GST on Real Estate in India 2026: Rates, ITC, Under-Construction vs Ready Properties
- shubhamtulsian05
- 1 day ago
- 3 min read
Real estate is simultaneously one of India's largest economic sectors and one of the most GST-complex. Buyers, developers, and investors frequently misunderstand the applicable rates, input tax credit rules, and the distinction between taxable and exempt supplies in this sector. This guide gives you the complete, current picture.
When is GST Applicable on Real Estate?
Under-construction properties: GST applies on the purchase of an under-construction residential or commercial property — i.e., where construction has not been completed and the completion certificate has not been issued as of the date of payment.
Ready-to-move-in (completed) properties: Sale of a completed property (where completion certificate has been issued) is NOT subject to GST. These transactions are subject only to stamp duty and registration charges.
Land: Pure land sales are outside the scope of GST entirely. When land is sold along with a constructed property, the value of land is excluded from the GST computation.
GST Rates on Under-Construction Properties
Affordable Housing
Definition of affordable housing: Residential apartments with carpet area up to 60 sq m (90 sq m in metros — Delhi NCR, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai) AND price up to ₹45 lakh.
GST rate: 1% without input tax credit.
Non-Affordable Residential Properties
GST rate: 5% without input tax credit.
Commercial Properties
GST rate: 12% without input tax credit (for properties in a project other than pure commercial).
Pure commercial projects: 12% with input tax credit available.
Why 'Without ITC'?
Since April 2019, builders opting for the new 1% and 5% rates cannot claim input tax credit on construction materials, services, or other inputs — the reduced rate compensates for the loss of ITC. Builders who continue on old projects (under the pre-April 2019 structure with ITC at 8%/12%) can claim ITC but must pass on the benefit to buyers under anti-profiteering provisions.
Buyers Cannot Claim ITC on Property Purchases
A common misconception: property buyers (whether individual or business) cannot claim GST paid on purchase of residential property as input tax credit — regardless of whether the property is for personal use or business use. This is a blocked credit under Section 17(5)(d). Even businesses that use a residential property as an office (post the July 2022 RCM change on residential rent) cannot claim ITC on the purchase price.
Commercial property exception: A business buying commercial property as a capital asset for use in its taxable business can claim ITC on the GST paid — this is one of the rare cases where property purchase ITC is available.
GST on Renting of Real Estate
Residential property to registered person: 18% GST under RCM paid by tenant (as covered in our earlier guide on GST on rent).
Residential property to unregistered individual: Exempt.
Commercial property: 18% GST on forward charge by the landlord, if GST-registered.
Renting of shops in a mall, warehouse, or office space: 18% GST — ITC available to tenants using for business purposes (except residential use as above).
GST on Construction Services — Works Contract
Civil construction for commercial or industrial purposes: 18% GST.
Construction of original works for government bodies and educational/healthcare institutions: 12% GST.
Construction services for affordable residential projects: 1% GST (aligned with the rate on the final sale).
Renovation and repair works: 18% GST.
ITC on works contract: Generally blocked for immovable property construction (Section 17(5)(c) and (d)) except for plant and machinery in industrial settings.
Anti-Profiteering in Real Estate — The ITC Benefit Issue
When GST was introduced in 2017, builders who were mid-project claimed ITC on construction materials and services (cement, steel, contractor services). The law required them to pass this ITC benefit on to flat buyers through reduced prices. Many builders did not pass on the benefit — leading to a large number of anti-profiteering complaints in real estate. NAA passed numerous orders directing developers to refund the ITC benefit to buyers with 18% interest. With NAA now dissolved and CCI taking over, ongoing enforcement in this area continues.
GST on Redevelopment Projects
Redevelopment projects (society redevelopment in cities like Mumbai) have specific GST treatment — where existing society members receive new flats as consideration, the 'deemed supply' provisions and the valuation rules create complex GST positions that developers must carefully navigate with expert advice before commencing redevelopment.
How PGT & Associates Can Help
PGT & Associates advises developers, buyers, and investors on GST implications of all real estate transactions — including rate applicability, anti-profiteering compliance, works contract classification, GST on rental income, and input tax credit issues in mixed-use projects. We also handle GST audit support and departmental notices arising from real estate transactions. Contact us at +91-87994-99189.
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