GST on real estate in 2026: 1% / 5% / 12% rates, 80% procurement rule, JDA and TDR treatment, brokerage, maintenance and resale clarified.
GST on Indian real estate is the most rate-heavy chapter in indirect tax law - layered by project type, completion status, affordability, and ITC eligibility. In 2026, with RERA enforcement tightening and Union Budget 2026 retaining the current rate structure introduced in April 2019, every developer, contractor, broker and home-buyer needs a clear view of how GST attaches to each segment of a real estate transaction. Get the structure wrong and you either inflate prices or hand the department a ready-made demand.
The Two Major Rate Categories
For residential real estate projects, the post-April 2019 regime applies:
- Affordable housing - 1% GST without ITC (carpet area up to 60 sqm in metros, 90 sqm in non-metros, and price up to ₹45 lakh)
- Other residential (non-affordable) - 5% GST without ITC
- Commercial space within RREP (Residential Real Estate Project) where commercial area is up to 15% of total carpet area - 5% without ITC
- Commercial real estate projects (offices, shops) - 12% with full ITC
Sale of completed property after issue of completion certificate, or after first occupation, is outside the GST net altogether - it is a transaction in immovable property.
Conditions for the Lower Rates
The 1% and 5% rates carry strict conditions:
- 80% of inputs and input services must be procured from registered persons
- Shortfall in 80% procurement attracts reverse charge at 18%
- Cement procured from unregistered persons always attracts RCM at 28%, irrespective of 80% threshold
- Capital goods procured from unregistered persons attract RCM at the applicable rate
- No ITC is available for the project; ITC reversal under Rule 42 / 43 must be tracked
Time of Supply and Tax Invoice
GST liability arises on receipt of payment or issue of invoice, whichever is earlier. Developers usually receive instalments linked to construction milestones - GST is charged in the invoice raised for each milestone. The HSN for residential construction service is 9954 (heading 9954 -construction services). RERA mandates that the invoice and demand letter clearly specify GST rate, ITC status and total inclusive price to the buyer.
Joint Development Agreements (JDAs)
JDAs between landowners and developers attract a special GST regime under Notification 4/2018 and amendments:
- Transfer of development rights and FSI by landowner - GST under RCM payable by developer on the date of completion certificate, computed on the value of construction service provided to landowner
- Construction service provided to landowner - GST at 5% / 1% / 12% as per project category
- Allocation of constructed area to landowner is exempt to the extent of unsold inventory as on completion date
- Transfer of fully constructed property after completion is outside GST
Long-Term Lease and TDR
Long-term leases (lease term 30 years or more) of plots for residential construction, granted by Government and notified industrial development authorities, are exempt under Notification 4/2019. Transferable Development Rights (TDR), long-term lease premium, and FSI used for residential construction are exempt to the extent of constructed area sold before completion certificate; the balance attracts GST under RCM in the developer's hands.
Brokerage, Maintenance and Resale
Allied transactions follow their own treatment:
- Brokerage / commission on sale of property - 18% with ITC
- Maintenance charges levied by RWA - exempt up to ₹7,500 per member per month, taxable at 18% above that
- Renting of immovable property for commercial use - 18% with ITC
- Renting for residential use to a registered person - 18% under RCM
- Resale of completed property - outside GST
ITC Reversal and Anti-Profiteering Considerations
Developers operating under the 1% / 5% regime cannot claim ITC on inputs and input services. ITC reversal under Rules 42 and 43 must be tracked for inputs used partly for taxable and partly for exempt supplies (e.g., interest income, sale of completed property). Cement RCM and shortfall RCM under the 80% procurement rule must be paid in cash and not adjusted against ITC. Maintain a project-wise ITC and reversal register to defend any future audit.
Anti-profiteering provisions under Section 171 of the CGST Act required developers transitioning from the old 12%-with-ITC regime to the new 5%-without-ITC regime to pass on the commensurate benefit of rate reduction net of ITC loss to home-buyers. The National Anti-Profiteering Authority (NAA), now subsumed under the CCI, has been active in this space. Maintain a transition working paper showing pre- and post-April 2019 pricing, ITC availability, and the net benefit calculation; without this, even legitimate price increases attributable to construction cost inflation can attract anti-profiteering scrutiny.
Conclusion
GST on real estate in 2026 is a precision exercise. Classify each project as affordable, non-affordable, RREP or commercial; lock the 80% procurement target into the procurement plan; track cement RCM separately; structure JDAs and TDR transactions carefully; and align RERA disclosures with GST invoices. Builders who treat GST as a strategic input - not a year-end clean-up - protect their margin and customer pricing alike.
