Buying A Property? Know The GST Rates First

So, you’re thinking of buying a property — maybe your first home, maybe an upgrade, or even an investment flat. But wait… what’s this GST everyone keeps talking about? Why is it added to the cost? Do you have to pay it, or is it the builder’s job?

Don’t worry — you’re not alone in feeling confused. Let’s break it down in simple terms so you know exactly what GST is, when it applies, and what kind of impact it has on your budget.

How Does GST on Real Estate Work?

GST — or Goods and Services Tax — doesn’t apply to all property purchases. It only kicks in if you’re buying an under-construction property directly from a builder or developer. The logic is: since the property is technically a service being delivered to you, GST is applicable.

However, if you’re buying a ready-to-move-in property (one that already has a completion certificate), there’s no GST involved. That’s one reason many people prefer ready homes — fewer surprises in the final bill.

When and How GST Applies to Property Deals

GST gets added when you buy a home that’s still being built. The builder will charge you GST on the property value (excluding land cost) and collect it as part of the sale. You’ll usually see it listed clearly in the cost sheet or agreement.

But here’s the catch — resale flats, i.e., properties being sold by individuals (not developers), don’t attract GST. So if you’re buying from another owner, you’re off the hook.

Who Pays GST? Buyer or Seller?

This is a super common doubt: Who pays GST?

The answer? You do — the buyer. The builder collects it from you and deposits it with the government. So when you get your payment schedule from the builder, GST will be added to the base cost of the flat.

What About Extra Charges?

GST isn’t just on the base flat price. It’s also charged on all those add-ons the builder might offer — things like:

• Clubhouse or gym membership
  
• Car parking
  
• Power backup or maintenance deposit
  
• Preferential Location Charges (PLC)

These charges might seem small individually, but together they can add up. And yes, they’re all taxable under GST.

Affordable Housing and GST: Lower Rates, But Some Conditions

There’s a special GST rate for what the government calls affordable housing. And it’s quite a benefit if you qualify — you only pay 1% GST on the property (no input tax credit, though).

To qualify as affordable housing:

• The flat should have a carpet area of up to 60 sq. m. in metros and 90 sq. m. in non-metros
  
• The property price must be ₹45 lakhs or less

Just be careful — not all low-priced flats are treated as “affordable” under GST. Always double-check the carpet area and pricing with your builder.

GST Rates and What They Mean for You

Let’s simplify the current GST rates so you know what to expect:

So, if you’re buying a newly launched apartment, the gst rate property buyers pay will either be 1% or 5%, depending on the project.

How GST Has Changed Property Prices and Builder Costs

Earlier, builders had to deal with multiple taxes — VAT, service tax, excise, and so on. Now, it’s all clubbed into one: GST. That has made things more transparent for buyers.

But here’s the other side: under the current GST system, builders don’t get full input tax credit, so they sometimes bump up base prices to cover their own costs. Which means — you end up paying more.

Residential vs Commercial Property GST: What’s the Difference?

Thinking of buying a shop or office instead of a home? Just know this — commercial properties attract 12% GST, compared to 1–5% for residential units.

However, commercial buyers often get input tax credit, which softens the blow a bit. For regular homebuyers though, no such benefit.

If You’re an Investor… Read This

Planning to buy a property for investment purposes? Then GST becomes part of your cost — and you need to factor that into your returns.

For example:

• Ready flats mean no GST, which keeps costs lower
  
• Under-construction flats come with GST, so your break-even point may be higher
  
• Commercial properties have higher GST, but you may be able to claim credit if you register under GST

Smart investors weigh all this before choosing a property type.

Mistakes to Avoid with GST on Property

Let’s be honest, GST can feel like a maze. Here are a few common slip-ups to avoid:

• Assuming all flats have GST — ready properties don’t.
  
• Believing low cost = affordable housing (check area + price).
  
• Forgetting about GST on extra charges.
  
• Not getting a full cost sheet with a GST breakup from your builder.

Always ask questions. It’s your money on the line.

Conclusion: What Every Buyer Should Know

GST might feel like a boring tax detail, but it can have a major impact on your total cost. Here’s what to keep in mind:

• You only pay GST on under-construction homes (not ready-to-move).
  
• The buyer — not the seller — pays GST.
  
• Know whether your project falls under affordable housing to benefit from the 1% rate.
  
• Get a full breakdown of GST and additional charges before you make that booking amount payment.

Knowing the gst rates ahead of time helps you plan better, budget smarter, and avoid surprises.

FAQs

1. How to calculate GST on purchase of property?

If your flat costs ₹50 lakhs (non-affordable category), GST at 5% = ₹2.5 lakhs. Always calculate GST on the base value (excluding land component).

2. How GST affects property prices?

GST increases your total cost on under-construction properties. Builders also adjust pricing based on whether they can claim input tax credit or not.

3. Who will pay GST, buyer or seller?

 The buyer pays GST. It’s collected by the builder at the time of payment.

4. What is the GST rate for property purchase?

 It’s 1% for affordable housing, 5% for other under-construction homes, 12% for commercial, and 0% for ready properties.

Disclaimer : Investments in debt securities/ municipal debt securities/ securitised debt instruments are subject to risks including delay and/ or default in payment. Read all the offer related documents carefully.