Understanding GST for Under-Construction Projects

For homebuyers exploring under-construction properties, one recurring question is: How does GST apply to my purchase? Understanding the basics of GST (Goods and Services Tax) can help you make informed decisions and avoid unexpected financial surprises.

What is GST on Property?

GST is a unified indirect tax applicable on the supply of goods and services across India. When it comes to real estate, GST is levied only on under-construction properties. Completed or ready-to-move-in properties are exempt, provided they have received the Occupancy Certificate (OC).

Current GST Rates on Residential Property

As of the latest structure:

• Affordable Housing: 1% (without ITC)
• Other Residential Projects: 5% (without ITC)
  
  

Note: ITC stands for Input Tax Credit, which means you cannot claim tax credits for the GST paid on raw materials or services used by the builder.

What Counts as Affordable Housing?

According to government norms:

• Carpet area up to 60 sq.m in metros and 90 sq.m in non-metros
• Property value not exceeding ₹45 lakhs

If the property fits this criteria, you’ll be eligible for the reduced 1% GST rate.

Why Does GST Matter?

Understanding how GST impacts your cost structure is crucial:

• It affects your total outlay at the time of booking/installments.
• It adds to your tax documentation.
• It influences your comparison between under-construction and ready homes.
  

Pro Tip

Always confirm whether the quoted price by the developer is inclusive or exclusive of GST. A 5% GST on a ₹70 lakh home is ₹3.5 lakhs — not a small amount to overlook.

By staying informed, you can make smart decisions and avoid surprises during your homebuying journey