GST Rates on Real Estate in 2023

GST on Real Estate

Paying taxes is essential in any real estate transaction except for plots and ready-to-move-in residential houses. Everyone is required to pay Goods and Services Tax for residential and commercial properties that are under construction or if the completion certificate is issued after the sale date. The GST on Real Estate in 2023 generally ranges from 5% to 12% on residential properties and 18% on commercial properties.

The Goods and Services Tax (GST) was implemented in India on July 1, 2017, to simplify and rationalise the indirect tax regime and create a uniform market across the country. In this blog, we will discuss how GST has affected the real estate sector in India and the current GST rates on real estate in 2023.

Current GST Rates on Real Estate

The current GST rates on real estate are as follows:

Type of Property Status GST Rate ITC Availability
Residential Under construction 12% or 5% depending on affordability*. No
Residential Completed or ready-to-move No GST if CC is issued before the sale. No
Commercial Under construction 18% (effective rate 12% after deducting land value). Yes
Commercial Completed or ready-to-move No GST if CC is issued before the sale. No
Land Purchase or sale No GST as it is neither goods nor services. No

*Affordable housing is defined as a residential apartment with a carpet area of up to 60 square meters for metropolitan cities and up to 90 square meters for other cities and a gross amount charged by the builder of not more than INR 45 lakh.

GST Rates on Construction Materials

The GST Rates on construction materials in 2023 mainly range between  5% to 28%. GST has also changed the construction sector’s tax rates, input tax credit mechanism, compliance requirements, and valuation rules. The current GST rates for construction materials in 2023 are detailed in the table below.

Particulars Applicable GST
Sand
Natural Sand 5%
Bituminous and Asphaltic Materials 18%
Cement
All kinds of Cement 28%
Bricks
Building Bricks 12%
Refractory Bricks 18%
Artificial Stones 28%
Gravel and Crushed Stones
Pebbles, Granite, and Crushed Stones 5%
Marble and Granite
Marble and Granite Blocks 12%
Marble, Granite, and Travertine 18%
Building Stone
Monumental Building Stones 5%
Steel
Iron Blocks, Wire, Rolls, and Rods 18%
Tiles
Earthen 5%
Bamboo Flooring Tiles 18%
Cement Tiles 28%
Coal
Coal 5%
Mica
Worked Mica and Articles of Mica 12%
Electrical Machinery
Electrical Machinery and Equipment 28%
Paint and Varnish
Paint and Varnish 28%
Bathroom Fittings
Tube/Pipe Fitting 18%
Ceramic Sinks and Wash Basins 28%
Wallpapers
All types of Wallpapers 28%

Impact of GST on Real Estate

The impact of GST on real estate can be assessed both in terms of positive and negative aspects. While GST has subsumed multiple taxations, such as VAT, service tax, stamp duty, etc., into a single tax payment, it is still not a replacement for other charges, such as stamp duty, registration fees, etc. Moreover, there can be compliance issues for developers on various fronts. 

Some of the positive impacts of GST on real estate are as follows.

  • With the introduction of GST, the earlier complex tax structure has been simplified.
  • The government has introduced several incentives and tax exemptions under the GST regime to boost affordable housing.
  • The secondary market for real estate, which includes the resale of properties, has not been affected by implementing of the GST.
  • GST has enabled developers to claim input tax credits on construction materials and services, which can reduce the cost of construction and benefit the buyers.
  • GST has increased transparency and accountability in the real estate sector by eliminating unethical practices and tax evasion.
  • GST has also facilitated the movement of goods and services across state boundaries by removing entry taxes and octroi. 

Some of the negative impacts of GST on real estate are as follows. 

  • The cost of new homes has gone up as a consequence of GST. Home-buyers must now pay 12% GST for new homes and 5% for under-construction houses.
  • Demand and supply of properties were also affected by the introduction of GST, as buying a new house has become a costlier deed. 
  • GST has also increased the compliance burden for developers who file multiple returns and follow different rules for different projects. For example, developers must maintain separate accounts for each project and pay GST on a reverse charge basis on inputs and services procured from unregistered suppliers.

Frequently Asked Questions (FAQs)

What is the applicable rate of GST in the case of affordable housing

The applicable rate of GST on affordable housing is 1% without input tax credit (ITC). This rate applies to all projects commencing on or after April 1, 2019.

What benefits can be availed per the revised GST rates or the rate cut in the real estate sector?

The GST rate cut has simplified the tax structure and ensured greater compliance from developers. This has resulted in fair property prices for potential homebuyers and eliminated the chance of homebuyers not deriving ITC benefits. The rate cut has also boosted the overall growth in the real estate sector.

What are the current GST Rates on Commercial Property?

The current GST rate for commercial properties is 12% with an input tax credit (ITC).

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