Buying a home is a significant milestone in one’s life, and understanding the tax implications is crucial before making such a big decision. One of the key components in the cost structure is GST (Goods and Services Tax). This blog aims to clarify how GST applies to under-construction and ready-to-move-in residential properties.
GST on Under-Construction Residential Property
When you buy a property that is still under construction, GST is applicable. The rates differ depending on the type of property and whether it qualifies as affordable housing.
Applicable GST Rates:
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1% GST for affordable housing projects
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5% GST for non-affordable housing projects
Important: These rates are applicable without Input Tax Credit (ITC). That means builders cannot claim a credit for the taxes they paid on inputs like cement, steel, and other construction materials.
What Qualifies as Affordable Housing?
For a residential unit to be categorized as affordable housing under GST:
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The carpet area should not exceed:
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60 square meters in metro cities
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90 square meters in non-metro cities
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The value of the property should not exceed ₹45 lakhs
If either of these conditions is not met, the property is classified under non-affordable housing and taxed at 5%.
GST on Ready-to-Move-In Property
Here’s the good news: No GST is applicable on ready-to-move-in properties provided:
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The completion certificate (CC) has been issued by the competent authority before the date of sale.
Since these properties are treated as the sale of immovable property and not as a supply of goods or services, they fall outside the scope of GST.
Why This Matters:
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Buyers save 5–12% of the property cost.
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Builders might charge a premium for ready-to-move-in properties, but the absence of GST balances the equation.
Comparative Summary
| Criteria | Under-Construction | Ready-to-Move-In |
|---|---|---|
| GST Applicable | Yes | No |
| GST Rate (Affordable) | 1% | NA |
| GST Rate (Non-Affordable) | 5% | NA |
| Input Tax Credit (ITC) | Not available | Not applicable |
| Completion Certificate | Not yet issued | Already issued |
Final Thoughts
Understanding GST implications can help you make informed decisions while buying a home. While under-construction homes may be slightly cheaper upfront, they attract GST. On the other hand, ready-to-move-in homes are GST-free, but may come with a higher price tag. Evaluate your priorities — budget, urgency, and possession timeline — before making the final call.
