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GST RATES FOR BUILDERS & DEVELOPERS

1. GST ON RESIDENTIAL PROJECTS

(a) Affordable Housing: GST @ 1% (without ITC)

A residential apartment qualifies as affordable housing if:

  • Metro Cities: Carpet area ≤ 60 sq. meters & Cost ≤ ₹45 lakh
  • Non-Metro Cities: Carpet area ≤ 90 sq. meters & Cost ≤ ₹45 lakh
Condition for GST @ 1%: Purchase from Registered Dealers
  • To avail the 1% concessional GST rate, at least 80% of the total inputs and input services (such as cement, steel, sand, labor contracts, etc.) must be purchased from GST-registered dealers.
  • If purchases from unregistered dealers exceed 20%, the builder must pay GST @ 18% under Reverse Charge Mechanism (RCM) on the shortfall.
Example 1: Affordable Housing Purchase Compliance
  • A builder constructs affordable housing with a total input purchase value of ₹10 crore.
  • Purchases from registered dealers = ₹7 crore (i.e., 70% of total).
  • Purchases from unregistered dealers = ₹3 crore (i.e., 30% of total).
  • Since the unregistered purchases exceed the 20% limit (only ₹2 crore is allowed), the builder must pay GST @ 18% on ₹1 crore under RCM.

(b) Non-Affordable Housing: GST @ 5% (without ITC)

  • For non-affordable housing, GST is 5%, but the 80% purchase condition still applies.
  • Any shortfall in registered purchases will attract GST @ 18% on the deficit under RCM.
Example 2: Non-Affordable Housing with Purchase Condition
  • A developer is constructing a non-affordable housing project with total purchases of ₹20 crore.
  • Purchases from registered dealers = ₹16 crore (80%) → No RCM required.
  • If purchases from registered dealers were only ₹14 crore (70%), the builder must pay GST @ 18% on ₹2 crore (shortfall amount) under RCM.

2. GST ON COMMERCIAL PROJECTS (Shops, Offices, etc.) – 12% (With ITC)

  • GST is 12% on commercial projects, and builders can claim ITC.
  • The 80% registered purchase condition does not apply here.
  • Builders can freely claim Input Tax Credit (ITC) on purchases.
Example 3: Commercial Project with ITC
  • A developer constructs a shopping mall and purchases cement, steel, and services worth ₹50 crore.
  • Since ITC is available, the effective tax burden is reduced.

3. GST ON UNDER-CONSTRUCTION VS. READY-TO-MOVE PROJECTS

  • Under-Construction Properties: GST is applicable as per the above rates.
  • Ready-to-Move-in Properties: No GST if the Completion Certificate (CC) is received before the sale.
Example 4: Ready-to-Move Property (No GST)
  • A builder completes a housing project and obtains the Completion Certificate (CC).
  • Flats sold after CC issuance attract No GST.

4. GST ON PLOTTED DEVELOPMENTS

  • Sale of developed land (plotted projects) is exempt from GST.
  • If a developer constructs buildings or bungalows, GST @ 1% or 5% applies.
Example 5: Sale of Land vs. Sale with Construction
  • A builder sells a plot for ₹50 lakh – No GST.
  • If the builder constructs a house on that plot for ₹30 lakh, GST @ 5% (or 1% for affordable) applies.

5. GST ON REDEVELOPMENT & JOINT DEVELOPMENT AGREEMENTS (JDA)

  • Redevelopment Projects: GST applies only on new sales before OC.
  • Joint Development Agreements (JDA): Builders must pay GST under Reverse Charge Mechanism (RCM).
Example 6: GST in Redevelopment
  • A society undergoes redevelopment, and the builder constructs 20 flats.
  • 10 flats are given to existing members (No GST).
  • The remaining 10 flats are sold before OC.
  • GST @ 5% (or 1% if affordable) applies.

CONCLUSION

  • Affordable Housing: 1% GST, but 80% of purchases must be from registered dealers; shortfall taxed at 18% under RCM.
  • Non-Affordable Housing: 5% GST, with the same 80% purchase condition.
  • Commercial Properties: 12% GST (with ITC); No purchase condition.
  • Plotted Development: No GST, unless construction is involved.
  • Ready-to-Move: No GST if CC is obtained.

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