GST Rates On Flat Purchases in 2022 and its Impact on Home Buyers

July 15, 2022
By Team MyGate
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When buying a home, you must pay Goods and Service Tax, or GST. The GST affects real estate buyers and developers. The GST on Indian property depends on its kind, value, whether it’s under construction or ready to occupy, etc.

In India, buyers of under-construction flats, apartments, and bungalows pay 1% GST for affordable housing and 5% GST for non-affordable housing. The GST applies to real estate land purchases.

What is the GST on property in India?

The Indian government implemented the Goods and Services Tax in 2017 to harmonise international taxation systems.

Before GST, developers and property purchasers had to pay several taxes, such as value-added, service, and central excise, increasing the burden on property purchasers. The taxation of the properties was structurally complicated and less transparent.

Initially, the GST on property acquisition was 12% for non-affordable housing and 8% for affordable housing for premium residential buildings.

Property purchasers were eligible for the input tax credit or ITC on the previously applicable GST rates.

The GST rates were updated during the 33rd meeting of the GST council and are effective as of April 1, 2019.

The new GST rate for purchasing affordable housing units is 1%, whereas it is 5% for non-affordable or luxury housing units without ITC.

GST on the purchase of a flat

Those purchasing flats and apartments in under-construction developments in India’s megacities in 2022 would be required to pay GST. Note that the GST does not apply to buying apartments in completed developments. A finished project has received a certificate of completion from the appropriate authorities.

GST on the purchase of a flat in 2022

Residential Property typesGST rate till March 2019GST rate from April 2019
Affordable housing under-construction 8% with ITC1% without ITC
Non-affordable housing other than under-construction12% with ITC5% without ITC
For ready-to-move-in propertiesNo GSTNo GST

Note that the new tax rate without input tax credit (ITC) will apply to all new projects. However, builders have until May 20, 2019, to choose between the old and new rates for current projects. This discount was applicable only for unfinished projects as of March 31, 2019.

Conditions governing GST on residential real estate

Prerequisites to qualify for the 1% GST exemption on residential property:

The site qualifies as a project of affordable housing if-

 For Metro cities The Property Comes Under Affordable Housing If-Area of the Under construction House = 60 sq.m.The Price Upto 45 Lakh
For Non-Metro cities The Property Comes Under Affordable Housing If-Area of the Under construction House = 90 sq.m.The Price Upto 45 Lakh 

The site qualifies as an affordable housing development with the above mentioned requirements.

Additional conditions to receive 1% GST on flat purchases

To be eligible for the 1% GST Rate on Flats, at least 80% of the raw materials must be purchased from a registered dealer. If not, the developer must pay 18 percent GST under RCM.

The 1 percent GST payable to affordable dwellings under development does not include an ITC. Therefore, the GST one pays while acquiring the property cannot be deducted from your income. Consequently, you will not receive the advantage of decreased yearly income tax on your income.

Calculation of GST on the purchase of a flat in India

It is essential to understand the parameters for affordable and non-affordable real estate to compute the GST on real estate In India.

The GST for affordable housing is less than the GST for housing units that are not affordable.

Let’s examine some samples of the GST computation for Indian apartment purchases.

Calculating GST on affordable property

The Cost of the Property Per Sq. ftRs 6000 
GST on the Affordable Housing Segment1%
GST Value Per Sq. FtRs 6
Price Per Sq. Ft after the GSTRs. 6006

Calculating GST on non-affordable property

The Cost of the Property Per Sq. FtRs 10,000 
GST on the Affordable Housing Segment5%
GST Value Per Sq. FtRs 50
Price Per Sq. Ft after the GSTRs. 10,050

Calculation of GST on affordable housing

How to compute the Goods and Services Tax (GST) on the purchase of affordable housing flats before and after the April 1, 2019, rate change:

Affordable housingGST on affordable housing before April 1, 2019GST on affordable housing after April 1, 2019
Property cost per Sq. FtRs 3,500Rs 3,500
GST rate on flat purchase8%1%
GSTRs 280Rs 35
ITC benefit for a material cost of Rs 1,500 at 18%Rs 270Not applicable
TotalRs 3,510Rs 3,553

The effect of GST on the purchase of luxury homes

Under the new GST rates, purchasers of premium real estate will save more than they did previously. Here is how to compute the GST on the purchase of a luxury home: 

Luxury homes segmentBefore April 1, 2019After April 1, 2019
Property cost per Sq. FtRs 7,000Rs 7,000
GST rate on flat purchase12%5%
GSTRs 840Rs 350
ITC benefit for the material cost of Rs 13,000 at an average of 15%Rs 126Not applicable
TotalRs 7,714Rs 7,350

Check Your GST knowledge!

GST applies to residential buildings with up to 15% of commercial area.

Commercial property GST is 12%.

Plot purchases are exempt from GST.

Ready-to-move-in apartments are GST-free.

The GST is not payable by landlords unless the tenant is a business entity.

GST on property registration does not include stamp duty or registration fees; you must still pay these fees when purchasing a home.

GST applies to bank services related to housing loans, such as processing fees, legal fees, etc.

At least a dozen other taxes have been absorbed by GST.

Ready-to-move-in houses cost more due to GST.

Even though GST is applicable, under-construction homes are less expensive than ready residences.

GST on registration of a flat

No GST applies to property registration fees. But can GST replace stamp duty and registration fees?

Lucknow-based lawyer Prabhansu Mishra says that the stamp duty on property transactions contributes significantly to state revenue in India. If states gave up this revenue, the exchequer would suffer even more significant losses than it is now, and thus the chances of GST combining the two taxes are zero, at least for now.

GST on subsidised housing projects

The administration says that government-led major subsidised housing projects aimed at the common man, including Rajiv Awas Yojana, the Pradhan Mantri Awas Yojana, the Jawaharlal Nehru National Urban Renewal Mission, and state government housing programs, will be subject to only 1% GST under the new regime.

GST for construction services

While real estate in India isn’t directly taxable under GST, numerous activities and services are. Following are the GST rates for construction-related activities in India:

An under-construction home bought under the PMAY Credit-Linked Subsidy Scheme (CLSS)8%
An under-construction home bought without the subsidy12%
Works contract for affordable housing12%

GST on maintenance fees for housing societies

Flat owners must pay 18 percent GST if they pay at least Rs 7,500 in maintenance fees. Housing societies or RWAs that collect Rs 7,500 per month per unit must additionally pay 18% tax. Housing societies with revenue under Rs 20 lakhs are free from GST. For GST to apply, each member must pay more than Rs 7,500 monthly maintenance fees, and the RWA’s annual revenue must be more than Rs 20 lakhs.

The full amount is taxed if monthly fees surpass Rs 7,500 per member. If maintenance fees are Rs 9,000 per month per member, the 18% GST on apartments is levied on Rs 9,000. Multi-flat owners in the same housing society will be taxed individually.

The impact of GST on the real estate market

The GST has been one of the most significant reforms in the real estate market. The developer already pays Customs Duty, VAT, Excise Duty, legal expenses, service taxes, permission fees, etc., hampering their tax processes and burdening homeowners.

Under GST, property tax was simplified. The new GST regime increased the real estate tax rate to 12% and lowered property buyers’ burden. Taxation impacts developers and property purchasers. The 34th council meeting held in 2019 announced new GST rates where they lowered the tax rates. For inexpensive housing developments, the new GST was 1%; for luxury residential buildings, it’s 5%.

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