Introduction
Since its introduction in 2017, the Goods and Services Tax (GST) has brought major changes to India’s real estate sector. From construction materials to apartment bookings, GST has affected almost every stage of property development and purchase. In 2025, the government introduced a few new clarifications and compliance rules that both homebuyers and builders should understand.
This article explains the latest updates on GST on property, how it applies to different property types, and what you should keep in mind before buying or selling real estate.
GST on Under-Construction Property
Under the current structure, GST is applicable only on under-construction properties, not on completed or ready-to-move homes.
– For under-construction residential properties, the GST rate is 5% without Input Tax Credit (ITC).
– For affordable housing, GST is only 1% without ITC.
Affordable housing here means properties priced up to ₹45 lakh and with a carpet area up to 60 sq. m in metros (and 90 sq. m in non-metros).
If the property is ready-to-move, meaning the builder has already received a Completion Certificate (CC), no GST is charged on the sale — only stamp duty and registration charges apply.
GST on Land and Construction Components
A key clarification by the GST Council this year is the separation of land value and construction cost.
GST does not apply to the value of land. Builders can charge GST only on the construction component, which is typically two-thirds of the total price, while one-third is considered land value and exempt.
This step helps ensure transparency and prevents overcharging buyers on the land component. Builders now need to clearly show the cost breakup between land and construction in invoices.
GST on Affordable Housing
The government continues to promote affordable housing through lower GST rates and incentives.
Under the current rule:
– Affordable housing projects: 1% GST without ITC
– Other residential projects: 5% GST without ITC
Although developers lose the benefit of Input Tax Credit, the reduced rate helps keep home prices more stable. Developers are expected to absorb part of the tax burden and offer more competitive pricing.
GST on Commercial Real Estate
For commercial properties such as shops, offices, and co-working spaces, GST is 12% with ITC.
Businesses registered under GST can claim input credit on rent or purchase, reducing their overall cost.
The GST Council has also discussed partial ITC allowance for commercial real estate leasing, which may come into effect by late 2025 or early 2026. This move aims to reduce the tax burden on developers and tenants and encourage more investment in commercial property.
GST on Redevelopment and Joint Development Agreements (JDA)
In 2025, a major clarification came regarding Joint Development Agreements (JDAs) — where landowners give land to builders in exchange for constructed units or a share of revenue.
As per the latest circular:
– GST liability arises at the time of issuing the completion certificate or first occupation.
– For advance payments, GST must be paid at the time of receipt.
This clarification brings transparency to redevelopment projects and ensures that both developers and landowners understand their tax obligations.
Input Tax Credit (ITC) and Compliance Updates
Builders used to benefit from Input Tax Credit — claiming back GST paid on raw materials such as cement, steel, and fittings. However, under the current system (5% or 1% GST without ITC), they cannot claim those credits.
Recent Rule 37A changes also make it mandatory to reverse ITC if the supplier hasn’t filed returns on time. The government has integrated AI-based verification on the GST portal to auto-match invoices and flag discrepancies.
For businesses with turnover above ₹5 crore, e-invoicing is now compulsory for all B2B transactions, including construction services.
Upcoming Reforms: Linking RERA and GST
To improve transparency, the government plans to link RERA (Real Estate Regulatory Authority) databases with the GSTN system.
This integration will allow buyers to verify whether a project is GST-registered and compliant before making any payment.
For developers, it will reduce paperwork but also make it harder to hide unregistered transactions.
This initiative is expected to roll out in phases by the end of 2025.
How GST Impacts Homebuyers and Developers
For homebuyers, GST brings:
– Clarity on tax rates
– Lower rates for affordable homes
– No GST burden on ready-to-move-in properties
For builders and developers, GST means:
– Stricter compliance and return filing
– No ITC for residential projects (5% or 1%)
– Real-time invoice validation through the GST portal
While builders face tighter regulation, buyers benefit from greater price transparency and consumer protection.
Conclusion
The GST on property has evolved over the years to make India’s real estate market more transparent and organized.
In 2025, with the government’s focus on RERA-GST integration, clarity on land and construction values, and simplified tax slabs, the sector is moving toward a more predictable and compliant system.
Whether you’re a homebuyer planning your first purchase or a developer launching a new project, understanding how GST on real estate works can help you make smarter, legally sound financial decisions.