GST on under-construction property: 1% vs 5%, and when there is none
GST applies only to homes bought before completion. The affordable housing test, why the rate is lower than it looks, ready-to-move and resale flats, and billing errors to challenge.
4 min read · Published 2026-10-31 · Last reviewed 2026-10-31
Goods and services tax on property confuses buyers because it depends on timing, not on the property. The same flat attracts GST if you book it while the tower is rising and none if you buy it after the completion certificate is issued. This guide explains the rates, the affordable housing test, what the rate is actually applied to, and the three situations where developers get the billing wrong.
When GST applies
GST is charged on the supply of construction services, so it applies only when the developer is still constructing what you buy. Once a completion certificate (or occupancy certificate) has been issued by the competent authority, or the first occupation has taken place, the sale is a sale of immovable property and is outside GST. In practice:
| Purchase | GST |
|---|---|
| Under-construction flat from developer | Yes |
| Ready-to-move flat from developer, completion certificate issued | No |
| Resale flat from an individual owner | No |
| Plot of land | No |
| Plot with construction service bundled | GST on the construction portion |
Stamp duty and registration apply in every case; they are state taxes and unrelated to GST.
The rates since April 2019
| Category | Effective GST rate | Input tax credit to developer |
|---|---|---|
| Affordable residential | 1% | No |
| Other residential | 5% | No |
| Commercial units in a residential project (up to 15% of carpet area) | 5% | No |
| Other commercial | 12% | Yes |
These rates were not altered by the September 2025 GST rate rationalisation, which restructured the general slabs to 5% and 18%; real estate kept its concessional scheme.
The "effective" rate is the number you pay on the agreement value. Technically the law charges GST on the construction value after deducting one-third of the total as the deemed value of land, which is why the headline rates were 7.5% and 1.5% while the effective rates are 5% and 1%. Developers quote the effective rate on the full agreement value, and that is what your calculator should use.
The affordable housing test
Both conditions must be met at the time of booking:
- Carpet area up to 60 square metres (646 sq ft) in metropolitan cities (Delhi NCR, Mumbai MMR, Kolkata, Chennai, Bengaluru, Hyderabad) or up to 90 square metres (969 sq ft) elsewhere, and
- Gross amount charged not more than ₹45 lakh, including all charges except stamp duty, registration and maintenance deposits.
A 640 sq ft (59.5 sq m) flat in Noida at ₹44 lakh is affordable. A 700 sq ft (65 sq m) flat in Noida at the same price is not, because NCR is a metro and the limit is 60 sq m. The same 700 sq ft flat in Jaipur qualifies under the 90 sq m limit. The test is on carpet area under RERA's definition, so ask for the RERA carpet area, not the brochure's super built-up.
What is in the taxable value
GST applies to the agreement value plus charges that form part of the construction supply: preferential location charges, floor rise, parking (as bundled), club membership, and development charges billed by the developer. It does not apply to stamp duty, registration, maintenance deposits held in trust for the society, or electricity and water deposits passed through to utilities. Society maintenance after possession is a separate supply, taxed at 18% if it exceeds ₹7,500 a month per member.
Three billing errors to challenge
- GST on a ready flat. If the completion certificate predates your agreement, no GST is due. Ask for the certificate date.
- The wrong rate. Projects that started before April 2019 could choose to stay on the old 12%/8% rates with input tax credit. If you are being charged 12% on a residential flat booked after 2019 in a new project, that is wrong.
- GST on deposits. Maintenance corpus and utility deposits are not part of the construction service.
Developers can no longer claim input tax credit on the 5% and 1% schemes, so the pre-2019 "anti-profiteering" pass-through claims no longer apply; the quoted rate is the final rate.
Budget impact
On a ₹75 lakh under-construction flat, 5% GST is ₹3.75 lakh, on top of roughly ₹5 lakh of stamp duty and registration. The same flat bought ready attracts no GST. Developers price this in: ready inventory typically trades 5–8% above under-construction inventory in the same project. Compare the all-in cost, not the headline price.
Run both scenarios in the property purchase cost calculator, which applies 0%, 5% or 1% by property type, and check any single invoice with the GST calculator.
Sources
This guide is general information, not financial, tax or legal advice. Rules change; the review date above tells you when it was last checked. See our editorial policy.