GST on Construction and Real Estate Services in India
GST on under-construction property
Buying an under-construction flat or house attracts GST because construction is treated as a "works contract" service, not a sale of immovable property. Rates depend on the housing category: affordable housing (units up to ₹45 lakh meeting defined carpet-area criteria) is taxed at 1% without Input Tax Credit, while other under-construction residential units are taxed at 5% without ITC. These concessional rates apply on two-thirds of the total value, with land value deemed to be the remaining one-third.
Ready-to-move and completed property
Once a project receives its completion certificate (or is otherwise "ready to move in"), the sale of that property is treated as a sale of immovable property, not a service — and immovable property sales are entirely outside the scope of GST. This is why ready-to-move flats are generally cheaper on a GST basis than an equivalent under-construction unit, though buyers should also compare stamp duty and registration costs, which apply either way.
GST on construction materials
Builders pay GST on cement (18%), steel/TMT bars (18%), tiles and sanitary ware (18%), paints (18%), and most other construction inputs at the standard rate. Under the concessional 1%/5% residential construction rates, builders cannot claim ITC on these input costs — a trade-off intended to keep housing more affordable for buyers even though it raises the builder's effective cost. Estimate material-level GST using the Standard GST Calculator.
Commercial real estate construction
Construction services for commercial property (offices, retail, warehouses) are taxed at the standard 18% GST rate, and builders can claim ITC on inputs used for commercial projects, unlike the concessional residential rates.
GST on works contracts and contractors
Independent contractors providing construction, renovation, or repair services under a works contract are liable to charge GST at rates that vary by the nature of the contract — typically 12% or 18% depending on whether the project is affordable housing, other residential, or commercial/government work. Contractors must register once turnover crosses ₹20 lakh (services threshold).
Real estate agent commission
Real estate brokerage and agency commission is a taxable service at 18% GST, applicable when a registered agent facilitates a property sale, purchase, or rental transaction — regardless of whether the underlying property sale itself attracts GST.
Quick reference
| Category | GST Rate | ITC |
|---|---|---|
| Affordable housing (under-construction) | 1% | No |
| Other residential (under-construction) | 5% | No |
| Ready-to-move / completed property | 0% (outside GST) | N/A |
| Commercial construction | 18% | Yes |
| Real estate agent commission | 18% | Yes |