The Goods and Services Tax (GST) has significantly reshaped the real estate sector in India since its implementation in July 2017. With a unified tax system replacing a web of indirect taxes, GST aimed to simplify taxation and improve transparency. But its impact on the real estate sector—particularly land, residential, and commercial property—has been complex and multifaceted. Let’s delve into how GST has affected different segments of the Indian real estate market.

1. Pre-GST Tax Structure in Real Estate

Before GST, the real estate sector was burdened with multiple indirect taxes such as VAT (Value Added Tax), service tax, stamp duty, and registration charges. The taxation varied from state to state, creating confusion and inefficiencies. For under-construction properties, both VAT and service tax were applicable, while completed properties attracted only stamp duty and registration charges. The input tax credit mechanism was not available across all indirect taxes, leading to a cascading effect. Developers were often unable to claim credits on construction materials, which increased the overall project cost.

2. Post-GST Tax Structure

Under GST, several indirect taxes were subsumed, and a dual-rate structure was introduced: Under-construction properties: At present, GST is applicable at: 1% for affordable housing (without input tax credit) 5% for non-affordable housing (without input tax credit) Completed or ready-to-move-in properties: These are not subject to GST. Only stamp duty and registration charges apply. Land transactions: Pure land sales are exempt from GST. However, the sale of developed land with amenities may be taxable under certain conditions. Commercial properties: GST is applicable at 12% with full input tax credit on under-construction commercial properties.

GST on Land: A Grey Area

One of the ongoing debates is the GST applicability on developed land or joint development agreements. While pure land sales are tax-exempt, land with infrastructure like roads, drainage, or plotting may attract GST, depending on how the transaction is structured. This grey area creates compliance risks for developers and confusion for buyers.

Stamp Duty and Registration: Still Applicable

Contrary to popular belief, GST has not replaced stamp duty or registration charges. These state-level levies remain unchanged and are payable on all property transactions—whether GST is applicable or not. The total transaction cost for buyers thus includes stamp duty (typically 5–7%) plus registration fees.

Conclusion: More Transparent, But Not Simpler

The introduction of GST in the real estate sector has brought greater transparency and accountability. Buyers are better protected, and tax evasion has reduced. However, the absence of input tax credit in residential real estate, continuing stamp duties, and ambiguities around land taxation create challenges. For buyers, it’s essential to understand whether GST is included in the price and if the project qualifies as affordable housing. For developers, choosing the right tax structure and managing compliance are key to profitability. As the GST Council continues to refine policies, further simplification—such as inclusion of stamp duty into GST or clearer land taxation rules—could truly transform Indian real estate into a more efficient, buyer-friendly sector.