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Impact of GST on Housing

pmay-hfa under gst

One of my friend’s recently paid of the mortgage on his house, which he purchased over ten years ago.  He fulfilled his dream of having his own home, which was designed exactly the way he had always wanted.  He also, after paying of the house loan, outfitted his kitchen with the biggest fridge, which was a dream of his, as he loves to cook.  The dream of owning a home, is a dream many can relate to, however, with the introduction of GST, and already high costs of real estate, the possibility of realizing this simple dream was becoming more and more improbable.  Nonetheless, the government heard the pleas of the people and reduced the GST rates from 18% to 12%.  This move benefits houses constructed or acquired in the affordable housing projects, such as PMAY-HFA, which is a welcome relief for home buyers.

GST Impact on Low Cost Housing

Post GST implementation, buyers, who buy fully constructed homes, will not have to pay GST, however GST will be applied for under construction properties.

Existing GST Rates – Prior to the 25th GST council meeting, the GST rates for semi-constructed or under-constructed houses bought under Credit Linked Subsidy Scheme (CLSS) was effectively 12% after the cost of land was deducted plus the additional cost of registration and stamp duty.  For those purchasing homes under Pradhan Mantri Awas Yojana – Housing for All (PMAY-HFA), GST will not be applied.. However, this exemption will not be available to residential complexes built by private developers.  Additionally, CLSS, a component of PMAY-HFA, can be availed by those belonging to Economically Weaker Sections (EWS), Lower Income Groups (LIG) and Middle Income Groups (MIG1/11), whose annual income is less than Rs 18 lakhs/annum.

New GST Rates – Post the 25th GST council meeting, held on January 18th, 2018, the new rate of GST on homes purchased under CLSS, EWS, LIG, MIG1/11 effectively will be 8%, after deducting the cost of land.  This concessional rate can be used for buying a house or constructing a new house.  Additionally, the low-cost housing projects have also been granted infrastructure status.  However, second time home buyers and those that do not qualify under CLSS, will continue to pay 12% effectively GST on purchase or construction of homes.

Advantage of Lower Rates

For developers, who pay GST of 28%-18% on materials used in construction, would be able to avail input credit, which they can pass on to the customer in the form of lower prices.  The availability of input credits for developers should motivate developers to get registered under GST, so that input credits can be availed.  The lower rates will give the real estate sector a big boost, especially in the low-cost housing sector.  This not only means lower prices for home buyers, but the side effect is that it creates more transparency in the industry, which previously was unmonitored and high black money transactions prevailed.

With the newer GST rates, the affordability of realizing your dreams of having your own home, just become more plausible.  So, instead of sitting and planning your perfect house with the perfect, kitchen or garden, take the steps to realizing your dreams, by taking advantage of the lower rates and buying your new home.  To carefully plan and execute the purchase of your new dream home, consult the tax experts at H&R Block India, so that you can avail of all the housing deductions and benefits available to you and save your money further.

Annalakshmi Ekambaram
Annalakshmi Ekambaram
Annalakshmi is a content writer at H&R Block India. She enjoys writing about Income Taxes in a simplified manner so that everybody can easily understand it.


  1. Venky says:

    Hi Madam,

    I have purchased a flat from private builder and got the loan from bank under CLSS scheme. Could you please let me know whether I am eligible for concessional rate of 8% GST or not?


    • Gajen says:

      Hello Venky,

      I too have the same issue. The private builder whom i am buying is claiming that the local commercial tax officers does not accepting 8% GST.

      I tried with CBEC, they replied positively as 8% is effective since 25th January 2018. HUDCO also confirmed GST is 8 % for CLSS scheme.

      But i have problem in local tax offices who charge the GST.
      Have you received any clarification further ?

      • souvik says:

        Hi Gajen , in this scenario you’ll not get reply from any CA or advocate perfectly. I’m also in this situation. Some telling we’ll get GST benefit, some telling the house project must be under PMAY to get GST benefit. This is India boss.

    • H&R Block India says:

      If you are coming under low-cost housing project and got the loan sanctioned for same, then yes you are eligible for concessional rate of 8%.
      If you have more queries related to GST, feel free to get in touch with us at We will be glad to help you!

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