GST on Flat Purchase: Rates, Land Deduction, and Total Cost

The rate depends on the stage of the flat and not on the buyer. A flat with a completion certificate carries no tax, and an under-construction flat carries 5% or 1%.
 

• Under construction: 5% without input tax credit
• 1% category: price up to Rs. 45 lakh, and carpet area up to 60 square metres in a metro or 90 square metres elsewhere
• Base: two-thirds of the agreement value, so the effective rates are 3.33% and 0.67%
• Ready flat: nil, with a completion certificate
• Resale flat: nil

• Maintenance: 18% above Rs. 7,500 per member per month

  
  

Ask the developer for the completion certificate date and the taxable value on every demand letter. Then compare the tax saved on a ready flat with the cost of waiting for one.

The rate is 5% on an under-construction flat, 1% on a flat that passes the price and area tests, and nil on a ready flat or a resale flat. The GST Council set the 5% and 1% rates at its meeting of 24 February 2019, effective 1 April 2019, and the September 2025 rate changes left them unchanged.
 

Input tax credit is the tax a developer pays on materials and services, which it can normally deduct from the tax that it collects. The 5% and 1% rates exclude that deduction, so the developer builds the cost of materials into the price.

GST on flat purchase uses a deemed land value. The law deems one-third of the price to be land, and land carries no GST. The GST Council's FAQ on real estate states that the valuation rule prescribes a one-third abatement for land.

Formula used: GST = agreement value × 2/3 × rate. Effective rate = rate × 2/3.

At 5%, the effective rate is 3.33% of the agreement value. At 1%, it is 0.67%. On a flat of Rs. 60,00,000, the tax is Rs. 2,00,000.

The deduction is one-third even when the actual land cost is higher. A developer cannot reduce the taxable value by showing a larger land cost, and you cannot ask for a larger deduction.

You pay no GST on a ready flat that has a completion certificate, or on a resale flat. GST applies to construction service, and a flat sold after the certificate no longer involves construction.

Two points limit this. A flat that you book before the certificate still carries GST on the payments that you make before it is issued. A resale flat has no GST, but stamp duty and registration charges still apply.

Trade-off: a ready flat saves the tax but needs the full price sooner. An under-construction flat spreads the payments and adds the tax.

Charges that the developer sells with the flat follow the flat's rate, and charges for later services carry 18%. Check each line of the cost sheet.
 

The price test for the 1% rate includes the preferential location charge. Read the guide to GST on flats up to Rs. 45 lakh for the area test.

For GST on flat purchase, check three lines on every demand letter before you pay. The first is the rate, which must match the flat's category. The second is the taxable value, which must equal two-thirds of the payment. The third is the developer's registration number for GST.

For a payment of Rs. 8,50,000 on an Rs. 85,00,000 flat at 5%, the taxable value is Rs. 5,66,667. The GST is Rs. 28,333. Keep every demand letter and receipt.

Carpet area decides the 1% category, so read the area in your agreement against the guide to carpet area rules.

A ready flat costs less in tax, and an under-construction flat can cost less in total once you add rent for the waiting period. The answer depends on the price gap, the rent you pay and the delay.

Formula used: Total cost of an under-construction flat = agreement value + (agreement value × 2/3 × 5%). Months of rent that equal the GST saved = GST saved ÷ monthly rent.

The example below shows both costs. Compare in the same way for your own flat, with the actual price and rent.

Arjun Nair, 35, lives in Bengaluru with a household income of Rs. 2.4 lakh a month and a CIBIL Score of 771. He compares an under-construction flat of 95 square metres carpet area at Rs. 85,00,000 with a ready flat at Rs. 90,00,000 that has a completion certificate. He pays rent of Rs. 35,000 a month.
 

The ready flat costs Rs. 2,16,667 more, which equals 6.2 months of Arjun's rent. The under-construction flat takes 24 months to finish, so he pays Rs. 8,40,000 of rent while he waits. He chooses the ready flat.

Bajaj Finance assesses the loan on the property value, income, existing obligations and credit record. At the 5% rate, GST on flat purchase adds 3.33% of the agreement value to your cost. Ask Bajaj Finance whether the GST on a demand letter counts toward the loan amount, because that decides how much of the tax you fund yourself.

Home loan interest carries no GST, and fees such as the processing fee carry 18%. Read the guide to home loan fees and charges to total the cost.

Approval timelines can extend where the agreement value and the stated carpet area need cross-checking, and minimum income thresholds can differ by city. Check your home loan eligibility before you book.