{"id":26319,"date":"2023-08-28T13:54:25","date_gmt":"2023-08-28T13:54:25","guid":{"rendered":"https:\/\/www.tatacapital.com\/blog\/?p=26319"},"modified":"2025-12-26T18:30:05","modified_gmt":"2025-12-26T13:00:05","slug":"how-to-calculate-gst-on-home-loan","status":"publish","type":"post","link":"https:\/\/www.tatacapital.com\/blog\/loan-for-home\/how-to-calculate-gst-on-home-loan\/","title":{"rendered":"How to calculate GST on a home loan?"},"content":{"rendered":"\n

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Goods and Services Tax (GST) is a comprehensive tax system introduced on July 1, 2017. With this uniform taxation system in place, the real estate sector has become more transparent in its dealings, leaving a positive impact on potential home buyers.<\/p>\n\n\n\n

That being said, if you\u2019re planning to opt for a loan to buy a house<\/a>, it is vital to know about the GST applicable on the same. While GST doesn\u2019t directly affect your loan EMIs<\/a> or home loan interest rates<\/a>, it applies to the processing fee and various other charges on your loan.<\/p>\n\n\n\n

Let\u2019s understand the home loan GST rate in detail below.<\/p>\n\n\n\n

What is GST, and how does it impact home loans?<\/strong><\/h2>\n\n\n\n

Goods and Services Tax (GST) is an indirect tax applied to the supply of goods and services. It replaces several earlier taxes, such as service tax, excise duty, entry tax, and Value-Added Taxes (VAT). <\/p>\n\n\n\n

When it comes to GST on home loans, it does not apply to the loan\u2019s principal or interest. Thus, your EMIs remain unaffected. However, the rate is charged on service-related components such as processing fees, legal fees, valuation charges, and other administrative services offered by lenders. The effect of GST on loans is the rise in the upfront cost of taking a home loan. Additionally, GST plays a role in property pricing. Under-construction properties attract GST at 5% in regular housing and 1% in affordable housing. However, ready-to-move-in homes are GST-free. When GST rates are reduced on housing projects, they can lower property costs, indirectly reducing the loan amount borrowers need.<\/p>\n\n\n\n

Also, read – GST on Personal Loan<\/a><\/p>\n\n\n\n

GST on home loans: Property-wise breakdown<\/strong><\/h2>\n\n\n\n

Here\u2019s a property-wise home loan GST breakdown:<\/p>\n\n\n\n

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  1. Under-construction properties<\/strong><\/li>\n<\/ol>\n\n\n\n

    These attract GST at 5% for standard housing and 1% for affordable housing. Since GST applies to payments made before the completion certificate, the property\u2019s overall cost may rise, influencing the loan amount required.<\/p>\n\n\n\n

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    1. Affordable housing projects<\/strong><\/li>\n<\/ol>\n\n\n\n

      With a reduced 1% GST on property purchase and no input tax credit, these projects remain more budget-friendly for you. Lower property prices can help you opt for smaller loan<\/a> amounts, keeping EMIs manageable.<\/p>\n\n\n\n

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      1. Ready-to-move-in properties<\/strong><\/li>\n<\/ol>\n\n\n\n

        GST does not apply once a completion certificate is issued. Buyers only pay stamp duty and registration charges<\/a>, reducing the upfront tax burden and keeping loan requirements comparatively lower.<\/p>\n\n\n\n

        GST rates on home loan charges – Processing, legal, pre-payment<\/strong><\/h2>\n\n\n\n

        GST applies differently to home loan-related charges. Here\u2019s a breakdown of home loan charges GST:<\/p>\n\n\n\n

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        1. GST on the loan processing fee<\/strong><\/li>\n<\/ol>\n\n\n\n

          Banks and lenders charge 18% GST on processing fees. For example, a Rs. 10,000 fee would attract Rs. 1,800 GST.<\/p>\n\n\n\n

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          1. GST on legal charges of a home loan<\/strong><\/li>\n<\/ol>\n\n\n\n

            The charges for legal verification, documentation, or property title checks are also subject to 18% GST. For example, if the legal fee is Rs. 5,000, the GST will be Rs. 900. This makes the services slightly more expensive. <\/p>\n\n\n\n

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            1. GST on pre-payment<\/strong><\/li>\n<\/ol>\n\n\n\n

              Pre-payment fees may include GST at 18% if the lender treats it as a service charge. This does not affect the principal or interest but adds to one-time costs.<\/p>\n\n\n\n

              How to calculate GST on home loan processing fee?<\/strong><\/h2>\n\n\n\n

              You must follow the steps mentioned below to calculate GST on a home loan<\/a> processing fee. <\/p>\n\n\n\n

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              1. Check the processing fee:<\/strong> Note the amount your lender charges. For example, Rs. 15,000.<\/li>\n\n\n\n
              2. Identify the GST rate:<\/strong> Most banks apply 18% GST on processing fees.<\/li>\n\n\n\n
              3. Calculate GST amount:<\/strong> Multiply the processing fee by the GST rate. For Rs. 15,000, the GST is Rs. 2,700 at 18%.<\/li>\n\n\n\n
              4. Add GST to the fee:<\/strong> The total fee payable is a sum of the processing fee and GST. In this case, it will be Rs. 15,000 + Rs. 2,700 = Rs. 17,700.<\/li>\n\n\n\n
              5. Pay the total amount:<\/strong> This is the upfront cost you need to settle before your loan is sanctioned.<\/li>\n<\/ol>\n\n\n\n

                These steps ensure accurate GST calculation for loans.<\/p>\n\n\n\n

                Also, read – GST on Flat Purchase and Its Impact on Home Buyers<\/a><\/p>\n\n\n\n

                How to calculate GST on a home loan?<\/strong><\/h2>\n\n\n\n

                The method to calculate GST on housing loans is fairly straightforward. Since it is levied on the processing fee on your housing loan, all you have to do is calculate 18% of the total fee charged to you. In the case of an under-construction property, the home loan GST rate is 12% of the overall processing fee.<\/p>\n\n\n\n

                For instance, if you have taken a loan amount of Rs. 50 lakh<\/a>, the processing fee will be between Rs. 12,500 to Rs. 50,000. Now, consider a home loan GST rate of 18% on this fee, and it will amount to Rs. 2,250 to Rs. 9,000. Therefore, the total amount payable on the loan will come somewhere between Rs. 14,750 and Rs. 59,000.<\/p>\n\n\n\n

                If you\u2019re unable to calculate the GST on a home loan manually, you can use an online GST calculator for home loans.<\/p>\n\n\n\n

                Also, read – Understanding GST on Sale of Used Car<\/a><\/p>\n\n\n\n

                Impact of GST on home loan EMIs<\/strong><\/h2>\n\n\n\n

                Since GST is levied on under-construction properties, it will significantly lower the cost of property and lead to lower EMIs for you. While the current standard GST rate on housing loans is 18%, the effective rate comes down to 12%. This is because builders transfer the input tax credit benefits of 6% to the buyer.<\/p>\n\n\n\n

                Here are some of the effects of GST on housing loan EMI<\/a>:<\/p>\n\n\n\n