Corporate Finance · GST

GST on Real Estate in India: When It Applies, When It Doesn't

Finin2min Research Desk·June 2026·8 min readGST REAL ESTATE

Real estate GST rules in India are among the most frequently misunderstood — many homebuyers are unsure whether GST applies to their purchase, at what rate, and whether they can claim any credit. The rules differ sharply between under-construction and ready-to-move-in properties, affordable vs regular housing, and residential vs commercial properties.

The Most Important Rule First: Ready-to-Move = No GST

If you are buying a completed, ready-to-move-in residential property with an Occupancy Certificate (OC) issued before the date of sale, no GST applies. The transaction is treated as a sale of immovable property (not a supply of service), and stamp duty + registration charges are the only indirect taxes payable.

GST applies only to the supply of construction services — i.e., when the builder is constructing the property and you're buying into an under-construction project.

GST on Under-Construction Residential Properties

Category	GST Rate (Effective from April 2019)	ITC Available?
Affordable Housing (see definition below)	1% (without ITC)	No
Other Residential (non-affordable)	5% (without ITC)	No
Residential under CLSS / PMAY schemes	1% (if meets affordable criteria)	No

GST on Commercial Properties

Situation	GST Rate	ITC?
Under-construction commercial property (shops, offices)	18%	Yes (buyer can claim ITC if registered)
Ready commercial property (OC obtained)	Nil (exempt)	N/A
Rental of commercial property by GST-registered owner	18% on rent	Tenant can claim ITC
Rental of residential to individual	Nil	N/A
Rental of residential to registered business	18% (RCM — tenant pays)	Tenant may claim ITC

Input Tax Credit: Why Builders Can't Pass It to Buyers (Post-2019)

Before April 2019, builders could claim ITC on construction materials (cement, steel, fittings) and pass the benefit to buyers via lower effective GST. From April 2019, builders who opt for the new GST rates (1%/5%) cannot claim any ITC. This simplified compliance but meant buyers couldn't benefit from the embedded ITC chain.

For commercial properties (18% GST), the ITC chain continues — the builder can claim ITC on inputs, and if the buyer is a registered business, they can claim ITC on the 18% GST paid on purchase.

GST on Land: Not Applicable

GST does not apply to the sale of land (vacant plots). However, when a developer sells a "plot with development" (ready-to-build plot with infrastructure), the development services component may attract GST. Pure land transactions are outside GST scope entirely — only stamp duty and registration apply.

Calculation: GST on a Flat Purchase

Example: You buy an under-construction 2BHK in Pune (non-metro) at ₹80 lakh (carpet area 75 sq.m). It does NOT qualify as affordable housing (carpet area 75 sq.m > 60 sq.m limit for metro; Pune is non-metro so 90 sq.m limit, which it meets — BUT price ₹80 lakh > ₹45 lakh — fails the price criterion). Rate: 5%.

Agreement value: ₹80 lakh
Less: Land value (typically 1/3 deducted — builder's proportion): ₹26.67 lakh
Construction component: ₹53.33 lakh
GST @ 5% on construction component: ₹2.67 lakh
Total payable: ₹82.67 lakh + stamp duty + registration

⚠ Land deduction in GST: The GST notification allows a deduction of one-third of the total consideration towards land value before computing GST. So GST is effectively 5% on 2/3 of the consideration — or 3.33% of total consideration. Always verify the actual split in your agreement.

GST on Resale of Property

When you resell a property (that you bought under construction or ready), the resale transaction is NOT subject to GST — regardless of whether it's residential or commercial, and regardless of how long you've held it. Only the original sale by the developer of under-construction property attracts GST. Resale transactions are subject to capital gains tax and stamp duty only. See our capital gains tax guide for property sale tax treatment.

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Frequently Asked Questions

Do I pay GST on a ready-to-move-in flat? ▼

No. If the flat has received its Occupancy Certificate (OC) before you make the purchase, GST does not apply. The transaction is classified as a sale of immovable property, not a provision of construction service. You pay only stamp duty (5-7% depending on state) and registration charges (1%). This is why completed properties with OC are often more attractive from a tax perspective — the GST saving (1-5% of property value) can be significant on high-value purchases.

Is GST on property refundable if the project is cancelled? ▼

Yes. If you paid GST on an under-construction project and the developer cancels the project or you cancel your booking (for whatever reason), you are entitled to a refund of the GST paid. The developer must file a refund claim with the GST department, and the refund should flow back to you. In practice, many developers are slow or reluctant to process these refunds — you may need to file a grievance with the GST authority or approach RERA for the state if the developer is unresponsive. Ensure your booking agreement clearly specifies the GST amount paid to help with the refund claim.

Can I claim GST paid on a commercial property I bought for my business? ▼

Yes — if you are a GST-registered business and bought an under-construction commercial property (office, shop) for use in your taxable supplies, you can claim Input Tax Credit (ITC) on the 18% GST paid. This effectively reduces the real cost of the property by the GST amount. To claim ITC: the GST must be reflected in your GSTR-2B (auto-populated from supplier's GSTR-1), you must possess a valid tax invoice from the builder, and the property must be used for taxable business activities. You cannot claim ITC if the property is used for exempt activities or personal use.