GST on Flat Purchase in India 2025: A Comprehensive Guide

Purchasing a flat in India involves multiple legal and financial considerations, with the Goods and Services Tax (GST)being one of the most significant cost components. The GST rate applicable to property transactions depends on whether the property is under-construction or ready-to-move-in, the carpet area, and the pricing of the unit.

This article provides a detailed analysis of the applicable GST rates, legal provisions, tax implications, and illustrative examples to help homebuyers understand their tax liability.

1. Applicability of GST on Residential Properties

(A) Under-Construction Properties

GST applies to flats that are under construction, and the rates depend on whether the housing unit qualifies as affordable housing or non-affordable housing.

1. Affordable Housing (GST Rate: 1% without ITC)
   • A unit qualifies as affordable housing if:
     • The price is ₹45 lakh or less.
     • The carpet area is:
       • Up to 60 sq. meters (645 sq. ft.) in metropolitan cities (Delhi-NCR, Mumbai-MMR, Bengaluru, Chennai, Hyderabad, and Kolkata).
       • Up to 90 sq. meters (968 sq. ft.) in non-metropolitan cities.
2. Non-Affordable Housing (GST Rate: 5% without ITC)
   • If the flat’s price or carpet area exceeds the limits mentioned above, the GST rate applicable is 5%.
3. Ongoing Projects Before April 1, 2019
   • Developers had the option to:
     • Continue with the old GST rates (12% with Input Tax Credit (ITC) for non-affordable housing and 8% with ITC for affordable housing).
     • Shift to the new GST rates (5% and 1% without ITC).

(B) Ready-to-Move-In Properties

• No GST applies if the Completion Certificate (CC) has been issued before the first sale of the property.
• If a buyer purchases a ready-to-move-in flat from the builder before the CC is issued, GST applies at 1% or 5% based on the category of the flat.

2. Legal Provisions Governing GST on Real Estate

The GST framework for residential real estate transactions is governed by:

• The Central Goods and Services Tax (CGST) Act, 2017
• The Integrated Goods and Services Tax (IGST) Act, 2017
• Various GST Council Notifications (including those from the 33rd and 34th GST Council meetings in 2019)

Key Legal Provisions

1. Section 7 of the CGST Act, 2017: Defines what constitutes a supply of goods or services.
2. Schedule II of the CGST Act: States that the sale of an under-construction property is treated as a supply of services and is thus taxable under GST.
3. Notification No. 3/2019 – Central Tax (Rate) dated March 29, 2019:
   • Introduced new tax rates (1% and 5%) for real estate, effective from April 1, 2019.
4. Section 15 of the CGST Act: Governs the valuation of the property for GST purposes.

3. GST Calculation with Examples

Example 1: Under-Construction Flat in Mumbai

• Flat Price: ₹40 lakh
• Carpet Area: 55 sq. meters
• Completion Certificate: Not issued
• GST Rate: 1% (affordable housing)
• GST Payable: ₹40,000 (1% of ₹40 lakh)

Example 2: Under-Construction Flat in Bengaluru

• Flat Price: ₹75 lakh
• Carpet Area: 80 sq. meters
• Completion Certificate: Not issued
• GST Rate: 5% (non-affordable housing)
• GST Payable: ₹3.75 lakh (5% of ₹75 lakh)

Example 3: Ready-to-Move-In Flat in Jaipur

• Flat Price: ₹50 lakh
• Completion Certificate: Issued before sale
• GST Rate: 0% (No GST is applicable)

4. Input Tax Credit (ITC) and Its Implications

• Before April 1, 2019: Builders could claim Input Tax Credit (ITC) on materials (cement, steel, fittings, etc.), which helped reduce the overall tax burden.
• After April 1, 2019: The new GST rates (1% and 5%) do not allow ITC, leading to a possible increase in project costs for developers.
• Impact on Buyers: Developers may factor in the loss of ITC into the pricing of flats.

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5. Other Charges Attracting GST

Apart from the flat’s price, GST applies to additional charges levied by builders, including:

• Preferential Location Charges (PLC) – 18% GST
• Parking Charges – 18% GST
• Maintenance Charges (Above ₹7,500 per month per unit) – 18% GST
• Clubhouse and Amenity Charges – 18% GST

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6. GST Exemptions and Special Cases

1. Sale of Land and Ready-to-Move Flats: Exempt from GST.
2. Government Housing Schemes: Certain government-affordable housing projects may attract a lower or nil GST rate.
3. Joint Development Agreements (JDAs): Developers and landowners may have different GST implications based on agreement terms.

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7. Conclusion

Understanding GST on property purchases is essential for homebuyers to make informed financial decisions. Key takeaways:

• GST applies only to under-construction properties (1% for affordable housing and 5% for non-affordable housing).
• Ready-to-move-in flats (with a Completion Certificate) are GST-exempt.
• Buyers should factor in additional GST costs on charges like parking, maintenance, and PLC.
• Consult a tax professional for personalized guidance, especially in cases involving joint development agreements or composite contracts.

By being aware of GST laws and tax implications, homebuyers can better plan their property investments in 2025.

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