How Much is the GST on Residential Property and Who Needs to Pay?

By Buniyad

03/06/2025

Buying a home is an emotionally satisfying decision, albeit one that requires major financial commitment on the part of the buyer. Apart from the asking price or the prevalent selling price of the property, many other finances come into picture, like stamp duty, registration charges, and Goods and Services Tax (GST), among others. The implementation of GST in India’s real estate sector has significantly altered its taxation landscape. Having clarity on implications of GST on residential property can help prospective homebuyers make informed decisions. This page is dedicated to clarifying the GST component on residential properties and common misconceptions surrounding the topic.

Rate of GST on Residential Property

When we talk about GST on house purchase, we need to understand that the rates applicable to residential property purchases vary based on the property’s completion status and its type. Housing properties are classified as affordable and non-affordable. Their completion status is categorised as under-construction and ready-to-move-in.

Under-Construction Properties: For under-construction residential projects, the current GST rate is 5% excluding Input Tax Credit (ITC). However, for affordable housing projects, the government has introduced a highly concessional GST rate of 1% without ITC.

Ready-to-Move-In Properties: Completed properties that have received an Occupancy Certificate (OC) are exempt from GST.

Now, to fully understand the applicable rate of GST on residential property, it is important to understand what defines an affordable house. In a metropolitan city, a residential unit not exceeding carpet area of 60 square meters and not costing more than Rs. 45 lakhs is considered an affordable house. In a non-metro city, the price capping remains the same but the carpet area for an affordable house has a capping of up to 90 square meters.

How does GST on house purchase impact a homebuyer?

Cost implications: Purchasing an under-construction property means the buyer has to shell out extra money to take care of the GST rate applicable on the type of the property. This increase in overall cost of the property sometimes dissuades the buyers.

Increased demand for ready-to-move-in properties: To escape the additional burden of tax, a lot of homebuyers look for ready-to-move-in properties. These properties are exempt from GST and hence the high demand.

Simplified taxation: While the introduction of GST on under-construction properties has led to second-thoughts in the minds of buyers, it has greatly helped the government streamline the real estate taxation process by replacing multiple indirect taxes with a single tax. It has also led to reduced complexity and increased transparency.

Considerations for Homebuyers

Prospective homebuyers are advised to thoroughly understand the GST on residential property to make a well-informed decision. The following points can help:

Determine whether the property is under-construction or not, as GST is applicable only on under-construction properties.

If the property you wish to buy qualifies as affordable property, you can benefit from the lower GST rate of 1% instead of the usual 5%.

As there is no GST on land purchase, you can buy a land parcel and build a home on it to save money on taxation. However, GST is applicable on the construction material needed to construct the home.

Keep in mind that GST does not include other charges such as stamp duty, registration charges, and maintenance charges.

Common Misconceptions about GST on Residential Property Purchase

Myth: One needs to pay GST when buying a resale flat.
Fact: Since resale properties fall under the category of immovable assets, no GST needs to be paid for them.

Myth: Only 1% GST is applicable on all low-cost housing projects.
Fact: Only if a housing project meets the criteria set by the government for a housing project for both metro and non-metro cities, does it get an exemption under the GST rules.

Myth: GST is refunded to the homebuyer if the project is delayed or cancelled.
Fact: GST paid on a transaction is generally non-refundable. However, in certain cases it can be adjusted through credit notes by the builder if the said project is delayed or paused.

Myth: GST is applicable on land purchases.
Fact: The buyer does not need to pay GST on land purchase.

Myth: Paying GST on residential property means no additional tax at a later stage.
Fact: Annual submission of property tax is still required on the part of the homebuyer.

Being vary of GST calculation can prove to be tricky, especially for first-time homebuyers. Seeking professional advice from real estate experts such as Buniyad Realty can make it easy to navigate through the steps involved. From property buying needs to seeking an independent house for rent in Noida to real estate taxation and everything in between, we at Buniyad Realty provide end-to-end real estate solutions to our clients.