GST 2.0 on housing: CA warns simplification doesn’t mean affordability for all homebuyers
The Goods and Services Tax (GST) regime in real estate has always been a complex web for homebuyers, developers, and investors alike. However, the GST Council’s recent rate cuts on key construction materials under GST 2.0 are expected to bring some relief. The decision to reduce tax rates on inputs such as cement, granite, marble, tiles, and paints is set to lower construction costs and possibly translate into lower property prices in the coming months.
Under the new structure, cement and ready-mix concrete will attract 18% GST (down from 28%), bricks, tiles, and sand are taxed at 5% (down from 18%), and paints and varnishes will also come under 18% (down from 28%). These revisions aim to enhance housing affordability and alleviate the financial burden on developers facing high input costs.
Yet, beyond these headline numbers, tax expert CA Nitin Kaushik (FCA, LLB) points out that the real impact of GST depends on the stage and type of property purchase. “Most people don’t read the fine print before buying property. But GST rules can significantly change how much you actually pay,” he explained, simplifying what every buyer needs to know.
According to Kaushik, for under-construction homes, GST is 1% for affordable housing and 5% for other residential units, both without input tax credit (ITC). Affordable housing is defined as units priced up to Rs.45 lakh with a carpet area up to 60 sq. m. in metro cities and 90 sq. m. in non-metro areas. The removal of ITC means developers cannot offset taxes on materials, which often keeps prices firm even as tax rates appear low.
For ready-to-move homes, however, no GST applies if the developer has obtained a Completion Certificate (CC) or Occupancy Certificate (OC). “That’s why developers rush for completion certificates—it attracts buyers immediately,” Kaushik noted.
When it comes to commercial real estate, the rules differ. Under-construction shops or offices attract 12% GST with ITC, benefiting corporates who can claim credits on taxes paid. For land transactions, pure land sales remain exempt from GST, but development agreements or joint ventures can trigger tax liabilities.
In the rental segment, residential rent for personal use is exempt from GST, while commercial leasing draws 18% GST. “This is why many landlords prefer residential leasing—it avoids the tax burden,” Kaushik added.
Developers, too, face layered taxation: 5% GST on services provided, 18% on transfer of development rights, and 12% on construction services. These costs, Kaushik said, “ultimately get baked into the final price the buyer pays.”
