Written by the CA & GST Advisory Team, Rudra Capital — specialists in structural Goods and Services Tax Compliance, Real Estate Taxation Architecture, Joint Development Agreements (JDAs), and Corporate Business Advisory solutions across Delhi NCR.
Last reviewed: June 2026 | References: Central Goods and Services Tax (CGST) Act, 2017 (specifically Section 15 on valuation mechanics, Section 16 governing Input Tax Credit eligibility, and Schedule III outlining transactions outside the scope of supply) · Finance Act 2019 · Central Board of Indirect Taxes and Customs (CBIC) Circular No. 08/2019-GST (clarifying taxability of real estate transactions) · CBIC Circular No. 177/09/2022-GST (governing the non-taxability of sale of developable land plots) · CBIC Circular No. 212/04/2024-GST (clarifying corporate guarantees and related-party transitions in infrastructure sectors)
Covers: Under-construction property · Ready-to-move · Commercial property · Rental income · RWA maintenance · GST 2.0 changes
Real estate is one of the most searched — and most misunderstood — areas of GST in India. Buyers worry about how much GST they are paying on a flat. Builders struggle with ITC restrictions. Landlords are confused about when to charge GST on rent. And almost everyone has heard contradictory advice.
The rules are actually clear, once you know where to look. This guide covers every major GST scenario in real estate — with exact rates, worked examples, and the critical distinctions that change your tax outcome.
Key fact: GST applies only to under-construction properties. If a property has received its Occupancy Certificate or Completion Certificate before the date of sale, zero GST is payable — regardless of the property’s value or location.
Is GST Applicable on Property Purchase in India?
GST applies to the supply of construction services — not to the sale of immovable property itself. When you buy an under-construction property, you are contractually purchasing a construction service from the developer, and GST applies on that service. When the property is complete and the Occupancy Certificate is issued, the developer is no longer supplying a service — they are transferring immovable property, which is outside GST’s scope.
The practical implication is significant:
- Buy before OC/CC is issued: GST applies on every payment you make
- Buy after OC/CC is issued (ready-to-move): Zero GST, full stop
- Second-hand resale transaction between individuals: No GST (stamp duty applies)
This is one of the most common questions Rudra Capital receives from property buyers: “I am buying from a builder who says the OC is ‘almost ready’ — do I still pay GST?” The answer is yes, until the OC is actually issued and in the builder’s hands, GST applies on any amount paid.
GST Rates on Under-Construction Residential Properties: 1% vs 5%
Since April 1, 2019 (post the GST Council’s reforms), residential under-construction properties attract one of two rates — and both come with a critical condition: no Input Tax Credit (ITC) benefit can be passed to the buyer.
| Property Category | GST Rate | ITC Available? |
|---|---|---|
| Affordable Housing (see criteria below) | 1% | No |
| Other residential under-construction (non-affordable) | 5% | No |
| Ready-to-move (OC/CC issued before sale) | 0% | N/A |
| Plotted development (land sales) | 0% | N/A |
What Qualifies as Affordable Housing? Exact Criteria for the 1% Rate
To qualify for the concessional 1% GST rate, a residential unit must satisfy both of the following conditions simultaneously:
Condition 1 — Value
Transaction value ≤ ₹45 lakh
Applies uniformly across India, regardless of city tier
Condition 2 — Carpet Area
≤ 60 sq.m. in metros | ≤ 90 sq.m. elsewhere
Metros: Delhi NCR, Mumbai MMR, Bengaluru, Chennai, Hyderabad, Kolkata
Common mistake: Many buyers assume that any property below ₹45 lakh qualifies for 1% GST. That is wrong. Both the value AND carpet area conditions must be satisfied. A ₹42 lakh apartment with 75 sq.m. carpet area in Delhi NCR does not qualify — it exceeds the 60 sq.m. metro limit. It is taxed at 5%.
How to Calculate GST on Property: The 1/3rd Land Deduction Rule
GST cannot be charged on the value of land — land is not a “supply” under GST. The government therefore mandates a notional deduction of 1/3rd of the total contract value as the land component before applying the GST rate.
Worked Example — 5% Property
Flat price agreed with builder: ₹80,00,000
Less: Land value (1/3rd) = ₹80L × 1/3 = ₹26,66,667
Taxable value (construction component) = ₹53,33,333
GST at 5% = ₹53,33,333 × 5% = ₹2,66,667
Effective GST on total flat price = 3.33% (not 5%) — because 5% applies only on the 2/3rd construction portion
This 1/3rd deduction is automatic and built into the GST rate structure — you do not need to separately negotiate it with the builder. If your builder is charging 5% on the full flat value without deducting the land component, that is an incorrect calculation and you are being overcharged on GST.
GST on Commercial Property — 12% and When ITC Applies
Commercial real estate — office spaces, shops, warehouses, industrial sheds — follows different GST rules from residential property, and the difference works in buyers’ favour.
- Under-construction commercial property: 12% GST on 2/3rd of the contract value (same 1/3rd land deduction applies)
- ITC is available: Unlike residential buyers who cannot claim ITC, GST-registered commercial property purchasers can claim Input Tax Credit on GST paid — provided the property is used for their taxable business
- Ready-to-move commercial property: Zero GST (same as residential)
✓ ITC Planning Insight: A GST-registered business buying an office unit worth ₹1.5 crore (under construction) pays approximately ₹12 lakh in GST (12% on 2/3rd = ₹1 crore × 12%). That ₹12 lakh is claimable as ITC against the company’s output GST liability — effectively making the net cost of GST nil for tax-efficient businesses.
GST on Rental Income: Residential vs Commercial — Complete Comparison
Rental income is one of the most frequently asked GST topics — and one of the most misunderstood. The rules changed significantly in July 2022 and again in 2024. Here is the current position:
| RENTAL SCENARIO | GST Rate | NOTES |
|---|---|---|
| Residential property rented for use as residence | Exempt | Whether tenant is individual or company — if used as residence, exempt |
| Residential property rented as office / commercial use | 18% | Taxable if landlord is GST-registered or if tenant is registered & uses under RCM |
| Commercial property rental — registered landlord | 18% | Landlord charges GST; tenant claims ITC if GST-registered |
| Commercial property rental — unregistered landlord | 18% RCM | GST-registered tenant pays under Reverse Charge Mechanism |
Critical 2022 change still missed by many tenants: From July 18, 2022, when a GST-registered company rents a residential property for its employees or directors to live in, the company must pay 18% GST under Reverse Charge Mechanism — even if the landlord is unregistered and the property is used as a residence. This catches many businesses off guard and results in RCM non-compliance notices.
GST on Maintenance Charges by RWAs and Housing Societies
Resident Welfare Associations (RWAs) and housing societies collect maintenance charges from residents. GST applies under the following structure:
- If monthly maintenance per member is up to ₹7,500: Exempt from GST — regardless of the RWA’s annual turnover
- If monthly maintenance exceeds ₹7,500 AND the RWA’s annual turnover exceeds ₹20 lakh: 18% GST applies on the entire amount (not just the portion above ₹7,500)
- RWAs that cross the ₹20 lakh turnover threshold must register for GST and collect it from all members paying above ₹7,500/month
✓ Expert Clarification: The ₹7,500 threshold is per-member per-month. If an RWA charges ₹7,000/month maintenance, it is fully exempt regardless of how many members it has or what its total turnover is. The GST obligation triggers only when the per-member monthly charge itself crosses ₹7,500.
Can Home Buyers Claim ITC on Their Property Purchase?
This is one of the most frequent questions from property buyers — and the answer is almost always no.
Under Schedule III read with Section 17(5)(d) of the CGST Act, no Input Tax Credit is available on the purchase of:
- Residential properties (whether 1% or 5% rate)
- Any immovable property constructed for sale (where the GST has been paid under the 1/5% scheme)
The rationale: the 1% and 5% rates are already concessional (effective after the 1/3rd deduction they work out to 0.67% and 3.33% on total price respectively). The trade-off for these low effective rates is the complete denial of ITC.
The exception: GST-registered businesses buying commercial under-construction property at 12% CAN claim ITC — provided the property is used for business purposes in making taxable supplies and is not primarily for personal use.
GST on Construction Materials in 2026 — Impact on Property Prices
While buyers pay low GST on the flat purchase, builders bear significant GST costs on construction materials — which they cannot fully recover through ITC under the restricted new scheme. This embedded cost is passed to buyers through pricing. Key rates:
| Material | GST Rate |
|---|---|
| Cement | 28% |
| Steel, iron, iron structures | 18% |
| Bricks (fly ash, sand lime, clay) | 5% / 12% |
| Sand, gravel, crushed stone | 5% |
| Paint, varnish, putty | 18% |
| Tiles (ceramic, vitrified) | 18% / 28% |
Because builders cannot fully offset the GST on these inputs (especially cement at 28%), the embedded GST cost in a ₹1 crore residential unit is estimated at ₹4–6 lakh — which increases the actual cost to the buyer even though they only see a 1% or 5% rate on their purchase price.
Common GST Mistakes Made by Property Buyers, Builders & Landlords
Mistake 1 — Paying GST on a ready-to-move property
If the builder has the Occupancy Certificate, zero GST is applicable. Some builders incorrectly charge GST even after OC is issued. Always ask for the OC date before agreeing to pay GST.
Mistake 2 — Builders not checking transition clause for ongoing projects
Builders with ongoing projects as on April 1, 2019 had a one-time choice between old rates (with ITC) and new rates (without ITC). Some chose incorrectly, leading to excess GST collection from buyers.
Mistake 3 — Landlords not registering for GST on commercial rentals
Commercial property landlords earning above ₹20 lakh annually from rent must register for GST. Non-registration while collecting rent means the landlord is liable for the uncollected GST — plus penalties.
Mistake 4 — Companies not paying RCM on residential rentals
Post July 2022, GST-registered companies renting residential property must pay 18% GST under RCM on their monthly rent. This is widely missed because landlords do not charge it — but the obligation sits with the company-tenant.
Have GST questions about your property purchase, rental, or construction project?
Rudra Capital’s CA team provides expert GST guidance for real estate buyers, builders, landlords, and RWAs across Delhi NCR.
Call us: +91-9953572838 | Book a Free Consultation →
FAQs — GST on Real Estate India 2026
Related reading: GST Major Pain Points 2026 · Legal GST Planning Strategies · GST Registration Services
