Understanding GST on Buying a Home: What You Need to Know

Buying a home is a big financial decision, and understanding how taxes work can help you make a better choice. One key tax to consider is the Goods and Services Tax (GST), which applies differently to ready-to-move and under-construction properties.

How GST Affects Developers

GST replaced older taxes like VAT and service tax, making the tax system simpler. However, developers no longer get an input tax credit (ITC), which has increased construction costs. As a result, property prices may be higher for buyers.

GST on Under-Construction Homes

If you buy an under-construction property, GST applies, increasing the total cost. The GST rates are:

• 1% for affordable housing (without input tax credit)
• 5% for non-affordable housing (without input tax credit)

For example, if a buyer purchases an under-construction flat for ₹50 lakh, they will have to pay 5% GST (₹2.5 lakh) in addition to stamp duty and registration charges.

GST on Ready-to-Move Homes

A ready-to-move home is fully built and has a completion certificate. These homes are exempt from GST, meaning buyers only need to pay stamp duty and registration fees (usually 5% to 10% of the property’s value, depending on the state). Since no GST is charged, these homes can be a more affordable option.

Which Option is Better?

• Under-construction homes: May have lower base prices but come with extra GST costs.
• Ready-to-move homes: No GST, but prices might be higher.

Things to Consider Before Buying

• Total cost (including GST, stamp duty, and registration fees)
• Location and when the property will be ready
• Reputation of the builder and project approvals

Before making a decision, homebuyers should compare the total cost and consult a financial expert to choose the best option based on their budget and long-term goals.