GST on Flat Purchase : The Goods and Services Tax (GST) has significantly transformed India’s taxation system, impacting various sectors, including real estate. For homebuyers, understanding the GST on flat purchases is crucial as it affects the overall cost of acquiring a property.
In this article, we will provide a detailed guide on GST implications for flat purchases, covering applicable rates, exemptions, input tax credit, and key considerations for buyers.
Understanding GST on Flat Purchase
Before the introduction of GST in 2017, property buyers had to pay multiple taxes, including VAT, Service Tax, and Stamp Duty, leading to increased property costs and confusion. GST streamlined the tax structure, making it easier for homebuyers to understand their tax obligations.
When Does GST Apply to Flat Purchases?
GST is applicable on the purchase of under-construction flats, apartments, and commercial properties from a builder or developer. However, it is not applicable if the property is:
- A ready-to-move-in flat (i.e., completion certificate obtained before the sale).
- A resale property purchased from an individual.
GST Rates on Flat Purchases
The GST rates on residential property purchases depend on the type of housing and the scheme under which the builder operates.
| Type of Property | GST Rate Before April 1, 2019 | Revised GST Rate (After April 1, 2019) |
|---|---|---|
| Affordable Housing | 8% (with ITC) | 1% (without ITC) |
| Non-Affordable Housing | 12% (with ITC) | 5% (without ITC) |
Definition of Affordable Housing (As per GST Rules)
A property qualifies as affordable housing if:
- The carpet area is up to 60 sq. meters in metro cities.
- The carpet area is up to 90 sq. meters in non-metro cities.
- The total value of the flat does not exceed ₹45 lakh.
If the property exceeds these limits, it falls under the non-affordable category, attracting a higher GST rate.
GST on Flats Purchased from Builders vs. Resale Flats
| Property Type | GST Applicability |
|---|---|
| Under-Construction Property | GST applies at 1% (affordable) or 5% (non-affordable) |
| Ready-to-Move Property | No GST |
| Resale Property | No GST |
| Land Purchase | No GST |
Input Tax Credit (ITC) and Its Impact
Before April 1, 2019, builders were allowed to claim Input Tax Credit (ITC) on GST paid for raw materials and services (such as cement, steel, labor, etc.). However, in the revised structure:
- Builders cannot claim ITC for projects under the new GST rate (1% and 5%).
- This change was made to simplify taxation and prevent misuse of ITC claims.
- As a result, developers may adjust pricing to accommodate for the loss of ITC benefits.
For homebuyers, the revised GST rates mean a lower upfront tax rate but potentially higher base property prices.
Stamp Duty and Registration Charges – Additional Costs
GST is not a substitute for Stamp Duty and Registration Charges. Buyers must still pay these additional costs while purchasing a flat:
- Stamp Duty: 5% to 7% (varies by state)
- Registration Charges: 1% of the property value
Since stamp duty is a state tax, it is not covered under GST and remains an additional cost for homebuyers.
Example: Total Cost Calculation for a Flat Purchase
Let’s assume a buyer is purchasing an under-construction flat worth ₹50 lakh (non-affordable category). The final cost calculation would be:
| Particulars | Amount (₹) |
|---|---|
| Base Price of the Flat | 50,00,000 |
| GST @ 5% | 2,50,000 |
| Stamp Duty @ 6% (approx.) | 3,00,000 |
| Registration Charges @ 1% | 50,000 |
| Total Cost of the Flat | ₹56,00,000 |
Buyers should factor in these costs while planning their property investments.
GST on Home Loans
Homebuyers often take loans to finance property purchases. While GST is not directly applicable on home loans, it does impact some aspects:
- GST on Bank Charges: Banks charge processing fees, legal fees, and valuation charges, which attract GST at 18%.
- No GST on EMI Payments: EMI payments towards the home loan principal and interest are exempt from GST.
GST on Builder-Promoted Services
Builders often provide additional services, such as parking, clubhouse access, and maintenance. The GST applicability for these services is as follows:
| Service Type | GST Rate |
|---|---|
| Parking Fees | 18% |
| Clubhouse Membership | 18% |
| Maintenance Charges (if exceeds ₹7,500/month per flat) | 18% |
Key Considerations for Homebuyers
✅ Ensure Clarity on GST Charges
- Confirm whether the builder has included GST in the total price.
- Check if the property falls under affordable or non-affordable housing.
✅ Verify the Completion Certificate
- If a property has received its completion certificate, no GST is applicable.
- If the builder claims GST is required, ask for proper justification.
✅ Compare Old and New GST Rates
- Projects launched before April 1, 2019, may still follow the old GST structure with ITC benefits.
- Confirm whether the builder has opted for the new GST scheme (1% or 5%) or the old scheme (8% or 12% with ITC).
✅ Evaluate Payment Timing and GST Impact
- If purchasing an under-construction property, factor in GST on installment payments.
- For down payment schemes, clarify how GST is applied to each stage of payment.
Conclusion
Understanding GST on flat purchase is essential for homebuyers to avoid unexpected costs. While GST applies to under-construction properties, ready-to-move and resale flats are exempt from GST. Buyers should also account for stamp duty, registration fees, and other additional charges.
Before purchasing a property, it is advisable to:
- Check the applicable GST rate.
- Understand the builder’s GST compliance.
- Compare the total cost with and without GST.
A well-informed buyer can make smarter financial decisions and avoid unnecessary taxation pitfalls when investing in real estate.
