Impact of GST on Real Estate Market

The much-awaited tax reform which was aimed to subsume all the indirect taxes into one with the aim to make India a unified market finally became a reality on July 1, 2017. The GST seeks to transform India with its “One Nation, One Market, One Tax” principle and under the law, none of the sectors including real estate were left out of the transformation.

The real estate sector which has been a pivotal sector of the economy for the massive employment opportunities it creates has been growing at a rapid pace over the past few years. The sector is expected to be $180 billion in revenues by 2020 as GST on real estate is expected to simplify taxation compliance thereby having a positive impact on the industry.

GST Impact on Real Estate – Buyers & Investors

Prior to GST, buyers were liable to pay taxes depending on the construction status of the property – completed or under construction.

For property under construction

A buyer had to pay VAT, service tax, stamp duty, and registration charges.

For completed properties

Buyers were exempted from VAT and service tax, and only stamp duty and registration charges were payable. 

Further, the state where the property was bought was of much relevance as VAT, stamp duty, and registration charges are all levied by a state and is a subject matter of state.

With the implementation of GST, one of the biggest benefits is that the tax is now applicable to the overall purchase price.

For properties under construction

GST will be charged at 12 percent of the property value. This excludes stamp duty and registration charges. 

For completed properties

The earlier provisions will continue, and buyers will pay no indirect tax on the sale of ready-to-move-in properties.

GST Impact On Real Estate

GST Impact on Real Estate – Developers

Prior to GST, a developer was liable for customs duty, central excise duty, VAT, entry taxes, etc. on construction material costs. Also, they were liable for 15 percent tax on services like labor, architect fees, approval charges, legal charges, etc. And like any other business, this tax burden was eventually passed on to the buyer.

For properties under construction

Under the new regime, tax on construction cost is determined based on rates applicable to materials used. For example, cement is now taxed at 28 percent, iron rods and pillars are taxed at 18 percent and the likes.

Furthermore, the reduced logistics cost is expected to add to the benefits by reducing expenses, and the input tax credits are expected to add to the margins. A developer is not entitled to take input credits on the sale of property under construction against the taxes that are paid by the buyer. This is expected to bring down the cost to the developer, and they will have the flexibility to pass on the benefits to the buyer.

Before implementation of GST on real estate, a significant portion of expenditure went unrecorded in the books. GST is expected to bring this down due to cloud storage of invoicing.

Compliance requirements

One of the areas of focus for companies will be now to improve their compliance after GST on real estate, and businesses should gear up for the same. All assesses (including composite dealer) will not be required to file annual returns on or before 31st

December following the relevant financial year.Moreover, assesses will have to file returns for each registered branch and warehouse. Also, there is a mandatory requirement of audit if the entity’s aggregate turnover during financial year crosses Rs 1 crore.


The GST on real estate is going to have a positive impact on the sector for both buyers and developers in terms of cost saving, flat rate, higher transparency and increased compliance. While there will be several challenges which the businesses will face in order to implement GST in regular course, over time with up gradation of IT solutions, it will prove to be beneficial.

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