GST on flat purchases in India applies only to under-construction properties. The rate is 1% for affordable housing and 5% for standard residential flats. Both rates apply without Input Tax Credit (ITC). Ready-to-move-in flats with a completion or occupancy certificate are fully exempt from GST. Resale flats are also exempt from GST. Commercial property attracts a separate 12% GST with ITC.
These rates have applied since 1 April 2019. The GST Council last revised real estate taxation at that time. The rates remain unchanged under the September 2025 GST 2.0 reform. The Council retained the 1% and 5% rates for residential property while restructuring other goods and services categories.
Key Takeaways
- GST applies only to under-construction flats. Completed flats with a completion or occupancy certificate are exempt.
- Resale flats are also exempt from GST.
- Affordable housing costs up to ₹45 lakh. The carpet area must be up to 60 sqm in metros or 90 sqm in non-metros. The GST rate is 1% without ITC.
- Standard residential flats outside the affordable category attract 5% GST without ITC.
- Commercial property attracts 12% GST. Developers can claim ITC on this category.
- GSbT 2.0, effective 22 September 2025, kept the 1%, 5%, and 12% real estate rates unchanged. It also reduced GST on cement from 28% to 18%.
- Land value is excluded from GST. Typically, one-third of the total consideration is treated as land value and deducted before applying GST.
- Residential construction services fall under SAC 995411. Developers and buyers cannot claim ITC on affordable or standard residential housing.
What is the GST Rate on Flat Purchase?
Whether you pay GST at all, and how much, depends entirely on the property’s construction status and category. The table below breaks down the current treatment across every scenario a buyer is likely to encounter:
| Property Type | GST Rate | ITC Available? |
|---|---|---|
| Affordable housing (under construction) | 1% | No |
| Standard/non-affordable housing (under construction) | 5% | No |
| Commercial property (under construction) | 12% | Yes |
| Ready-to-move-in flats (completion certificate issued) | Exempt | Not applicable |
| Resale flats | Exempt | Not applicable |
| Purchase of land | Outside GST | Not applicable |
Note: No compensation cess applies to real estate. These are the total GST rates paid on the applicable portion of the property value.
What Qualifies as Affordable Housing?
The 1% GST rate applies only when a flat meets both government-defined conditions:
- Price: The flat must cost up to ₹45 lakh.
- Carpet area: The area must be up to 60 square metres in metro cities. In non-metro cities, it must be up to 90 square metres.
The listed metro cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Kolkata, and the Mumbai Metropolitan Region.
If a flat meets only one condition, it does not qualify for the 1% rate. It will attract the standard 5% GST rate instead.
What is the HSN/SAC Code for Flat Construction Services?
An under-construction flat is treated as a construction service for GST purposes. Therefore, it uses a Services Accounting Code (SAC) instead of an HSN code.
| SAC Code | Covers | GST Rate |
|---|---|---|
| 995411 | Construction of single-dwelling, multi-dwelling, or multi-storied residential buildings | 1% for affordable housing or 5% for standard housing, both without ITC |
| 995412 | Construction of other residential buildings, such as old age homes, hostels, and shelters | 1% or 5%, depending on the category |
| 995414 | Construction of commercial buildings, such as offices, malls, and hotels | 12%, with ITC |
Developers should use SAC 995411 consistently on invoices. They should also report it correctly in GSTR-1 and GSTR-3B. This helps avoid mismatches between the SAC code and GST rate.
Can You Claim Input Tax Credit on a Flat Purchase?
ITC eligibility depends on the property type and buyer. The rules differ for residential and commercial properties.
- Individual homebuyers: Cannot claim ITC on a residential flat. This applies even when the property is used personally.
- Residential developers: Cannot claim ITC on inputs used for affordable or standard residential projects. The 1% and 5% GST rates apply without ITC.
- Commercial property buyers and developers: Can claim Input Tax Credit (ITC) on commercial property taxed at 12% GST.
- Mixed-use projects: Developers must apportion ITC between residential and commercial portions. The applicable rules determine the allocation.
Residential projects generally have no ITC, while commercial projects allow ITC. This can make commercial development more tax-efficient for developers.
How is GST Calculated on a Flat Purchase?
GST applies to the taxable value of the property, not the full property price. Land value is excluded from GST. In practice, one-third of the total consideration is treated as land value. This amount is deducted before applying the GST rate.
Example: An under-construction flat priced at ₹50 lakh
- Affordable housing at 1% GST: ₹50,00,000 × 1% = ₹50,000
- Standard housing at 5% GST: ₹50,00,000 × 5% = ₹2,50,000
Stamp duty and registration charges are separate state-level levies. Budget for them in addition to GST. Legal fees, maintenance deposits, and interior work costs are also excluded from this calculation.
Impact of GST on Homebuyers and Developers
GST affects homebuyers and developers differently. The impact depends on the type of property and transaction.
For homebuyers:
- GST adds to the cost of an under-construction flat. Developers cannot claim ITC on residential projects.
- Ready-to-move-in and resale properties are exempt from GST. This can make them cheaper from a tax perspective.
- The 1% affordable housing rate benefits buyers who meet the required price and carpet-area limits.
- Compare the all-inclusive cost across developers. Consider the base price, GST, stamp duty, and registration charges.
For developers:
- Developers must register for GST once their turnover exceeds ₹20 lakh. They must also issue tax invoices and file GSTR-1 and GSTR-3B.
- Developers cannot claim ITC on residential projects. This increases effective construction costs.
- Lower cement and other construction material rates under GST 2.0 provide some relief. However, they do not directly offset the ITC restriction.
- Commercial developments remain more tax-efficient because developers can claim ITC.
GST Exemptions for Residential Properties
Not every property transaction attracts GST. Knowing which transactions are exempt can help you make a better purchase decision. The main exemptions are:
- Flats with a valid completion or occupancy certificate: These flats are fully exempt from GST, regardless of their price or size.
- Resale flats: Resale flats are not subject to GST because they are treated as completed properties changing hands. However, stamp duty and registration charges still apply.
- Government-aided affordable housing schemes: Properties that qualify under schemes such as PMAY continue to attract the concessional 1% GST rate. ITC is not available.
- Purchase of land itself: Land purchases are outside the scope of GST. This applies whether you buy the land independently or as part of a larger transaction. The land-value abatement rule may apply to construction contracts.
GST Compliance for Real Estate Transactions
Compliance obligations mainly apply to developers rather than buyers. However, buyers should understand these requirements. This helps them verify that they are dealing with a properly registered and compliant builder.
The core requirements are:
- GST registration: Developers must register for GST once their turnover crosses ₹20 lakh.
- Tax invoicing: Developers must issue GST-compliant invoices for under-construction property sales. The invoice must clearly show the applicable GST rate.
- Return filing: Developers must regularly file GST returns through GSTR-1 and GSTR-3B.
- Audits: Periodic audits help ensure compliance. They also reduce the risk of disputes with tax authorities.
