Purchasing a flat or apartment involves significant financial planning and an understanding of various taxes, including the Goods and Services Tax (GST). Introduced in 2017, GST replaced multiple indirect taxes, simplifying the taxation process for homebuyers. This comprehensive guide clearly outlines how GST applies to flat purchases, the applicable rates, calculation methods, exemptions, and valuable tips for homebuyers.
1. What is GST on Flat Purchase?
Goods and Services Tax (GST) is an indirect tax levied on the sale of under-construction properties (apartments or flats) across India. GST applies to properties sold before receiving the completion certificate (CC) or occupancy certificate (OC). Properties with completed construction, or those sold after obtaining CC or OC, are exempt from GST.
Important Note:
- GST is not applicable on completed properties (Ready-to-move-in flats with CC/OC).
- GST is applicable only on under-construction properties.
2. GST Rates on Flats in 2025
The GST Council has standardized the GST rates applicable for flat purchases as follows:
| Property Type | GST Rate |
|---|---|
| Affordable Housing Projects | 1% (No ITC) |
| Non-Affordable (Regular) Housing Projects | 5% (No ITC) |
| Commercial Properties (Shops/Offices) | 12% (With ITC) |
Definition of Affordable Housing (as per GST Council):
- Flats priced up to ₹45 lakhs and measuring up to 60 sq.m. (carpet area) in metro cities or 90 sq.m. in non-metro cities qualify as affordable housing.
3. How is GST Calculated on Flat Purchases?
GST on flats is calculated on the total agreement value. This includes the cost of construction, amenities, facilities, and parking charges.
Example of GST Calculation:
- Suppose you’re purchasing an under-construction flat valued at ₹50 lakhs (non-affordable category).
- GST = ₹50,00,000 × 5% = ₹2,50,000
- Therefore, total cost including GST = ₹52,50,000.
4. When is GST Payable?
GST is payable at the time of installment payments made to the developer, in line with the schedule outlined in your construction agreement. It is collected by the developer and deposited with the government.
Points to Remember:
- GST is collected in stages as per the progress of construction.
- GST must be clearly mentioned in the payment receipts issued by the developer.
5. Properties Exempt from GST
- Completed Properties: Flats sold after obtaining a Completion Certificate or Occupancy Certificate are completely exempt from GST.
- Resale Flats: No GST is applicable on resale properties since they are not considered under-construction or new sales.
- Land Transactions: Pure land sales (without construction) are also exempt from GST.
6. Impact of GST on Property Prices
- Transparency: GST has streamlined the property taxation process, enhancing transparency in property transactions.
- Price Impact: Initially, property prices saw marginal variations, but GST has largely stabilized real estate pricing, simplifying property purchases for buyers.
7. Tips for Homebuyers Regarding GST
- Verify Documentation: Always request proper GST invoices or payment receipts from developers for each installment.
- Check GST Registration: Ensure the developer is GST registered and the GST number is mentioned in the agreement and invoices.
- Professional Advice: For comprehensive advice and a thorough legal review of your property documents and agreements, consider Verified.RealEstate’s Due Diligence service.
8. Common Misconceptions about GST on Flats
- GST on Land Component: GST is applicable only on the construction portion. Although land value is part of the overall property price, GST applies to the overall agreement value as per GST council guidelines, adjusted for standard deductions.
- GST after OC: No GST is payable after the Occupancy Certificate or Completion Certificate is received.
9. Key Documents to Check When Paying GST
- Agreement of Sale (mentioning GST clearly)
- Construction Agreement
- GST Registration Certificate of Developer
- Payment Receipts with GST break-up
10. How to Get Clarity on GST Payments?
For clear guidance and to prevent potential disputes, consider utilizing Verified.RealEstate’s expert Legal Opinion service to review your property agreements, GST compliance, and other legal documentation comprehensively.