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Guide · GST Rates

GST on Real Estate in India — Flat Purchase & Rates

The correct GST rate on under-construction flats, affordable housing, ready-to-move property, commercial units, works contracts and rental — plus why buyers get no ITC.

Written by
TaxClue Editorial Desk
Updated
18 August 2026
Reading time
5 min
Questions
16 answered
  • Updated for FY 2026-27
  • GST Expert Reviewed
  • Homebuyer & Developer Guide
Quick Answer

GST applies only to under-construction property, not to completed (ready-to-move) flats. An under-construction residential flat is taxed at 5% without ITC, or 1% without ITC for affordable housing (≤ ₹45 lakh and ≤ 60/90 sqm carpet area). A ready-to-move flat with an OC/CC is fully exempt — only stamp duty applies. Commercial under-construction units are now taxed at 18% with ITC after the GST 2.0 reform (22 September 2025).

5%Under-construction flat
1%Affordable housing
0%Ready-to-move
18%Commercial (under const.)
At a glance

GST on Real Estate — Decision Table

Every common property scenario, with the GST rate and whether the buyer gets Input Tax Credit.

Property / SupplyStatusGST RateITC to Buyer
Affordable residential (≤ ₹45L, ≤ 60/90 sqm)Under construction1%No
Other (non-affordable) residentialUnder construction5%No
Any residential flatReady-to-move (OC/CC)Exempt—
Commercial unit (office, shop)Under construction18%Yes
Commercial unitReady-to-move (OC/CC)Exempt—
Works contract (construction service)—18%Yes*
Residential rent → individual—Exempt—
Commercial rent → registered business—18%Yes
Land sale (plot only)—Outside GST—

* Works-contract ITC flows to the contractor, not to the flat buyer. Residential 1%/5% rates are the no-ITC scheme (Notf 03/2019) unchanged by GST 2.0; commercial moved 12%→18% on 22 Sep 2025. Confirm on the official GST portal before invoicing.

The 1% question

Affordable Housing — 1% or 5%?

For under-construction residential property, one test decides 1% vs 5%: whether the flat qualifies as "affordable housing". Both the price and carpet-area limits must be met together.

1%

Affordable housing — no ITC

  • Gross price (excl. GST) ≤ ₹45 lakh
  • Carpet area ≤ 60 sqm in metros
  • Carpet area ≤ 90 sqm in non-metros
  • Both price AND area limits must be met
  • No Input Tax Credit to buyer
5%

Other residential — no ITC

  • Price above ₹45 lakh, or
  • Area above the 60/90 sqm limit
  • All premium & larger flats
  • Under construction only
  • No Input Tax Credit to buyer
Buyers get no ITC on a flat

The 1% and 5% residential rates come with a strict no-ITC condition. GST the developer pays on cement (now 18%), steel and works contracts cannot be passed to you as credit — it is embedded in the price. So 5% is the final, absolute cost on the construction value, with nothing to claim back.

Not sure if your flat qualifies as affordable at 1%?

Get My GST Rate →
Worked example

How GST Adds Up on a Flat

GST is charged only on the construction value of an under-construction flat. Compare a ₹40 lakh affordable flat, a ₹80 lakh premium flat and a ready-to-move purchase.

1% Affordable flat (₹40L)

Flat value₹40,00,000
GST @ 1%₹40,000
Buyer pays (excl. stamp duty)₹40,40,000

5% Premium under-const. (₹80L)

Flat value₹80,00,000
GST @ 5%₹4,00,000
Buyer pays (excl. stamp duty)₹84,00,000
  1. 1Book flatUnder-construction booking
  2. 2Pay in stagesGST on each construction-linked instalment
  3. 3Get OC/CCProperty becomes ready-to-move
  4. 4Post-OC balanceNo GST on payments after OC — stamp duty only
TaxClue Insight

Timing matters. GST applies to instalments paid while the project is under construction. Any consideration paid after the Occupancy/Completion Certificate is issued is for a ready property and carries no GST — only stamp duty and registration. Buying at the ready-to-move stage avoids GST entirely.

Buying an under-construction flat? Get your GST and TDS on property checked.

Talk to a Tax Expert →
GST 2.0 change

Commercial Property & Works Contracts

The GST 2.0 rationalisation effective 22 September 2025 removed the 12% slab. Commercial under-construction property moved from 12% to 18% (ITC still available to a business buyer), and construction works contracts are now a flat 18%.

SupplyOld rateGST 2.0 rate (from 22 Sep 2025)ITC
Commercial under-construction sale12%18%Yes
Works contract (residential / commercial)12% / 18%18%Contractor
Cement (key input)28%18%Contractor
Residential 1% / 5% scheme1% / 5%UnchangedNo

Residential no-ITC rates were kept; commercial and works-contract rates rose to 18%. Cement fell 28%→18%, cutting developer input cost.

✓Commercial buyer benefits

  • Business buyer can claim full ITC on the 18% GST
  • Lower cement GST (18%) reduces build cost
  • Clear single 18% rate — no slab disputes

!Watch out for

  • Higher headline rate (18% vs old 12%)
  • ITC needs valid invoice & GSTR-2B match
  • No ITC if the unit is for exempt/personal use

Buying or building commercial property? Get your ITC position mapped.

Talk to a GST Expert →
Landlords & investors

GST on Property Rental

Renting real estate follows separate rules. Commercial rent is 18% when the landlord is registered; residential rent to an individual is exempt; but residential property let to a GST-registered business attracts 18% under Reverse Charge (RCM) since 18 July 2022.

  • Commercial premises (shop, office, warehouse) → 18%, landlord charges it, tenant claims ITC.
  • Residential → individual for personal use → fully exempt.
  • Residential → GST-registered business → 18% under RCM, tenant self-pays (ITC often blocked).
  • Sale of bare land / plot is outside GST — it is neither goods nor services.

Earning rental income from property? Get registration and RCM sorted.

GST on Rent Guide →
Stay compliant

Real Estate GST — Key Points

  • GST only on under-construction property
  • No GST after OC/CC is issued
  • No ITC to residential flat buyers
  • 1% needs both price & area limits
  • Commercial under-const. now 18%
  • Works contracts taxed at 18%
  • Bare land sale outside GST
  • Commercial rent at 18% (ITC to tenant)
  • Residential-to-business rent under RCM
  • Stamp duty is separate from GST
GST is not the only property tax

GST applies only to the construction value of an under-construction unit. Stamp duty, registration charges, and (on resale) capital-gains tax are separate levies outside GST. Do not confuse the two when budgeting a purchase.

Sources
  1. Rates & notifications: gst.gov.in
  2. CBIC rate finder: cbic-gst.gov.in
  3. Residential 1%/5% scheme: Notification 03/2019-CT(R) (eff. 1 Apr 2019)
  4. GST 2.0 two-slab structure: effective 22 September 2025

Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position or speak to our CA team before you act on it.

People also ask

Questions, answered

Short, direct answers to the 16 questions readers ask most on this topic.

Under-construction residential property is taxed at 5% without Input Tax Credit, or 1% without ITC for affordable housing (gross price up to ₹45 lakh and carpet area up to 60 sqm in metros / 90 sqm in non-metros). These rates come from the special real-estate scheme effective 1 April 2019 and were not changed by the GST 2.0 reform of 22 September 2025.

No. Once a property has received a Completion Certificate (CC) or Occupancy Certificate (OC), it is treated as immovable property, not a supply of service, so no GST applies. The buyer pays only stamp duty and registration charges. GST applies solely to under-construction property.

For an under-construction flat: 5% (non-affordable) or 1% (affordable), both without ITC. For a ready-to-move flat with OC/CC: zero GST. GST is charged only on instalments paid while the project is under construction; anything paid after the OC is issued carries no GST.

Partly. The residential 1% and 5% no-ITC rates were kept unchanged. However, the GST 2.0 reform (effective 22 September 2025) removed the 12% slab, so commercial under-construction property moved from 12% to 18% (with ITC), works contracts became a flat 18%, and cement fell from 28% to 18%.

A residential unit qualifies for the 1% rate only if both conditions are met: the gross consideration (excluding GST) is up to ₹45 lakh, and the carpet area is up to 60 square metres in metro cities or up to 90 square metres in non-metro cities. If either limit is exceeded, the 5% rate applies.

For the GST affordable-housing definition, metros are Delhi NCR, Mumbai (MMR), Bengaluru, Hyderabad, Chennai, Kolkata and their notified urban regions. In these metros the carpet-area cap is 60 sqm; elsewhere it is 90 sqm. The ₹45 lakh price cap is the same everywhere.

No. Homebuyers cannot claim Input Tax Credit on GST paid for a residential flat. The 1% and 5% rates are granted on the strict condition that no ITC is available — to either the buyer or, on residential projects, the developer. The GST paid is a final cost embedded in the price.

From 1 April 2019 the government replaced the earlier 12%-with-ITC regime with lower headline rates (1% / 5%) but withdrew Input Tax Credit. The idea was a simpler, visibly lower rate for buyers; the trade-off is that developers absorb the GST on inputs like cement and steel with no credit pass-through.

An under-construction commercial unit (office, shop) is now taxed at 18% with ITC, revised from 12% under the GST 2.0 reform effective 22 September 2025. A business buyer can claim the 18% as Input Tax Credit. A ready-to-move commercial property with an OC/CC carries no GST.

Yes. Unlike residential buyers, a GST-registered business buying an under-construction commercial unit for taxable business use can claim the 18% GST as Input Tax Credit, provided it holds a valid tax invoice and the credit appears in its GSTR-2B. ITC is blocked only where the unit is used for exempt or personal purposes.

Construction works contracts are taxed at 18% after GST 2.0 (22 September 2025), which removed the earlier 12% concessional rate. The contractor charges 18% and can claim ITC on inputs such as cement (now 18%) and steel. This ITC benefits the contractor, not the residential flat buyer.

Yes. GST on cement was cut from 28% to 18% effective 22 September 2025. Cement is a major construction input, so the lower rate reduces a developer or contractor's input cost. However, because residential projects run on the no-ITC scheme, this saving is not passed to buyers as credit.

Commercial property rent is taxed at 18% when the landlord is GST-registered, and the tenant can claim ITC. Residential rent to an individual for personal use is fully exempt. Residential property let to a GST-registered business attracts 18% under Reverse Charge (RCM) since 18 July 2022, paid by the tenant.

No. The sale of bare land or a plot is outside the scope of GST — it is treated as neither goods nor a service under Schedule III of the CGST Act. Only stamp duty and registration charges apply. GST can arise only where construction service is bundled with the land.

Yes, they are separate. On an under-construction flat you pay GST (1% or 5%) on the construction value plus stamp duty and registration charges levied by the state. On a ready-to-move flat there is no GST — only stamp duty and registration. The two levies are not interchangeable.

GST is charged on the construction-linked value of each instalment while the project is under construction: 5% (or 1% affordable) on the amount paid. Multiply each demand by the applicable rate and add it to the payment. Any amount paid after the Occupancy Certificate is issued carries no GST.