Introduction
The GST on flat purchase in India is a critical factor for homebuyers navigating the Goods and Services Tax (GST) regime, effective since July 1, 2017. Introduced to streamline taxation, GST impacts the cost of under-construction flats, with varying rates for affordable and non-affordable housing, influencing decisions in cities like Patna, Bangalore, and Hyderabad. This blog provides a comprehensive guide on GST on flat purchase in 2025, detailing rates, exemptions, compliance requirements, and impacts on homebuyers as of June 3, 2025, and explains how TaxQue simplifies GST processes for businesses and individuals during company registration or property transactions.
What Is GST on Flat Purchase?
GST on flat purchase refers to the tax levied under India’s GST framework on the sale of under-construction residential and commercial properties, classified as a supply of services under the CGST Act, 2017. GST replaced a complex pre-GST structure (VAT ~5–14%, service tax ~4.5%, totaling ~15–20%) with unified rates, administered by the GST Council. Rates are 1% for affordable housing and 5% for non-affordable housing, without Input Tax Credit (ITC), while ready-to-move-in flats are exempt. This impacts pricing, compliance, and homebuyers’ budgets, requiring clarity during company registration for real estate businesses or property purchases in Patna or Bangalore.
1. GST Rates and Exemptions for Flat Purchases
Below is a table summarizing GST on flat purchase rates and exemptions for 2025:
| Property Type | GST Rate | HSN Code | Details |
|---|---|---|---|
| Affordable Housing (Under-Construction) | 1% (No ITC) | 9954 | Flats with carpet area ≤60 sq.m in metro cities (Delhi-NCR, Mumbai, Bangalore, Chennai, Hyderabad, Kolkata) or ≤90 sq.m in non-metro cities (e.g., Patna), priced ≤₹45 lakh. Intra-state: 0.5% CGST + 0.5% SGST; Inter-state: 1% IGST. |
| Non-Affordable Housing (Under-Construction) | 5% (No ITC) | 9954 | Flats exceeding ₹45 lakh or carpet area limits. Intra-state: 2.5% CGST + 2.5% SGST; Inter-state: 5% IGST. |
| Commercial Properties (Under-Construction) | 12% (With ITC) | 9954 | Shops, offices, malls. Intra-state: 6% CGST + 6% SGST; Inter-state: 12% IGST. |
| Ready-to-Move-In Flats | 0% | N/A | Flats with Completion Certificate (CC) or Occupancy Certificate (OC) issued by local authorities. |
| Resale Flats | 0% | N/A | Previously owned flats, considered immovable property. |
| Land Purchase | 0% | N/A | Exempt under Schedule III of CGST Act. |
- Affordable Housing: Defined as flats priced ≤₹45 lakh with carpet areas ≤60 sq.m in metros or ≤90 sq.m elsewhere (e.g., Patna). For a ₹40 lakh flat, GST is ₹40,000 (1%), totaling ₹40,40,000.
- Non-Affordable Housing: Includes luxury flats or those exceeding size/price limits. For a ₹1 crore flat, GST is ₹5,00,000 (5%), totaling ₹1,05,00,000.
- Exemptions: Ready-to-move-in flats with a CC/OC or resale flats are GST-free, reducing costs significantly. Land purchases are also exempt.
- Commercial Properties: 12% GST with ITC benefits for developers, e.g., ₹12,00,000 GST on a ₹1 crore shop.
- Note: Rates are unchanged since April 1, 2019 (33rd GST Council), per web sources. X posts indicate consumer frustration with even 5% GST, advocating exemptions for housing as an essential need.
2. Compliance and Input Tax Credit (ITC)
GST on flat purchase compliance involves:
- GST Registration: Mandatory for developers with turnover above ₹20 lakh (₹10 lakh in special category states like Assam), via the GST portal. Homebuyers pay GST to developers, who remit it to the government.
- Invoicing: Developers issue invoices with GSTIN, HSN code (9954 for construction services), and GST (1% or 5%). Buyers ensure invoices reflect correct state codes (e.g., 29 for Karnataka).
- ITC Eligibility: ITC is unavailable for residential flat buyers (1% or 5%) under Section 17(5)(d) of CGST Act, as flats are immovable property. Developers can claim ITC for commercial properties (12%) if used for rental/leasing services qualifying as a “plant” per Supreme Court’s functionality test.
- Returns Filing: Developers file GSTR-1 (sales) and GSTR-3B (summary) monthly/quarterly, reporting flat sales with HSN and state codes.
- Reverse Charge Mechanism (RCM): If developers procure services (e.g., from unregistered contractors), they pay GST under RCM (e.g., 18% on services), claiming ITC if applicable.
- Additional Charges: GST applies to maintenance fees (18% if society turnover >₹20 lakh and per-flat charges >₹7,500/month), parking, or preferential location charges (PLC) at 1% or 5% with the flat.
- Penalties: Non-compliance incurs ₹10,000–₹25,000 fines, 18% interest, or legal action.
3. Impact on Homebuyers and the Real Estate Sector
The GST on flat purchase has transformed India’s real estate market:
- Transparency: GST consolidates VAT, service tax, and excise duty, reducing hidden costs and ensuring clear pricing for buyers in Bangalore or Patna.
- Affordability: The 1% rate for affordable housing (e.g., under PMAY) lowers costs (e.g., ₹40,000 GST on a ₹40 lakh flat versus ~₹4,80,000 pre-GST), but the 5% rate for non-affordable flats adds ₹5 lakh to a ₹1 crore flat. Ready-to-move-in exemptions save buyers ~5% (~₹5 lakh on ₹1 crore).
- Consumer Sentiment: X posts criticize GST on flats, arguing housing should be exempt like essentials, with frustration over 5% adding lakhs to costs. Buyers prefer ready-to-move-in flats to avoid GST.
- Industry Challenges: Developers face higher costs due to ITC unavailability for residential projects, potentially passing expenses to buyers. The sector, contributing ~7.8% to GDP, sees growth (~1.73 lakh units sold in H1 2024) but demands ITC reinstatement or lower rates.
- Company Registration: Real estate firms registering in Hyderabad or Patna must align GSTINs with state codes (36, 10) and ensure compliance with RCM and maintenance fee GST during project development.
TaxQue simplifies GST on flat purchase compliance with expert support for GST registration, invoicing, and return filing. TaxQue’s GST compliance guide or company registration services for seamless solutions.
FAQs
1. What is the GST rate on flat purchases in India?
The GST on flat purchase is 1% for affordable housing (≤₹45 lakh, ≤60/90 sq.m) and 5% for non-affordable housing, both without ITC, for under-construction flats.
2. Is GST applicable on ready-to-move-in flats?
No, ready-to-move-in flats with a Completion or Occupancy Certificate are exempt from GST.
3. Can buyers claim ITC on GST paid for flats?
No, ITC is unavailable for residential flat buyers at 1% or 5% rates, but developers can claim ITC for commercial properties (12%).
4. Does GST apply to maintenance fees for flats?
Yes, 18% GST applies if society turnover exceeds ₹20 lakh and per-flat maintenance fees exceed ₹7,500/month.
5. How does TaxQue assist with GST on flat purchase compliance?
TaxQue provides tools for GSTIN verification, RCM compliance, and return filing for real estate businesses and buyers. Explore TaxQue’s compliance services.
Conclusion
GST on flat purchase in India, at 1% for affordable housing and 5% for non-affordable under-construction flats, enhances transparency but adds costs for homebuyers. Exemptions for ready-to-move-in and resale flats offer savings, while commercial properties at 12% allow ITC benefits. As of June 3, 2025, businesses in Patna, Bangalore, and beyond navigate compliance complexities like RCM and maintenance fee GST during company registration. TaxQue streamlines GST on flat purchase compliance with expert tools for registration, invoicing, and return filing. Stay informed, plan wisely, and make confident homebuying decisions in 2025.
