What this covers: GST rates applicable to different types of real estate transactions in India, ITC eligibility, applicable CGST/SGST notifications, and key conditions. Includes a summary of GST on rental income.
Statutory framework: Central Goods and Services Tax Act, 2017; Integrated Goods and Services Tax Act, 2017; GST (Rates) Notifications, CGST Notification 3/2019, 4/2019 (as amended); GST Council decisions.
GST Rates on Real Estate Transactions
| Transaction Type | GST Rate | ITC Availability | Applicable Notification / Condition |
|---|---|---|---|
| **Under-construction residential apartment, Non-affordable housing** | **5% (2.5% CGST + 2.5% SGST)**, effective from April 1, 2019 | No ITC allowed | CGST Notification 3/2019; at least 80% of inputs (by value) must be procured from registered suppliers; otherwise developer reverses ITC or pays 18% GST |
| **Under-construction residential apartment, Affordable housing** | **1% (0.5% CGST + 0.5% SGST)** | No ITC allowed | “Affordable housing” = carpet area ≤ 60 sq.m in metropolitan cities (Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai MMR); ≤ 90 sq.m in other cities AND gross consideration ≤ INR 45 lakh |
| **Under-construction commercial properties (offices, shops, IT parks)** | **12% (6% CGST + 6% SGST)**, effective from April 1, 2019 | No ITC allowed (for residential component); ITC available for commercial component if sold before OC | CGST Notification 3/2019; no ITC available post-OC |
| **Completed residential property (sold after Occupancy Certificate / Completion Certificate)** | **Exempt (0% GST)** | N/A | Completed construction and resale transactions are outside the scope of GST; stamp duty and registration charges apply instead |
| **Land sale/purchase** | **Exempt (0% GST)** | N/A | Pure land transactions are not subject to GST; however, sale of a “development right” or TDR in certain structures may attract GST (see below) |
| **Transfer of Development Rights (TDR) / Joint Development Agreement (JDA)** | **18% GST on TDR value** (where developer pays GST under reverse charge mechanism) | Developer can claim ITC of GST paid on TDR against output tax | Developer pays GST on TDR under reverse charge (Section 9(4) CGST Act); GST payable on the construction component received from developer by landowner; complex area, seek specific advice |
| **Real Estate Investment Trusts (REITs), distribution** | Specific provisions under GST; returns from REITs may include dividend, capital gains, or interest components with varying GST treatment | N/A | Separate REIT-specific GST guidance applicable |
| **Development rights in JDA (landowner perspective)** | Landowner may need to pay GST on deemed supply of development rights to developer | Varies based on transaction structure | Reverse charge applies; complex; seek specific advice |
Pre-April 2019 (Old Regime), For Reference
For bookings made and invoices raised before April 1, 2019 (under the old GST regime):
- Under-construction residential: 12% GST with full ITC (effective rate approximately 8% net of ITC)
- Affordable housing: 8% GST with ITC (effective approximately 6%)
These rates applied to installments due before April 1, 2019. Post April 1, 2019 rates apply to amounts due after that date unless the contract was entirely completed under the old regime.
GST on Rental Income
| Type of Rental | GST Rate | Notes |
|---|---|---|
| **Rental of commercial immoveable property** | **18% GST** if the landlord is registered under GST and the tenant is registered under GST; otherwise Reverse Charge Mechanism (RCM) applies | Landlord charges 18% GST on rent; tenant can claim ITC on this GST if they are registered and use the space for business |
| **Rental of commercial immoveable property by GST-unregistered landlord to registered tenant** | **18% GST under RCM**, tenant pays GST on behalf of landlord | Applicable from 2022 Budget amendment; tenant pays 18% GST under RCM and can claim ITC |
| **Rental of residential property for residential use** | **Exempt** | GST is not applicable on rent for residential property used for residential purposes |
| **Rental of residential property for commercial use** | **18% GST** if landlord is registered (from January 1, 2023, GST now applies to rentals of residential property where it is used for a non-residential purpose) | CGST Notification 04/2022; contentious; verify current position |
| **Serviced apartments / furnished accommodation (hotel-like services)** | **12% or 18% GST** depending on room rent per day | Treated as supply of services (accommodation), not pure rent |
Key Concepts for Real Estate GST
Input Tax Credit (ITC): Under the new rates effective from April 1, 2019, no ITC is available for under-construction residential real estate. This is a significant change from the pre-2019 regime. Developers cannot offset GST paid on construction materials and services against their output GST liability; the 5% / 1% rate is a “net” rate with no ITC.
Completion Certificate (CC) / Occupancy Certificate (OC): The milestone at which GST liability crystallises differently. Sales before OC attract GST; sales after OC are outside GST (stamp duty applies). This is one reason why developers sometimes delay applying for OC.
Affordable Housing Definition: The 60/90 sq.m carpet area limit and INR 45 lakh consideration limit must both be satisfied simultaneously for the 1% rate to apply.
This resource is for general information purposes only and does not constitute legal advice. For advice on your specific situation, seek appropriate professional counsel.
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