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GST on Flat Purchase and Its Impact on Home Buyers

By Tata Capital
30 December 2025
9 mins read
3055

Buying a home is a significant life milestone for many. However, the journey to homeownership often comes with multiple financial considerations, one of which is the Goods and Services Tax (GST). The implementation of GST on flat purchases has significantly impacted home buyers, transforming the overall cost of owning a home and influencing decision-making processes.

Whether you’re a first-time buyer or a seasoned investor, understanding the GST’s role in real estate is crucial for making informed decisions. In this blog, we’ll delve into the intricacies of GST for new flat purchases and its impact on home buyers.

What is GST on property in India?

Launched in 2017, GST is a comprehensive tax levied on every value addition. In the real estate sector, GST directly affects the cost and pricing of properties, including flats.

In India, GST on property is levied on the sale of under-construction properties or properties that are still in the development phase. This tax does not apply to ready-to-move-in flats or resale properties, as these are considered completed projects where GST has already been paid during the construction phase.

The current GST rate for under-construction properties, including affordable housing, is relatively lower as compared to the previous tax regime, which included multiple taxes such as VAT, Service Tax, etc. This not only streamlines the process and brings more transparency but also reduces the tax burden of home buyers.

Also, read – Home Loan Process on Under Construction Property (Flat)

GST rate for flat purchase in 2024

The GST applicable in flat purchases depends on the type of property you are buying.

Type of property	GST rate
GST on flat purchase – under construction (affordable housing)	1% without Input Tax Credit (ITC)
GST on flat purchase – under construction (non-affordable housing)	5% without Input Tax Credit (ITC)
GST on read-to-move flats	Nil

Also, read – GST Calculator to Calculate GST Amount Online

Impact of GST on home buyers

GST on flat purchases significantly impacts home buyers in several ways:

Price transparency

GST has streamlined the tax structure, making it more transparent. Buyers now have a better understanding of the taxes they are paying, as the multiple indirect taxes that were previously applicable have been combined under GST.

Increased affordability in some segments

For affordable housing, the reduced GST rate of 1% without Input Tax Credit (ITC) has made these homes more affordable for buyers. This is particularly beneficial for middle-income groups and first-time home buyers.

Impact on non-affordable housing

Although the 5% GST rate for non-affordable housing is higher than that for affordable housing, it is still considered quite reasonable by many. However, the elimination of ITC means that developers can no longer claim tax credits on construction costs. This might result in higher overall project expenses and ultimately, increased prices for buyers.

Clarity in taxation

The uniform GST rate across the country has brought more clarity in terms of taxation, as compared to the earlier system where VAT and service tax rates varied from state to state.

Impact on under-construction properties.

GST is applicable only on under-construction properties. Therefore, buyers opting for ready-to-move-in properties can avoid paying GST, which can be a significant saving.

Also, read – GST on Personal Loan: Rates, Impact & What Gets Taxed in India

Understanding GST on flat maintenance charges

When purchasing a flat, you might also have to pay GST on the maintenance charges. If the total maintenance charges collected by a residential welfare association or society exceed Rs. 7,500 per member per month, and if the society’s annual turnover is Rs. 20 lakhs or more, then GST at the rate of 18% is applicable.

The maintenance charges may include various components such as property tax, water bill, electricity charges for common areas, and more. However, societies can claim ITC on GST paid on various goods and services used for maintenance purposes to reduce the overall cost of maintenance for members.

Societies that are liable to pay GST must also comply with GST filing requirements. This includes obtaining GST registration, issuing tax invoices, and filing GST returns. It is important to note that GST does not apply to property tax and non-taxable services.

Also, read – How to Calculate GST on Home Loan

What happens if you cancel a flat purchase?

According to the GST laws, if a buyer cancels the booking of a flat before taking possession, the GST paid on the advance amount can be refunded. This is because the GST is paid on the transaction of sale, which is not complete until the possession of the property.

In such a situation, the developer or builder will be responsible for refunding the GST amount to the buyer. They can then claim a refund of this amount from the government.

But while GST can be refunded, the builder may deduct a certain amount as cancellation charges before refunding the booking amount and GST. The percentage or amount of these charges varies depending on the builder’s policy and the terms of the agreement. Additionally, the buyer should ensure that they have all documentary evidence of the cancellation and the amount paid for processing the GST refund.

Also, read – GST on Used Cars: All you Need to Know About GST on Sale of Old Car

Simplify your home ownership journey with Tata Capital

Navigating the intricacies of GST on flat purchases is crucial for any home buyer. From determining the applicable GST rates to understanding its impact on overall costs and maintenance charges, it plays a significant role in your financial planning. As a home buyer, staying informed about these aspects will help you make informed decisions, ensuring your dream home doesn’t become a financial burden.

If you’re planning to buy a flat and looking for financial assistance, Tata Capital’s home loans offer attractive interest rates and easy EMI options. Our handy home loan EMI calculator further helps you determine your potential EMIs and plan your finances effectively. Visit our website to apply online for a seamless borrowing experience.

Also, read – Difference Between Debit Note and Credit Note

Common misconceptions about GST on residential property purchase

Understanding GST on property purchase is essential for home-buyers to make informed decisions.

Here are some common misconceptions:

Uniform GST rate: Many believe the GST rate is the same for all properties, but it varies depending on whether the property is in the affordable housing or luxury segment.

GST on resale properties: A common misconception is that GST applies to resale homes, whereas it is levied only on new properties sold by developers.

Input tax credit availability: Some buyers assume input tax credit is available for all purchases, but it depends on the type of property and its intended use.

GST covers all fees: Many think GST includes registration and stamp duty, but these charges are separate and not part of GST.

Clearing these misconceptions helps buyers plan their finances effectively and avoid unexpected costs.

Also, read – Home Loan Tax Benefit for Under Construction Property

Tips for Home Buyers to Save on GST

Saving on GST on property purchase can significantly reduce the overall cost of a new home. Here are practical tips for homebuyers to optimise GST on purchase of house:

Affordable housing projects: Many buyers can save as these projects attract a lower GST rate compared to luxury properties.

First-time buyer benefits: First-time homebuyers may be eligible for exemptions or reduced GST rates, lowering their financial burden.

Staggered payment schedules: Paying in stages according to construction progress helps manage GST payments effectively.

Input tax credit eligibility: Buyers investing in under-construction properties should check if they qualify for input tax credit.

Consult your Lender: Engaging with your Lender or tax advisor ensures all possible GST savings are explored and compliance is maintained.

By following these tips, homebuyers can make informed decisions and optimise their savings on GST.

Also, read – Can I Claim 80EEA For Under Construction Property?

Key Factors Affecting GST on Flat Purchases

Being aware of the factors that influence GST on purchase of house can help buyers plan their investment more effectively. Here are some key aspects to consider:

Type of Property: Affordable housing projects attract a lower GST rate compared to luxury apartments, making them more cost-effective for first-time buyers.

Completion Status: GST is applicable differently on under-construction properties versus ready-to-move-in flats, affecting the overall cost.

Input Tax Credit: Eligible buyers can claim input tax credit, which reduces the net GST payable and lowers the financial burden.

Property Size and Value: Larger or high-value properties may incur higher GST, so the property’s price bracket directly impacts taxation.

Construction Progress: Paying in stages aligned with construction milestones can make GST management easier and reduce upfront costs.

Exemptions and Concessions: First-time buyers or certain government-approved projects may enjoy exemptions, lowering the effective GST.

Conclusion

Navigating GST on property purchase is an essential part of planning your home investment. Being aware of applicable rates, exemptions, and input tax credit eligibility helps buyers make informed financial decisions and avoid unexpected costs. For first-time home-buyers, understanding the nuances of GST on purchase of house can enhance affordability and simplify budgeting for both property and maintenance expenses.

Careful planning, including considering property type, completion status, and staged payments, allows buyers to manage GST efficiently while maximising potential savings. Consulting your Lender or financial advisor ensures compliance and helps explore all available options to reduce your tax burden.

With the right guidance and planning, buying your dream home can be a smooth and financially smart experience. Tata Capital’s home loans offer attractive interest rates, easy EMI options, and online application facilities to help you achieve your home-ownership goals with confidence.

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FAQs

How to avoid GST on flat purchases?

You can avoid GST on property purchase by choosing a ready-to-move-in flat that already has a valid Occupancy Certificate or by buying a resale property. GST applies only to under-construction units because these are treated as a supply of service. Ready-to-move properties and resale transactions are exempt from GST, although you still pay stamp duty and registration fees.

What is the GST on commercial property?

When you buy commercial space such as offices or shops, GST is charged at 12% for under-construction commercial properties. This is higher than rates on residential units because commercial real estate is treated differently under GST law. If a commercial unit is part of a mixed project with certain conditions, applicable rates may vary.

What is the new GST rate on flat purchases in 2026?

In 2025 the GST on purchase of house for under-construction residential flats is 1% for affordable housing and 5% for other residential units. Affordable housing is defined by carpet area and price caps. Ready-to-move-in flats with an Occupancy Certificate attract no GST.

Is it mandatory to pay GST on residential property?

Paying GST on a residential property is mandatory only if you buy an under-construction flat from a builder before the project is completed. Resale flats and ready-to-move-in units with an Occupancy Certificate do not attract GST, but you still need to budget for stamp duty and registration charges.

How to calculate GST on a flat in 2026?

To calculate GST on a property purchase, use the formula: GST Amount = Base Price × GST Rate. For an under-construction non-affordable flat, multiply the base price by 5%. For affordable units the rate is 1%. Additional charges like parking may attract separate GST.

What is the new GST rule on property purchases?

The GST rule in 2026 continues to exempt ready-to-move-in properties with an Occupancy Certificate from GST on purchase of house. Under-construction flats attract 1% GST for affordable housing and 5% for other residential units, with commercial properties taxed at 12%. Land and resale properties remain GST-free.

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