GST on Flat and Home Purchase in India (2025): Impact & Implications

Purchasing a home marks a significant milestone in many people's lives. However, the journey to homeownership is accompanied by various financial considerations, one of the key aspects being the Goods and Services Tax (GST). The impact of GST on flat purchases has brought about notable changes for home buyers, altering the overall cost of owning a home and influencing decision-making processes.

Understanding the role of GST in real estate is indispensable for both first-time buyers and seasoned investors. In this blog post, we will explore the nuances of GST concerning new flat purchases and its implications for home buyers.

What is GST and How It Impacts Your Property Purchase

Introduced in 2017, the Goods and Services Tax (GST) is a comprehensive indirect tax applied on every value addition across industries. In the real estate sector, GST has a direct influence on the cost of flats and properties, particularly in the case of under-construction projects.

When it comes to GST on flat purchase in India, buyers need to note that GST is applicable only on under-construction residential properties or those still in the development stage. In contrast, ready-to-move-in homes and resale properties are exempt from GST, since tax has already been paid during the construction phase of completed projects.

The current GST on property purchase, especially for under-construction and affordable housing projects, is lower compared to the earlier tax regime that included multiple levies such as VAT, Service Tax, and other charges. This unified structure has simplified compliance, reduced cascading taxes, and brought greater transparency to property pricing.

However, while GST on home purchase has streamlined the tax process, it still impacts overall affordability for some home buyers. Understanding the GST rates, exemptions, and their implications is crucial for making an informed property investment decision in 2025.

Also Read: Decoding Commonly Used Home Loan Terminologies

GST Rates on Flat & Properties in 2025

The GST rate on flat purchase varies depending on the type of property being acquired.

GST rate on flat purchase - under construction (affordable housing): 1% without Input Tax Credit (ITC)

GST rate on flat purchase - under construction (non-affordable housing): 5% without Input Tax Credit (ITC)

GST on ready-to-move flats: Nil

Impact of GST on Home Buyers

The imposition of GST on flat purchases has several implications for home buyers:

• Price Transparency: GST has rationalized the tax structure, offering greater transparency. Buyers now have a clearer understanding of the taxes they are paying, as multiple indirect taxes formerly applicable have been amalgamated under GST.

• Increased Affordability in Some Segments: The reduced GST rate of 1% without ITC for affordable housing has made such properties more accessible to buyers. This is particularly advantageous for middle-income groups and first-time home buyers.

• Effects on Non-Affordable Housing: While the 5% GST rate for non-affordable housing is higher than that for affordable housing, many still consider it reasonable. However, the elimination of ITC implies that developers cannot claim tax credits on construction costs, potentially leading to higher overall project expenses and subsequently, increased prices for buyers.

• Clarity in Taxation: The standardized GST rate nationwide has brought about more clarity in tax terms compared to the previous system where VAT and service tax rates varied from state to state.

• Impact on Under-Construction Properties: GST is only applicable to under-construction properties. Hence, buyers opting for ready-to-move-in properties can bypass paying GST, resulting in significant savings.

How much GST Apply on Maintenance Charges for Flats

Apart from the initial GST on flat purchase, home buyers should also be aware of GST on maintenance charges. These charges are collected monthly by housing societies for services such as security, common area electricity, water supply, and housekeeping.

As per GST rules:

• If the monthly maintenance charges per member do not exceed ₹7,500, no GST applies.
• If the charges exceed ₹7,500 per month per member and the housing society’s annual turnover is more than ₹20 lakhs, GST at 18% is applicable.

This means GST applicability depends on two key factors:

• The annual turnover of the housing society
• The monthly maintenance charges per member

GST Applicability on Maintenance Charges

What is Included in the ₹7,500 Threshold?

The threshold of ₹7,500 per member per month covers certain costs, while some charges are excluded.

Key Insight for Home Buyers

While GST on property purchase is a one-time cost during acquisition, GST on maintenance charges can be a recurring cost depending on society rules. Housing societies that fall under GST can also claim Input Tax Credit (ITC) on goods and services used for maintenance, which may reduce the effective cost for members.

Also Read: A 360-degree View of Home Loan Management at Different Stages

How GST is Calculated on Flats

Understanding how GST is calculated on flat purchase helps home buyers know the exact cost of their property. The calculation involves applying GST on the base price of the flat and then adding other charges that may attract GST. Here’s a simple step-by-step guide:

1. Start with the Base Price

Identify the basic cost of the flat as mentioned in the builder-buyer agreement. This does not include GST or additional charges.

2. Apply GST on the Base

Apply the applicable GST rate (generally 1% for affordable housing and 5% for other residential properties) on the base price. This gives you the GST component on the flat.

3. Add in the Extras

Certain charges, such as preferential location charges (PLC), parking fees, and development charges, may also attract GST. These need to be added separately.

4. Calculate Total GST

Sum up the GST applied on the base price and the GST levied on extras to arrive at the total GST on property purchase.

5. Get the Final Price

Finally, add the base price + total GST + extras (if applicable). This gives you the final payable amount for the flat.

Example:

If the base price of a flat is ₹50,00,000 and the GST rate is 5%:

• Base Price = ₹50,00,000
• GST (5%) = ₹2,50,000
• Extras (parking, PLC, etc.) = ₹3,00,000 (GST @ 5% = ₹15,000)
• Final Price = ₹50,00,000 + ₹2,50,000 + ₹3,15,000 = ₹55,65,000

Thus, buyers should always calculate the total GST on home purchase to understand the real cost of ownership.

I want to cancel my flat purchase. Who will bear the GST burden?

As per GST laws, if a buyer cancels a flat booking before possession, the GST paid on the advance amount can be refunded. Since GST is paid on the sale transaction, which remains incomplete until property possession, developers are responsible for refunding the GST amount to buyers. The builders can then claim a refund from the government.

However, builders may deduct cancellation charges before refunding the booking amount and GST, the specifics of which are determined by the builder's policy and agreement terms.

Buyers should ensure they have all the necessary documentation for processing the GST refund.

Home Ownership Made Easy with Godrej Capital

Understanding the complexities of GST regarding flat purchases is indispensable for any home buyer. From ascertaining applicable GST rates to comprehending its impact on total costs and maintenance charges, GST plays a pivotal role in financial planning. Staying informed about these details empowers buyers to make educated decisions, ensuring their dream home does not become a financial burden.

If you are considering buying a home and require financial assistance, Godrej Capital Home Loans offer attractive interest rates and flexible repayment options. Our user-friendly home loan EMI calculator aids in determining potential EMIs and effectively planning your finances. Visit our website to apply online for a hassle-free borrowing experience.

FAQs

Q.1. Is GST applicable on housing loan EMI?

A. No, GST is not applicable on housing loan EMIs. Home loans are financial transactions, and GST does not apply to repayment of principal or interest. However, GST is charged on certain bank services like processing fees, legal fees, or valuation charges.

Q.2. What is the GST rate on under-construction flats in 2025?

A. As of 2025, the GST rate on under-construction residential properties is 5% without Input Tax Credit (ITC). For affordable housing projects, a reduced GST rate of 1% without ITC applies.

Q.3. Do I need to pay GST on ready-to-move homes?

A. No, GST is not applicable on ready-to-move-in flats or resale properties. GST is only charged on under-construction properties where the builder is still providing construction services.

Q.4. Can GST be claimed back by the buyer?

A. Individual home buyers cannot claim Input Tax Credit (ITC) on GST paid for residential property purchases. ITC is available only to developers/builders on goods and services used for construction, not to end consumers.

Q.5. How does GST impact stamp duty charges?

A. GST has no impact on stamp duty and registration charges. These charges are levied by state governments and must be paid separately by the buyer at the time of property registration.

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially.
The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements.
Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com