GST on flat purchase has revolutionised the real estate sector in India, bringing transparency and reducing tax burdens. This comprehensive guide delves into the intricacies of GST rates applied to flat purchases as of 2024.
Let’s explore the beneficial impacts of GST on the real estate market, highlight the current rates for residential properties, and discuss the anticipated improvements within this regime.
Whether you're a first-time buyer or a seasoned investor, understanding these changes is crucial for making informed decisions. Join us as we navigate the evolving landscape of GST on flat purchases.
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GST has a beneficial impact on India since it is charged on goods and services at multiple stages. The implementation of GST significantly reduces the inefficiency of India’s tax structure.
Although the GST regime has been in place for four years and many changes have been made to the GST tax structure in a short period; real estate experts believe there is still room for improvement in the regime, which was introduced with much fanfare.
This article looks into the matter of the GST rate on flat purchases in 2023. Read further to know more about the GST rate on a flat purchase.
Note: The usual rates of GST are announced on the commencement of the fiscal year i.e., 1st April of each year. But a few regulations/changes will be made on the GST rates of the textile industry from the 1st of January, 2023. The rates given below have been implemented by the government of India since April 1st, 2019. Changes are made and announced in the budget annually.
Multiple taxes were imposed and levied on products and services under the previous indirect tax structure. Both the federal government and the state-imposed taxes. Different states had their own set of rules and regulations, and they mostly levied VAT. At the same time, a Central State Tax was imposed on interstate transactions. Many other indirect taxes, such as Entertainment, Octroi, and Local Tax, were levied jointly by the federal government and the state. That is, there was a significant overlap of taxes on taxes.
The following is a list of taxes that existed before the GST –
| Duties of Excise | Central Sales Tax |
| Central Excise Duty | Entry Tax |
| Additional Duties of Customs | Luxury Tax |
| Additional Duties of Excise | Purchase Tax |
| Special Additional Duties of Customs | Entertainment Tax |
| State VAT | Taxes on advertisement |
| Cess | Betting, Lottery and Gambling Taxes |
In 2024, the landscape of GST on flat booking continues to align with the Indian government's aim to make housing more accessible and affordable. For those investing in under-construction properties, including flats, apartments, and bungalows, the GST framework has been meticulously structured. Affordable housing, a category defined by specific government criteria considering factors such as location, carpet area, and overall value, attracts a minimal GST rate of 1%. This initiative is designed to encourage investment in economically priced homes.
For properties falling outside the affordable housing bracket, often referred to as non-affordable housing, a GST rate of 5% is applicable. This tax rate is imposed on the purchase price of under-construction properties, ensuring a uniform tax structure across the real estate sector. Notably, the purchase of real estate land is also subject to GST, highlighting the comprehensive application of this tax regime in the property market.
Since its establishment, the government has considerably decreased the GST on purchase of flats to replicate demand during a prolonged slowdown. According to analysts, this might potentially reduce the buyers’ pay-out by 4% to 6% on the total purchase.
| Property type | GST rate from April 2019 | GST rate till March 2019 |
| Affordable Housing | 1% without ITC | 8% without ITC |
| Non-affordable Housing | 5% without ITC | 12% without ITC |
The new tax rate was applied to all new projects without an input tax credit (ITC). Builders were given a one-time option to choose between the old and new rates for their ongoing projects by May 20, 2019. This deal was only good for projects that were still unfinished as of March 31, 2019. After the developer community expressed worries about tax liabilities in the absence of ITC, the government made its decision.
The government categorises housing units worth up to Rs 45 lakhs qualify as affordable housing. The unit must, however, meet certain specifications.
A housing unit in a metropolis qualifies as an inexpensive dwelling if it costs less than Rs 45 lakhs and has a floor area of less than 60 square metres (carpet area).
Metropolitan cities include the Delhi-National Capital Region, Bengaluru, Chennai, Hyderabad, Mumbai-Mumbai Metropolitan Region, and Kolkata.
A housing unit in any Indian city other than the ones listed above qualifies as an affordable house if it costs less than Rs 45 lakhs and has less than 90 square metres of carpet area.
Following the implementation of GST on flat purchases, state government levies such as real estate registration and stamp duty have remained in existence. These costs differ from one state to the next, as well as from one circle to the next within the same state. Stamp duty and registration charges will continue to apply in the GST era to both already-built and under-construction properties across India, whereas GST on a new flat purchase would only apply to under-construction properties that are sold.
If a flat owner pays their housing society at least Rs 7,500 in maintenance fees, they are subject to paying 18% GST on residential property.
Housing societies or Residents' welfare associations (RWAs) must additionally pay an 18% tax on the total money collected if they collect Rs 7,500 per month per unit. However, housing societies are excluded from paying the GST if their yearly revenue is less than Rs 20 lakhs. Both requirements must be met for the GST to be applied, i.e., each member must pay more than Rs 7,500 per month in maintenance fees and the RWA's annual revenue must exceed Rs 20 lakhs.
Additionally, the government has made it clear that the entire sum is taxed if the monthly fees for each member exceed Rs 7,500.
For instance, the 18% GST on apartments will be due on the whole value of Rs 9,000 and not on Rs 1,500 if the maintenance fees are Rs 9,000 per month per member (Rs 9,000-Rs 7,500). Additionally, owners of numerous apartments in the same housing society will pay taxes individually for each unit.
RWAs, on the other hand, are eligible to claim ITC on taxes they spent on input services like repair and maintenance services as well as capital items like generators, water pumps, lawn furniture, and taps.
High-End property refers to luxurious real estate that comes with superior amenities, infrastructure, and facilities. In India, the real estate market has seen a substantial boom in the luxury property sector in recent years. However, the implementation of Goods and Services Tax (GST) has brought about significant changes in the tax structure and has impacted the luxury property market.
GST on flat purchases under construction has been a point of concern for luxury property buyers. Under GST, the tax rate applicable to under-construction properties is 5%. However, the tax rate may vary depending on the state and the nature of the project. Input tax credit (ITC) is available to the developer, but the developer may or may not pass on the benefit to the buyer. The buyer should ensure that the developer passes on the benefit of ITC to them.
GST for a new flat is 5%, but the final price of the flat may vary based on the developer's decision to pass on the ITC benefit to the buyer or not. The ITC benefit is available to the developer on the purchase of raw materials and services required for the construction of the property. However, it is not mandatory for the developer to pass on the ITC benefit to the buyer.
GST on the purchase of a flat can be either under construction or ready to move. In the case of under-construction properties, GST is applicable at 5%, and the developer may or may not pass on the ITC benefit to the buyer. In the case of ready-to-move properties, GST is not applicable as they are considered completed properties.
GST on ready-to-move flats is not applicable as they are considered completed properties. However, if the buyer purchases a flat with interior work that is yet to be completed, then it would be considered an under-construction property, and GST at 5% would be applicable.
Here’s how to calculate GST on house purchases in the affordable housing segment before and after the April 1, 2019, rate change:
| Affordable Housing | GST on affordable housing after April 1, 2019 | GST on affordable housing before April 1, 2019 |
| Property cost per sq. ft | Rs. 3500 | Rs 3500 |
| GST rate on flat purchase | 1% | 8% |
| GST | Rs. 35 | Rs. 280 |
| ITC benefit for the material cost of Rs 1,500 at 18% | Not applicable | Rs. 270 |
| Total | Rs. 3553 | Rs. 3510 |
The Rate of GST on the purchase of a residential flat is fairly easy to calculate if you have all the correct information. If there are any more queries, there are a number of online websites that help with GST calculation on a flat purchase.
As a supportive measure from the government, the housing sector was expecting an additional GST in flat purchase rate reduction in Budget 2021. While the government has reduced the rate for affordable housing to 1%, the industry believed that all under-construction projects should be taxed at the same rate, regardless of ticket size. However, with the announcement of the Budget on February 1, 2021, Finance Minister Nirmala Sitharaman chose to remain silent on the issue.
Input Tax Credit (ITC) is a critical mechanism that enables taxpayers to claim a credit for the taxes paid on inputs used to manufacture the final product or service. It is one of the most significant features of the Goods and Services Tax (GST) system in India. ITC under GST helps to eliminate the cascading effect of taxes and reduces the overall tax liability of the taxpayer. The process of claiming ITC involves verifying invoices, checking the supplier's GST registration number, and submitting GSTR-2A. Claiming ITC can help reduce the overall cost of production, making the goods or services cheaper for the end consumer.
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Ans. There will be no service part in the transfer of a completed property to the buyer. As a result, GST for the purchase of a flat will not be applicable in such sales. So, if you acquire a ready-to-move property, you may be able to avoid paying GST for apartment purchases.
Q2. Who is responsible for paying the GST on flat purchases?Ans. When buying or investing in under-construction properties, the house buyer or investor must pay GST on completed flats or GST on new residential properties.
Ans. With effect from April 1, 2019, inexpensive residential units will be subject to a 1% GST on property sales without ITC, while other residential properties will be subject to a 5% GST without ITC.
Ans. There are three versions of GST in India: The State Goods and Services Tax (SGST) or Union Territory Goods and Services Tax (UTGST), the Central Goods and Services Tax (CGST), and the Integrated Goods and Services Tax (IGST) (IGST).
Q5. Is real estate subject to GST?Ans. Yes, the real estate sector is subjected to GST. There is a GST on residential property purchases. The real Estate GST rate is even levied on properties that are still under construction and have not yet gotten their occupancy certificate (occupancy certificate). There is a charge for GST for flat registration also.
When you buy a ready-to-move-in flat, you don't have to pay any GST. If the tenant is not a business company, the landlord does not have to pay GST. GST on house registration: GST doesn't cover stamp duty or registration fees, so you still have to pay GST when you buy a home.
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