Real Estate | purchase flat | Tax Credit | Affordable Housing

The GST rate on flat purchase is one of the many taxes buyers must pay when buying a property. Even though these things are true, the GST tax structure has changed a lot in such a short time. This was put in place in 2017. So that the country’s tax system would be the same as that of other countries.

India’s tax system was inefficient before the GST was implemented, and the GST has made the tax system much more efficient. Real estate experts think that the GST tax system, which was introduced with a lot of fanfare but has only been in place for four years so far despite the many changes that have been made to it in such a short time, could still be better. 

gst on flat purchase
Source: Photo by MOHD AZRIN on Unsplash

In this article, we look at the effects of the GST on real estate and the results of the GST on general flat buyers and house buyers.

GST Rate on Real Estate

The GST on real estate has dramatically decreased the number of charges involved. Included in this are the Value Added Tax, Registration expenses, Service charges, and the Service Tax. 

Additionally, the rates of taxes differed from one state to the next. The advent of the GST has made the tax more accessible, and as of right now, its rate may be anywhere from 5 percent to 18 percent.

Homebuyers in India are compelled to pay GST, which stands for the, regardless of the property price range. The GST rate on a flat purchase that is affordable is 1 percent, but the rate for housing that is not affordable is 5 percent. 

The GST applies to purchase buildings still being constructed, such as flats, apartments, and bungalows. In the future, if plots have the potential to be developed, GST will be levied.

Other qualifications to qualify for a 1 percent GST rate flat purchases include:

In addition, to qualify for the 1 percent GST rate on flat purchase, at least 80 percent of the raw material must be obtained from a registered dealer. This is a must. If this is not the case, the RCM mandates the developer to pay the GST of 18 percent.

The one percent of the GST rate that applies to inexpensive under-construction dwellings does not consider the input tax credit. 

This implies that the GST you paid when purchasing the property cannot be deducted from your income. You will not, as a consequence, be entitled to the advantage of a reduced annual income tax that is relevant to your income.

GST on the purchase of a flat-

Starting in 2022, buyers of flats and apartments in India’s megacities still being built will have to pay the GST. It’s important to know that the GST does not apply to purchase flats for already-done projects. A project finished successfully has been given a certificate of completion by the right people.

Builders can get a tax credit on products they buy from suppliers or contractors, and this credit is supposed to be passed on to people who buy houses as part of the GST that is already charged on purchasing a flat framework.

The value-added sales tax GST on flats currently being built but don’t qualify as affordable housing has been cut to 5%, which is expected to increase demand for these properties. 

Applying the GST to homes still being built expands the definition of “affordable housing.” This would make homes more affordable and increase demand.

GST on housing society maintenance fees-

Let’s say the residents have to pay more than INR 7,500/- per month in maintenance fees to the Cooperative Housing societies or the Resident Welfare association. In that scenario, they won’t be responsible for paying those charges. In the past, the most it could cost was up to 5,000 Indian Rupees (INR).

The Value-Added Tax on High-End Property

People can now buy luxury real estate at a much lower price than before because the GST rate on flat purchase has changed. The GST rate for apartments that are too expensive for most people to buy is 5%.

Input Tax Credit for builders

According to the planned GST, inputs like cement, bricks, sand, labor, etc., used to build a property can claim the ITC (Input Tax Credit). The main reason for ITC is to avoid a tax burden. 

The GST paid at each stage of construction will be offset by the ITC earned on the GST charged at the stage before. At the time of the new GST and Input Tax Credit proposal for real estate.

It is essential to remember that the Input Tax Credit does not apply to supplies acquired for the building of any immovable property on any personal account, except any equipment or machinery. 

This is one of the most essential components of the Input Tax Credit, which is one of the most essential things to consider in this context. For instance, there is a possibility that the ITC will not pay to renovate the interiors of service flats. Mainly due to the fact that doing so would increase the overall price of service units. This is because the cost of such changes would be factored into the total cost.

How is the GST applied for rental properties?

In this method, we can examine two distinct scenarios at the same time. Both residential and commercial real estate are currently available for purchase. The amount of rent paid to a landlord by a tenant is exempt from the Goods and Services Tax (GST).

On the other hand, if the property is rented out for business, also referred to as “commercial purposes,” then a GST surcharge equal to 18 percent will be charged to the rent.

GST Rate on Flat Purchase for Affordable Housing

The government submitted the proper criteria for qualifying affordable housing at the 33rd meeting of the GST council. These suggestions were provided at the meeting that we had. 

For a residential property to qualify as inexpensive housing in India, the total carpet area of the residential property must be more than sixty square meters. 

The residential property does not qualify as affordable housing if it is more significant. This criterion applies to metropolitan cities like Mumbai, Delhi National Capital Region, Kolkata, Chennai, Hyderabad, and Bengaluru.

The GST Rate and Its Impact on Properties That Are Still Under Construction-

Many builders can get around paying the GST if they build a house and call it a “built property.” After the sale, they may decide it is best to keep making the property.

This is another area where the government has shown a lot of creativity. A piece of real estate is not considered to be done until the Completion Certificate has been given.

Because there are so many rules and regulations to follow to get the Completion Certificate, it is not easy to get around the law in this situation.

Suppose the developer receives the consideration relating to the construction or development of such land or building before the completion or occupancy certificate issuance. In that case, GST is payable on the construction services provided by the developer to the buyer. 

This applies whether the consideration is received in whole or in part. This is true regardless of whether the factor in question is related to the development of the land or the construction of a structure.

Transactions that are related to construction are exempt from the application of the GST-

The GST on real estate transactions will not apply to purchasing or selling previously owned residences, resold properties, or empty land. This tax is going to be used only for new real estate transactions. According to the Products and Services Tax Act, the act of providing goods or services is expressly omitted from the definition of “sale-purchase activity.” Consequently, this does not apply to transactions of this kind, including real estate.

After GST Rate on Flat Purchase implementation

Before the GST was implemented in 2017, buildings were subject to several different state and federal taxes at various points in the building process.

Even though these taxes went up, the cost of building a project didn’t change, and builders didn’t have any credits. They could use to reduce their output responsibility.

Under the old system of indirect taxes, many fees were put on a wide range of goods and services and collected from consumers. Taxes are taken out by both the federal government and each state. 

Most of the states had a value-added tax. Each state had its rules and laws, and most had a value-added tax.

Before GST, real estate developers had to pay several taxes, such as:

  • VAT 
  • Central Excise Tax
  • Services Tax
  • Entry Tax
  • Octroi Tax
  • LBT Tax

Types of state and federal taxes that the GST collected

When it was implemented, the GST replaced several state and federal taxes. The following is a list of the levies that were returned:

State taxes list:

  • Sales tax or Value Added Tax
  • Octroi
  • Tax on Entertainment
  • Tax on gaming, betting, or lotteries
  • Payment Tax
  • Premium Tax

Central taxes list:

  • Service Tax
  • Increased Excise Tax
  • Central Excise Duty

The Stamp Duty and the Registration of Real Estate-

When the GST was applied to purchasing flats, state fees like real estate registration and stamp duty did not go away. Not only do these prices change from one state to the next. But they also change from one circle to the next within the same state. In India, properties that have already been built or are being built will still have to pay stamp duty and registration fees. However, the GST will only apply to sell new flats in-built properties.


As the last section showed, lowering the GST rate that applies to real estate has made people’s lives easier. The method used to figure out the GST rate on flat purchase that applies to real estate transactions has become much more accessible, which is a big step forward.

The GST won’t change the real estate business much in the next few days. Both the buyers’ trust in this industry and their views on how it changes will get better.

The GST will make it easier for developers to work with it, and the tax credit contribution will be a bonus. Real estate buyers might investigate the possibility of submitting a claim to the GST authorities for a refund of any prior GST collected in excess.