Goods and Service Tax has stepped in the Indian property market which means homeowners and property investors are liable to pay GST on property. This tax has taken over a range of other taxes and completely transformed the GST tax system on Indian property which is completely shaping the economy.
Affordable housing GST rates help individuals have stable living situations. The government has prioritised affordable housing on both social and financial agendas. Using the correct GST rates for housing developments will greatly affect sector profitability. Thus, one must be intensely aware of the GST rate’s nuances.
Despite GST entering the Indian property market over the years, homeowners still face the challenges to completely understand the concept of GST on affordable property. To keep you updated on affordable housing GST, we have put together this dedicated Brick & Bolt blog that uncovers everything you need to know.
About GST on Indian property
GST on Indian property has given relief to all the home and property buyers in India by streamlining the taxation system. Earlier with multiple taxes for buyers to pay, there was a lack of clarity. However, when GST came into effect, it came with GST on non-affordable homes with 12%, whereas people choosing affordable homes were liable for 8% GST. The instances have been changed right after the 33rd GST Council meeting and have been effective from April 1, 2019. Buyers with eyes on affordable houses are liable for the new GST rate of 1%.
Current GST on Affordable Housing
For purchases of affordable homes, the current GST rate is 1%; for non-affordable or luxury homes, it is 5%. Introduced by the GST Council to encourage reasonably priced homes, these updated rates came into effect from from April 1, 2019. According to the latest GST taxation, buyers are not accounted for input tax credit (ITC)
Taxes Before General Taxation
Under the indirect tax system, the Centre and the states imposed a number of levies. Every state gathered taxes in the form of Value Added Tax (VAT) and had its own set of laws and policies. Regarding inter-state sales of products, central state tax (CST) applied. The states and the Centre imposed indirect taxes like octroi, municipal taxes, etc. This resulted in what was known as the cascade effect of taxes—much of overlapping taxes.
List of all the indirect taxes before GST:
- Central Excise Duty
- Duties of Excise
- Additional Duties of Excise
- Additional Duties of Customs
- Special Additional Duty of Customs
- Cess
- State VAT
- Central Sales Tax
- Purchase Tax
- Luxury Tax
- Entry Tax
- Taxes on advertisements
The CGST, SGST, and the IGST have replaced all the previous levies.
Key Eligibility Requirements for Obtaining Reasonably Priced Housing GST Rates
Under GST rules, a residence must satisfy many criteria to be deemed “affordable.” These criteria guarantee that the GST advantages for affordable housing go to those who most need them.
Carpet Area
Different criteria apply for metropolitan and non-metropolitan locations. Metropolitan regions are permitted a maximum carpet area of 60 square meters (645 square feet). It is 90 square meters (960 square feet) for non-metropolitan locations. Among the major metropolitan regions are Bengaluru, Chennai, Delhi-NCR, Hyderabad, Kolkata, and Mumbai.
Source of Raw Materials
One important statistic is the percentage of supplies coming from approved suppliers. Builders risk losing their eligibility if they disobey these affordable housing GST guidelines. Of the materials utilised, eighty percent must come from approved suppliers qualifying for the 1% GST rate. In case of non-compliance, the developer will be liable for the higher GST rate of 18%.
Limitations on Income
This guarantees that only those most in need may benefit from GST discounts on affordable homes. Most of the persons qualified for these subsidies have moderate to low salaries.
Appreciability of Property
The home worth must not be too high to maintain house expenses within a realistic level.
Affordable housing currently refers to apartments priced at or less than Rs 55 lakh.
Particularly in developing cities, these rules are meant to make housing more accessible and encourage growth within the sector of inexpensive homes.
GST on Flat Purchase in India in 2024
In India, the GST on purchasing a flat only covers under-construction buildings. It does not apply to ready-to-move-in or resale residences, as the building is already finished. Furthermore, GST does not apply to land acquisitions.
When a customer makes a purchase, he must pay the developer GST. After that, removing the GST from the Government of India falls on the developer. When the GST rates changed in March 2019, the ongoing projects were given a one-time window to decide which regime the project would fall under.
| Type of Property | GST Rate Till March 2024 | GST Rate After March 2024 |
| Under-construction property (affordable housing) | 8% with input tax credit1% without input tax credit | 8% with input tax credit1% without input tax credit |
| Under-construction property (non-affordable housing) | 12% with input tax credit5% without input tax credit | 12% with input tax credit5% without input tax credit |
| Ready to move in | No GST | No GST |
GST on Above ₹50 Lakhs Flat Purchase
When you have your eyes on purchasing flats that cross the price tag of 50 lakhs, you will be liable to pay GST at a fixed rate of 5%. This category of flat purchase is excluded from the affordable housing category and does not fall within the benefit of input tax credit (ITC).
GST for Under-Construction vs. Ready-to-Move Flats: Key Difference
Here’s a comparison table for GST rates on under-construction and ready-to-move flats:
| Property Type | GST Rate for Affordable Housing (≤₹55 lakhs) | GST Rate for Other Residential Properties |
| Under-Construction | 1% without ITC | 5% without ITC |
| Ready-to-Move | Not Applicable | Not Applicable |
GST is not applied to entirely built homes. Once a property earns its completion certificate or occupancy certificate, it is regarded as a finished project, and further transactions are handled, such as the sale of immovable property. State legislation, rather than GST, governs these transactions and these transactions are liable to stamp duty and registration fees. Homebuyers should be aware of this difference as it will greatly affect the cost of acquiring a house.
GST on Maintenance Charges
GST is applied on certain maintenance expenses under specific criteria.
- Should a homeowner pay a maintenance charge of Rs 7500/ or more to their society, they must pay 18% GST on residential property.
- The house society that gathers Rs 7500/-per month for each apartment must also pay 18% tax.
- Housing societies with less than 20 lakh yearly revenue are free from GST payment obligations.
- Both criteria should be relevant for the GST to be applicable: every homeowner should be paying maintenance of more than 7500/-per month, and the yearly turnover of society should be more than 20 lakh.
- The maintenance cost is taxed if the flat’s maintenance costs exceed 7500. For instance, if the maintenance price per flat is Rs 10,000, the GST will be over the whole amount – Rs 10,000 rather than Rs 2500 (10,000 – 7,500).
- Housing societies may claim input tax credits on the tax they spent on items such as generators, furnishings, hardware fittings, etc. and services including repair and maintenance.
Effect of Government Plans on GST Rates
When paired with GST on apartments below 45 lakhs, government initiatives—especially the Pradhan Mantri Awas Yojana (PMAY)—greatly affect housing affordability. Under PMAY, qualified recipients may get a house loan interest subsidy, lowering borrowing expenses. With the lowered 1% GST rate, this interest subsidy helps projects for affordable homes significantly cut the general cost of homeownership.
Many states at the regional level have developed their own reasonably priced housing programs to supplement national government projects. These state-specific initiatives can call for extra subsidies, loosened FSI (Floor Space Index) rules, or accelerated approval of reasonably priced housing developments. Although these programs do not directly lower GST rates, they build an environment that improves the advantages of the lowered GST rate, therefore making cheap housing even more available to a larger spectrum of the population.
Particularly for GST on apartments below 55 lakhs, the GST framework for affordable housing shows a great attempt by the government to make homeownership more accessible. With other government programs and exemptions, the lowered 1% GST rate has made the atmosphere more favorable for purchasers and developers in the affordable housing market. Understanding the subtleties of GST on reasonably priced homes can help purchasers make better judgments and save on their house purchases.
Conclusion
GST represents the largest transformation in the real estate sector. The developer’s payment of customs duty, VAT, excise duty, legal charges, service taxes, and licensing fees compromises homeowners’ tax processes, among other things. GST has helped to simplify property tax and a reduced GST on affordable property is expected to help lakhs of people in India.
FAQs
No, there is no chance of resale of flats to apply for the GST regime. However, these are termed as the sale of immovable property, which investors only need to pay for the required stamp duty and registration fees.
No, GST does not enter into the picture of home loan applications. This means that the decreased GST on affordably priced property may reduce the end cost of property, which will impact the loan needed.
Yes, but there is a streamlined process that you need to follow to claim the refund. To begin with, you need to send across the refund claim application to the GST council for under-construction flats where the builder has already paid. While sending across the application to the respective associations, you need to add up your apartment’s registration information, the developer’s GST information, and the GST paid amount.
Hemali Patel