.
7. 📝 GST vs Stamp Duty – What’s the Difference?
Even after the introduction of GST, stamp duty and registration charges are still applicable. They are levied by state governments and are not subsumed under GST.
So, when buying a property:
- Pay GST (if applicable, for under-construction)
- Pay stamp duty (usually 5%–7%)
- Pay registration fees (typically 1%)
8. 📊 Pros and Cons of GST in Real Estate
✅ Advantages:
- One tax instead of multiple confusing taxes
- Greater transparency in pricing
- Better compliance from developers and agents
- Buyers know exactly what tax they are paying
❌ Disadvantages:
- No ITC available to buyers under current rules
- Increased cost for under-construction properties
- Builders may factor in GST while setting base price
9. 🧾 Important Compliance for Builders and Developers
- GST Registration mandatory
- Must file monthly returns (GSTR-1 and GSTR-3B)
- Separate accounting for residential vs commercial projects
- Maintain records of invoices and credit notes
10. 📌 Conclusion
The impact of GST on real estate has simplified the tax structure by replacing multiple taxes with one, but it has also introduced new compliance requirements. For buyers, the tax liability depends on whether the property is under construction or ready to move in.
Understanding the GST rules in real estate can help both buyers and developers make informed decisions and avoid unnecessary tax burdens.
📞 Need Help with GST in Real Estate?
If you’re a builder, broker, investor, or property buyer and are facing difficulties related to GST compliance, project planning, or real estate tax filing, feel free to contact us:
📍 Taxeasy Solution
Supaul Bazar, Biraul,
Darbhanga, Bihar – 847203
📞 Mob: 6289187606
📧 Email: jhajp96@gmail.com
