GST on Property Sale: Does It Apply to Sellers in India?

GST — the Goods and Services Tax — has been a source of genuine confusion for property sellers in India since its introduction in 2017. Sellers frequently ask whether they need to charge GST on the sale price, register for GST before selling, or worry about any GST liability at all. The answer depends almost entirely on what kind of property you are selling and whether construction is complete. This article explains the rules clearly for residential owners, builders, and developers.

The Key Dividing Line: Under-Construction Versus Completed Property

The single most important principle governing GST on property sales is the distinction between under-construction property and completed (ready-to-move) property.

Sale of completed residential property — defined as property for which the builder has received the Occupancy Certificate (OC) or Completion Certificate before the date of sale — is outside the scope of GST. It is treated as a sale of immovable property (not a supply of goods or service), and no GST is levied or collected. This is explicitly provided under Schedule III of the CGST Act, 2017. If you are a residential property owner selling your flat or house that has an OC, you do not charge GST and you do not need to register for GST on account of that sale.

Sale of under-construction property — where the OC has not yet been received — is treated as a supply of a service (construction service bundled with the sale of land) and is subject to GST. This primarily concerns builders and developers selling flats in projects that are still being constructed at the time of sale.

GST Rates for Under-Construction Property (Applicable to Builders and Developers)

If you are a builder or developer selling units in an under-construction project, GST applies on the transaction value (excluding the value of land, which is not subject to GST). The prevailing rates as of 2026 for residential projects are:

• Affordable housing projects: 1% GST (without input tax credit). "Affordable" is defined based on carpet area limits and price ceilings set by the GST Council — the specific limits have been revised over time, so confirm the current definition with your CA or a GST consultant.
• Other residential projects: 5% GST (without input tax credit).
• Commercial properties: 12% GST (with input tax credit).

These rates are applied on the consideration received minus the value of land. The GST Council has prescribed that the land value is deemed to be one-third of the total amount charged for the property, meaning effectively GST is computed on two-thirds of the sale consideration for residential units. However, if the actual land value as per the terms of the agreement is separately stated and is higher than one-third, there can be disputes about which figure to use — verify with your GST consultant.

Individual Homeowners: When Does GST Apply?

For an individual who owns one or a few residential properties and sells them, GST almost never applies in practice:

• If the property is ready-to-move (has an OC), the sale is outside GST entirely.
• If an individual sells an under-construction flat (for example, a property bought from a builder before completion and being resold), the position has been debated, but most interpretations hold that an individual reselling an under-construction flat where the original developer's contract has been novated to the buyer attracts GST only on the developer side, not on the individual reseller's portion — particularly if the individual is not in the business of selling property. However, this is a nuanced area and you should take professional advice before proceeding with such a resale.
• If you are in the regular business of buying and selling properties (a property trader, in effect), your transactions may be characterised as a business activity and attract GST registration requirements and potential liability. The threshold for mandatory GST registration is aggregate turnover of ₹20 lakh per year for services (₹10 lakh for some states), but the nature and frequency of your transactions matter in determining whether you are conducting a business.

Plot and Land Sales: No GST

Sale of a plot of land — bare land without any construction — is also outside the purview of GST, regardless of whether the seller is an individual or a company. Land is not goods, and sale of land is not a service, so GST does not apply. This position is consistent with the pre-GST regime where land sales attracted only stamp duty and capital gains tax.

A caveat: if a developer sells a plot along with an obligation to develop it (a "development agreement" or "development rights" arrangement), the tax treatment of the development portion can attract GST. Pure land sales without any associated construction commitment do not attract GST.

What Sellers Do Pay: Taxes That Are Not GST

While GST may not apply to most residential sellers, the following taxes remain very much applicable and must be planned for:

• Capital gains tax: On profit from the sale. Long-term capital gains (property held more than 24 months) are currently taxed at 12.5% without indexation under the Finance Act amendments — though the indexation rules have changed and you must confirm the current applicable method and rate with a chartered accountant. Section 54 and Section 54EC exemptions may significantly reduce this liability.
• TDS by the buyer: The buyer must deduct 1% TDS under Section 194-IA when the consideration exceeds ₹50 lakh (applicable to resident sellers). For NRI sellers, TDS is deducted at higher rates (broadly 12.5%–20% on LTCG plus surcharge and cess) unless a lower-deduction certificate under Form 13 is obtained in advance.
• Stamp duty: Payable by the buyer (not the seller), but understanding stamp duty rates helps in pricing discussions.

Practical Steps for Builders Before Selling

If you are a builder or developer with an ongoing project:

• Ensure GST registration is in place before you begin collecting consideration from buyers. Collecting sale proceeds without GST registration (when GST is applicable) is an offence under the CGST Act.
• Maintain proper books of account for GST purposes — input tax credits (where available) on construction materials and services can be offset against GST output liability, reducing your net payment to the government.
• Issue GST-compliant invoices or receipts (known as tax invoices) for each payment received. Buyers need this for their own records and for claiming any credit on commercial purchases.
• File monthly or quarterly GST returns (GSTR-1 and GSTR-3B) as applicable. Non-compliance attracts interest and penalties that add up quickly on high-value property transactions.

Do I need to collect GST from the buyer when selling my flat?

If your flat has received an Occupancy Certificate (OC) or Completion Certificate before the date of sale, no GST is applicable and you do not collect or remit any GST. The transaction is treated as a transfer of immovable property, which is outside the GST net. Only under-construction properties sold by builders or developers before receiving the OC attract GST. As an individual reselling a completed residential flat, you are not required to register for GST solely on account of that sale.

Will the buyer demand a GST invoice from me?

If the property is completed (OC received), there is no GST to invoice and no legal obligation to issue a GST invoice. The registered sale deed is the transaction document. If you are a builder selling under-construction units, buyers will — and should — ask for GST-compliant receipts and must be given proper tax invoices for each payment. Sophisticated buyers purchasing commercial premises from a GST-registered seller may need the invoice to claim input tax credit in their own business accounts.

Is GST payable on the resale of commercial property?

The GST treatment of commercial property resale is more complex. If a GST-registered business sells a commercial property that it had used in the course of its business and on which it had availed input tax credit, the sale may be treated as a supply of goods (as part of the transfer of business assets) or as an exempt sale of immovable property, depending on the specific facts and whether the business is being sold as a going concern. This is an area requiring careful advice from a GST specialist before structuring the transaction. An individual or non-business entity selling a commercial property they own as an investment (not used in a business for ITC purposes) is generally treated similarly to land — outside GST if the property is completed.

What if I receive part-payment before the OC and part after?

This situation arises in pre-launch and under-construction project sales. GST applies on the consideration received before the OC is issued, on a time-of-supply basis. Amounts received after the OC is granted are not subject to GST. It is therefore important for builders to track the timing of each receipt relative to the OC date and apply GST only to the pre-OC receipts. If an advance was collected before OC and the balance is paid after OC, GST applies only to the advance portion. Proper accounting and GST return filings must reflect this split accurately.

For most residential property sellers in India, GST is not a concern — the transaction falls outside its scope once the property has an OC. Your real focus should be on capital gains planning and reaching the right buyers efficiently. How selling works on BookPropertyVisit walks you through a platform designed for exactly this — free listing, verified buyers, and zero brokerage until your property sells. List your property for free right now and let BookPropertyVisit bring you genuine buyers with coordinated, no-hassle site visits. To get in touch, call +91 7025892205 or write to info@mexilet.com.