If you’re planning to buy a home in Kolkata, it’s essential to understand the Goods and Services Tax (GST) implications on residential property purchase. GST is a type of tax that applies to various goods and services in India, including real estate transactions.
However, the application of GST depends on whether you’re purchasing an under-construction property or a ready-to-move-in home. Under-construction properties are subject to GST, whereas completed projects with a Completion Certificate (CC) do not incur this tax.
Understanding the tax implications can significantly affect your overall budget when planning a residential property purchase. Whether you’re a first-time homebuyer or looking to upgrade, knowing the ins and outs of GST will help you make informed decisions.
GST on Residential Property Purchase in Kolkata: 2025 Guide
Continue reading for an in-depth understanding!
1. GST on Under-Construction Residential Properties
When it comes to purchasing under-construction residential properties, GST becomes an essential consideration. There are two primary categories for these properties, namely affordable housing and non-affordable housing.
Affordable housing includes projects with a carpet area of up to 60 sq. meters and are priced under ₹45 lakh. The GST rate for these is set at 1%. This lower rate makes affordable housing a more enticing option for budget-conscious buyers.
On the other hand, non-affordable housing, which includes both luxury and regular residential properties, is subject to a 5% GST rate. This category is applicable to properties that exceed the specified limits for affordable housing.
Therefore, if you’re considering purchasing an under-construction residential property purchase in Kolkata, you must first assess whether it falls under the affordable or unaffordable category, as this will directly impact your overall costs due to GST.
2. GST on Ready-to-Move-In Properties
If you’re looking to bypass GST altogether, ready-to-move-in properties are an attractive option.
If a residential property has received a Completion Certificate (CC) from the relevant municipal authority, it is exempt from GST altogether. This exemption is significant as it means that buyers can avoid additional costs that come with GST when they opt for homes that are already built and ready for occupancy.
Buyers can move into their new homes without the waiting period associated with under-construction properties. This immediacy and cost-effectiveness make ready-to-move-in homes a popular choice among potential buyers looking to avoid the complexities of GST.
3. GST on Other Charges in Real Estate
In addition to the property pricing itself, there are several other charges that may attract GST when purchasing real estate in Kolkata.
Typically, these charges are subjected to an 18% GST rate. For instance, maintenance charges over ₹7,500 per month per flat, clubhouse or gym fees, brokerage and legal fees, and any parking charges (if sold separately) will incur this tax. You must factor in these additional costs when budgeting for your property purchase.
Understanding the scope of these additional charges will give you a clearer picture of the total cost involved in purchasing a home.
Make sure to inquire about all potential charges upfront when communicating with builders or real estate agents. Budgeting for these GST-inclusive fees ensures there are no surprises during the final stages of your property acquisition.
4. Stamp Duty & Registration Charges in Kolkata
While GST is an important component of the residential property purchase costs, it is not the only tax you need to consider. In Kolkata, buyers also need to account for stamp duty and registration charges, which are separate from GST.
If the properties are priced above ₹40 lakh, buyers are required to pay a 7% stamp duty along with a 1% registration charge. And for homes priced at or below ₹40 lakh, the charges reduce to a 5% stamp duty + 1% registration fee.
Similarly , for properties located in Panchayat areas, the same rates (5% stamp duty + 1% registration) apply. As an example, if you purchase a property costing ₹50 lakh, you would pay ₹3.5 lakh in stamp duty and ₹50,000 in registration fees.
This totals to an additional cost of ₹4 lakh, separate from any GST or other fees, which should be carefully factored into your overall home buying budget.
5. GST Impact on Home Loans
When financing your home through a bank loan, it’s important to know how GST applies. The good news is that GST does not affect the principal or interest payments of home loans.
However, it is noteworthy that certain charges associated with taking out a home loan will incur GST. Specifically, processing fees, legal fees, and administrative charges are typically subject to an 18% GST.
That’s why, when securing a home loan, make sure to inquire about these additional costs, as they can add up and impact your total expenditure. Knowing these details in advance can help you plan your budget better, so that you’re fully aware of all the charges associated with obtaining your home loan.
6. How GST Affects Property Prices in Kolkata
The introduction of GST has a noticeable impact on property prices, particularly for under-construction homes.
The tax may slightly increase the overall cost of these properties. However, it is common for builders to make adjustments to their prices to accommodate the GST implications. As a result, while the actual increase in cost may not be as significant, it’s essential to acknowledge that the price adjustments are still linked to the incumbent GST rates.
On the flip side, ready-to-move-in homes do not incur GST, but they may carry higher base prices. The increased demand for completed homes, coupled with the absence of GST, often pushes builders to price them higher!
Buyers may, hence, find that while they are saving on GST, they might still face higher prices than they would in the under-construction market.
7. Exemptions & Concessions
While there are no specific GST exemptions for first-time homebuyers, there are various concessions that can make homeownership more accessible.
For eligible buyers, programs like the Pradhan Mantri Awas Yojana (PMAY) offer significant subsidies that can reduce the financial burden of homeownership. These subsidies primarily aim to promote affordable housing and make homeownership attainable for the lower-income segment of society.
Also note that purchasing resale properties does not attract GST, as second-hand homes are exempt from this tax. This can make them an appealing choice for buyers looking to avoid additional tax costs while still securing a suitable home.
8. GST on Joint Development Agreements (JDA)
In cases where builders enter into a Joint Development Agreement (JDA) with landowners, GST becomes applicable on the builder’s share of the constructed property at a rate of 18%. This situation often arises when landowners decide to collaborate with builders to develop residential projects.
The tax liability is thus shared, but it’s crucial for both parties to be informed about the GST implications involved.
Further, if the landowner intends to sell their share of the flats before the property reaches completion, different GST rates come into play based on whether the project qualifies as affordable housing or non-affordable housing. This could mean paying 1% GST for affordable housing or 5% for luxury housing. .
9. GST on Under-Construction Property Booking & Cancellation
When you decide to book an under-construction property, you must know that GST applies to the booking advance you pay. It is calculated at either 1% or 5%, depending on the category of the property.
This means that while you’re securing your future home, a portion of your payment is also going toward GST. This initial tax might be a small price to pay for locking in your dream property, but it’s one more cost to consider in your overall budget.
Now, if circumstances change and you need to cancel your booking, the GST implications can vary significantly. If you cancel before the formal agreement is executed, you can receive a refund, including the GST paid.
However, if the cancellation occurs after the agreement, the GST becomes non-refundable. Staying informed in this sense can help you weigh your options and avoid any financial surprises should your plans change.
10. GST on Affordable vs. Luxury Housing in Kolkata
In Kolkata, the distinction between affordable and luxury housing directly impacts the GST you’ll pay on residential property purchases. Affordable housing benefits from a reduced GST rate of just 1%, which makes it an irresistible option for many first-time buyers looking to enter the real estate market.
This reduced rate not only lowers the overall financial burden but also encourages more people to invest in properties designed to be budget-friendly.
Luxury homes, categorized as those priced above ₹45 lakh or exceeding 60 square meters, face a 5% GST rate. This significantly raises their cost, which can deter some buyers.
As a result, many builders are now crafting projects that meet the criteria for affordable housing to attract more buyers. This trend showcases how GST rates can influence market behavior, with developers wanting to capitalize on the growing demand for affordable housing options.
11. GST on Rent of Residential Properties
When renting residential properties, the application of GST depends on the purpose for which the property is being rented. If you’re renting a property for personal use, you just got lucky, no GST applies!
However, if the property is rented out for business or commercial purposes, an 18% GST will be applicable if the landlord is registered under GST. This distinction is crucial for both landlords and tenants to understand, as it can significantly impact rental agreements.
Furthermore, for Non-Resident Indians (NRIs) renting out properties in India, the rules also apply. If the annual rental income exceeds ₹20 lakh, the 18% GST will apply.
This makes it even more complicated for NRIs who may not always be familiar with local regulations. Therefore, being aware of these rental GST implications can help you navigate leasing arrangements more effectively and avoid unexpected costs!
12. GST on Home Renovation & Interior Work
If you’re considering renovating your home or hiring an interior designer, it’s important to factor GST into your budget.
Here, considering the construction and structural work, the GST rate applied is typically 18%. This includes everything from basic remodeling to significant structural changes. The same 18% GST applies to interior design services, which can add up quickly if you plan on hiring professionals to enhance your space.
Besides, if you plan to purchase furniture, fixtures, or a modular kitchen, these pre-fabricated items also attract an 18% GST. Raw materials needed for renovation, such as cement, bricks, and paints, have varying GST rates ranging from 5% to 28%.
So, if you’re eager to spruce up your home, understanding these rates will help ensure your renovation plans stay within budget while also complying with tax obligations.
13. GST on Parking & Other Facilities
When it comes to parking charges, understanding how GST applies can save you money. If the builder charges for parking separately, this charge incurs an 18% GST, which can add to your overall expense.
On the other hand, if parking is included in the total price of the property, the applicable GST will be either 1% or 5%, depending on the category of the property.
Similarly, maintenance charges also carry GST implications. If the maintenance costs exceed ₹7,500 per month per flat, they will attract an 18% GST. This can be an essential factor in your budget, especially in housing societies where additional amenities, such as gyms and clubhouses, are offered.
Knowing the costs associated with these facilities will allow you to make better-informed decisions when evaluating potential properties.
14. Can You Claim Input Tax Credit (ITC) on Residential Property?
One common question buyers have is whether they can get back the GST they paid through Input Tax Credit (ITC), but unfortunately, that is not allowed under the current GST rules.
ITC is a system that allows businesses to reduce their tax burden by claiming credit for the GST they pay on raw materials and services.
However, for residential properties, neither buyers nor builders can claim this benefit. Since builders cannot recover the GST they pay on construction materials, they often include this cost in the property price. As a result, homebuyers end up paying a higher price without any way to get back the GST amount.
Again, because GST on residential property purchase is a non-recoverable expense, it’s important for buyers to plan their budget accordingly.
15. GST Benefits for Homebuyers in Kolkata
Firstly, the lower GST rate of 1% on affordable housing makes it an attractive option for budget-conscious individuals or families looking to step into homeownership.
Essentially, this move aims to boost the real estate market by encouraging more people to invest in homes that fall within the affordable housing category. With reduced tax burden on such properties, the government hopes to make housing more affordable and drive overall growth in the sector.
Yet another advantage for homebuyers is that GST is not applicable to ready-to-move-in homes. If a property has received a completion certificate, buyers do not have to pay any GST on the purchase. This reduces the overall cost, thus making it easier for individuals to make a residential property purchase without worrying about additional tax expenses.
Since under-construction properties attract GST, many buyers prefer ready-to-move-in homes to save on these extra costs.
When it comes to home loans, GST is only charged on services like loan processing fees, while the principal amount and interest payments remain exempt. This provides some financial relief to homebuyers, as the major portion of their loan repayment does not include GST. However, you should be aware that certain charges associated with loan processing do attract GST at 18%, which adds a small but notable expense to the overall cost of residential property purchase.
How to Save GST in a Residential Property Purchase?
If you’re looking to save on GST while buying a home, there are several strategies you might consider.
Preferably, opt for a ready-to-move-in property ensures you avoid GST altogether, making it a straightforward choice if you want to sidestep any additional tax costs. Alternatively, if you’re looking at affordable housing, properties priced under ₹45 lakh and under 60 sq. meters, you will enjoy the benefits of only paying 1% GST.
You can also negotiate for all-inclusive pricing that covers associated costs such as parking and maintenance fees. This arrangement can help you ensure there are no extra GST charges layered onto your total payment.
If you’re planning to make a purchase, it’s wise to book before any anticipated price hikes due to changing tax laws. Being proactive can help you secure a good deal while navigating the complexities of GST.
Why Buying a Plot With Sri Sai Ujaan Nagar Residential Township Project Can Be a Smart Move for You
Purchasing a residential plot can be a great financial decision, especially when you think about the tax benefits.
Unlike under-construction properties that may have a GST of 1% for affordable housing and 5% for other types, buying a plot means you won’t have to pay any GST at all. The exemption lets you invest in land without the worry of extra taxes, which can really help keep your upfront costs lower.
Plus, owning land is a smart long-term investment since it typically appreciates in value, giving you added flexibility to build your dream home exactly how you want it, according to your budget and style.
Another big plus of buying a plot is the potential savings you’ll enjoy. When you choose under-construction properties, the GST is already factored into the price, which can add to the overall cost.
However, with land purchases being GST-free, you can save a good amount of money upfront. This makes buying a plot not only a cost-effective choice but also a wise investment for your future. You also have the freedom to plan your construction later on, so you can choose the materials and contractors that meet your needs and budget.
If you’re looking for a more flexible investment with fewer tax liabilities and more options for customization, purchasing a residential plot can be an appealing choice. It lets you take control of your building process and make decisions that are best for you.
If you’re considering your real estate options, think about how a residential property purchase with the leading residential township project like Sri Sai Ujaan Nagar could be the right fit for you!