Goods and Services Tax (GST) has significantly changed real estate taxation since its introduction in 2017. The rates were revised further in 2019 by the GST Council. Understanding when GST applies — and at what rate — is essential before signing any property purchase agreement.
Important: GST rates and definitions are subject to revision by the GST Council. Always verify the applicable rate with a GST practitioner or Chartered Accountant for your specific transaction.
The Fundamental Rule: Ready-to-Move vs Under Construction
The most important distinction in real estate GST is whether the property has received its Occupancy Certificate (OC) or Completion Certificate at the time of the agreement:
Ready-to-move-in property (OC already received): No GST is payable. The sale is treated as a sale of immovable property, not a supply of services, and is therefore outside the scope of GST.
Under-construction property (OC not yet received): GST is applicable. The transaction is treated as a composite supply of construction services.
Pure land purchase: No GST. Sale of land is not a supply under GST. Stamp duty and registration charges apply.
Current GST Rates for Residential Property (Post-2019 Revision)
| Property Type | GST Rate | Input Tax Credit (ITC) |
|---|---|---|
| Affordable housing — under construction | 1% | Not available to developer |
| Non-affordable residential — under construction | 5% | Not available to developer |
| Residential — ready to move (OC received) | Nil (No GST) | N/A |
| Commercial property — under construction | 12% | Available to buyer (if registered) |
| Pure land purchase | Nil (No GST) | N/A |
What is Affordable Housing for GST Purposes?
A residential unit qualifies as "affordable housing" for GST purposes if both of the following conditions are met:
Carpet area:
Up to 60 square metres in metropolitan cities: Bengaluru, Chennai, Delhi NCR (Delhi, Noida, Greater Noida, Ghaziabad, Gurugram, Faridabad), Hyderabad, Kolkata, and Mumbai Metropolitan Region.
Up to 90 square metres in cities and towns other than those listed above (including Coimbatore, Madurai, Tiruppur, Visakhapatnam, Vijayawada, etc.).
Sale price: The gross amount charged (excluding GST) does not exceed ₹45 lakh.
Both conditions must be satisfied simultaneously. A unit with carpet area of 55 sqm but priced at ₹60 lakh does not qualify for the 1% rate — it would attract GST at 5%.
GST on Land Plus Construction (Composite Deals)
When a developer sells a plot along with a construction agreement (a common structure for villas and row houses), GST is calculated on the construction portion only, not the land. The GST Council has prescribed a deemed land deduction: one-third of the total amount charged is treated as the value of land and is excluded from the GST computation. GST applies to the remaining two-thirds.
Example: If a developer charges ₹90 lakh for a villa (inclusive of land), the deemed land value is ₹30 lakh (one-third). GST applies to ₹60 lakh. At 5% for non-affordable housing, the GST payable is ₹3 lakh.
Who Pays GST?
GST is payable by the buyer on under-construction purchases. The developer collects it and remits it to the government. The buyer should receive a proper GST invoice from the developer and verify that the developer's GSTIN (GST Identification Number) is valid on the GST portal (gst.gov.in).
Practical Implications for South Indian Buyers
In cities like Coimbatore, Madurai, Tiruppur, Nellore, and Guntur (non-metro), buyers have a higher carpet area threshold (90 sqm) for the affordable housing 1% rate — this is a significant advantage compared to metro buyers.
Ready-to-move homes attract no GST, which can make them substantially more cost-effective than under-construction alternatives for comparable properties.
Always ask the developer for the breakup of total price into land value, construction value, and GST. A developer who cannot provide this clearly should be treated as a red flag.
Pure plot purchases (without construction) are not subject to GST — only stamp duty and registration charges apply.