GST and real estate

While legal protection of consumer rights has largely been institutionalized through the promulgation of the Real Estate (Regulation and Development) Act (RERA), 2016, prudent pricing by developers, straight-forwarding of invoices, strict supervision of the rules on anti-profiteering and digital surveillance are some of the steps the government may take to translate the ‘feel good’ factor of GST 2.0 into boosting consumer desire to invest more in purchase of real estate

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Since 22 September 2025, economic excitement has been generated in the aftermath of the declaration of reduced rates of the Goods and Services tax (GST 2.0).

Leading FMCG brands, automobile manufacturers, electronic retailers et al, have been announcing reduced and therefore more attractive rates on their products to entice consumers. The reduced rates of GST have been hailed as the harbinger of enhanced savings and higher investment, thereby propelling economic growth fueled by the engine of domestic markets.

In this backdrop, given that the real estate sector contributes around 7.8 per cent of the country’s GDP, next only to agriculture and the IT sector in employment generation, it would be of interest to explore the consequences of the reduced rates of GST on the real estate sector. GST is a destination-based, multi stage, comprehensive tax levied at each stage of value addition.

This tax, aimed at simplifying the structure of indirect taxation in India, is levied on goods and services sold for domestic consumption in the country. As GST is levied on the final market price of goods and services manufactured within the domestic boundaries, it reflects the maximum retail price. GST is a form of indirect taxation which is passed on to consumers, to be collected by sellers who would then pay such taxes to the government.

Intended to operate as a consolidated, “one umbrella” indirect tax structure, GST replaced all indirect taxes levied on goods and services produced within the country. The objective is to provide a unified system of centrally set tax rates for a good or service that was to be followed by all states in India. It accounts for every stage of manufacture whereby the value added to, as well as a change of destination of an item, is taxable.