GST on Under-Construction Property in India 2026 — Rates, ITC, Exemptions
Buyers of under-construction flats in India pay GST at 5% (non-affordable) or 1% (affordable), with no Input Tax Credit pass-through. Ready-to-move flats with a valid Occupancy Certificate are fully exempt. This guide explains every rate, exemption, and edge case for 2026.
Updated May 2026 · 11 min read · Brickplot Editorial
The short version: GST on under-construction residential property is 5% on non-affordable housing (no ITC) and 1% on affordable housing (no ITC) per Notifications 03/2019 and 04/2019 effective 1 April 2019. Ready-to-move property with a completed Occupancy Certificate is GST-exempt. Many buyers wrongly believe builders can pass on Input Tax Credit — they cannot under the post-April-2019 scheme. Always demand a GST invoice for every instalment and verify your project's scheme election in writing.
GST rate summary
| Property type | GST rate | ITC available? | Effective for projects after |
|---|---|---|---|
| Affordable housing (under construction) | 1% | No | 1 April 2019 |
| Non-affordable residential (under construction) | 5% | No | 1 April 2019 |
| Commercial units in residential project (under construction) | 5% | No | 1 April 2019 |
| Ready-to-move with Occupancy Certificate | 0% (exempt) | N/A | Always exempt |
| Resale of completed apartment | 0% (outside GST) | N/A | Always outside GST |
| Pre-April-2019 ongoing projects (builder elected old scheme) | 12% effective (8% affordable) | Yes (pass-through) | Pre-1 April 2019 |
Source: CGST Notifications 03/2019 and 04/2019 dated 29 March 2019; CBIC circulars and FAQs.
What attracts GST and what does not
GST is charged on under-construction residential property because the law treats sale of an under-construction flat as a supply of construction service by the builder, not as a sale of immovable property. The Schedule III exclusion under the CGST Act keeps sale of land and sale of fully completed buildings outside the GST net, but anything sold before the Occupancy Certificate (OC) or completion certificate is issued is taxable. The exact cutoff is the date of issue of the OC or completion certificate, or the date of first occupation, whichever is earlier — once that date passes for the building, any subsequent sale of any unit in that building is GST-exempt. Resale apartments are also outside GST because the second-hand transaction is a transfer of immovable property between owners, not a construction service. This is why two flats with the same sticker price can have meaningfully different total acquisition costs depending on construction stage.
Current GST rates (post-April 2019)
Notification No. 03/2019-Central Tax (Rate) and Notification No. 04/2019-Central Tax (Rate) dated 29 March 2019 introduced the new GST scheme that came into force on 1 April 2019. The headline rate for under-construction non-affordable residential apartments is 5% (CGST 2.5% + SGST 2.5%) without Input Tax Credit. The rate for affordable housing is 1% (CGST 0.5% + SGST 0.5%), also without ITC. Affordable housing under this scheme is defined as a residential unit with carpet area up to 60 square metres in metropolitan cities and up to 90 square metres in non-metro cities, and a gross consideration not exceeding ₹45 lakh. Metro cities for this purpose include Delhi NCR, Mumbai MMR, Chennai, Kolkata, Hyderabad, and Bengaluru. Commercial shops or office units within a Residential Real Estate Project (RREP) where commercial area is up to 15% of total carpet area also attract the 5% rate without ITC.
Pre-April-2019 vs post-April-2019 schemes
Before 1 April 2019, under-construction residential property attracted GST at 18% on two-thirds of the value (one-third deemed land value), giving an effective rate of 12% — and 8% effective for affordable housing under the Pradhan Mantri Awas Yojana definition. Crucially, the old scheme allowed builders to claim Input Tax Credit on inputs like cement, steel, lifts, paint, and contractor services, and the law required them to pass on the ITC benefit to buyers via price reduction. In practice, anti-profiteering enforcement under the NAA was patchy and many buyers did not see the full pass-through. The new scheme launched in April 2019 dropped the rate to 5% and 1% but withdrew ITC entirely. Builders of projects that were under-construction on 31 March 2019 were given a one-time election between continuing under the old 12% / 8% with ITC regime or migrating to the new 5% / 1% without ITC regime. Many builders elected to migrate, but a minority of legacy projects still operate on the old scheme — always ask your builder in writing which scheme applies to your project and ensure the invoice rate matches.
What is included in the taxable value
GST is charged on the gross consideration for the construction service, which the law deems to be two-thirds of the total amount charged (the remaining one-third being the land value, which is outside GST). The taxable two-thirds includes the basic sale price (BSP) plus preferential location charge (PLC) for higher-floor or corner units, floor rise premium, covered or stilt car parking, club or amenity membership charged at booking, and any builder-supplied interior fit-outs that are part of the booking contract. External Development Charges (EDC) and Infrastructure Development Charges (IDC) paid by the builder to local authorities are generally treated as part of the construction consideration and attract GST — though some builders argue these are pass-through pure agent payments. The CBIC position is that EDC and IDC are part of the supply when collected as part of the agreement value; ask for a written break-up of how each component is treated on your invoice. The 5% notified rate is already calculated on the gross consideration with the one-third land abatement built in, so you do not need to compute the abatement separately.
Charges outside the scope of GST
Stamp duty payable to the state government on the Agreement for Sale and the Sale Deed is outside GST entirely — stamp duty is a separate state levy under the relevant Stamp Act and ranges from 4% to 7% depending on the state, with Karnataka at 5.6% in 2026 for properties above ₹45 lakh. Registration fee, also a state levy, is similarly outside GST and is typically 1% of the agreement value. Society maintenance charges collected after handover by the resident welfare association or apartment owners association are exempt from GST when the monthly contribution per member does not exceed ₹7,500. Property tax paid to the municipal corporation (BBMP, BMC, MCG, etc.) is a local body levy outside GST. Lease rent on land taken on long lease by the builder is treated separately and may or may not be passed on to the buyer.
Affordable housing exemption mechanics
To qualify for the 1% GST rate as affordable housing, three conditions must be satisfied simultaneously: carpet area within the prescribed cap (60 sqm in metros, 90 sqm in non-metros), gross consideration value not exceeding ₹45 lakh, and the property must be intended for residential use only. Carpet area is defined under RERA Section 2(k) as the net usable floor area within the walls of the apartment, excluding the area of external walls, balcony, verandah, and open terrace — this is stricter than the salable or super built-up area builders typically advertise, so always demand the RERA-disclosed carpet area on Form B before assuming affordable-housing eligibility. The ₹45 lakh cap is on the total consideration including PLC, floor rise, parking, and club — not just the basic sale price — which means a ₹42 lakh BSP flat with ₹4 lakh of add-ons would breach the cap and revert to the 5% rate. The cap is uniform across India and is not indexed to inflation, which means real eligibility has narrowed steadily since 2019 as prices have risen.
TDS interaction under Section 194-IA
Section 194-IA of the Income Tax Act requires the buyer of any immovable property with consideration of ₹50 lakh or more to deduct TDS at 1% and deposit it with the Income Tax Department. The TDS is computed on the sale consideration only and not on the GST component charged separately on the invoice — a CBDT circular has clarified this position, though many buyers and builders mistakenly include GST in the TDS base. If your builder presents a demand letter showing ₹50 lakh basic plus ₹2.5 lakh GST, you must deduct 1% TDS on ₹50 lakh (₹50,000), not on ₹52.5 lakh. Stamp duty value or circle rate considerations under Section 50C and Section 56(2)(x) apply only to the buyer-side income computation if the agreement value is below the circle rate by more than 10%, and do not change the TDS base. Always file Form 26QB within 30 days of the end of the month in which TDS is deducted and issue Form 16B to the seller — failure attracts interest under Section 201 and penalty under Section 271H.
Real-world impact on flat buyers
For a ₹1 crore non-affordable under-construction flat, GST at 5% adds ₹5 lakh to your acquisition cost — payable in stages as each instalment falls due. Add stamp duty of ₹5.6 lakh and registration of ₹1 lakh in Karnataka, and your effective total acquisition cost reaches ₹1.116 crore against the ₹1 crore agreement value. For a ₹40 lakh affordable flat that qualifies for the 1% rate, GST adds only ₹40,000, with stamp duty at the lower under-₹45-lakh slab adding another ~₹1.6 lakh — total acquisition near ₹42 lakh. Compare these with a ready-to-move resale flat of similar specification: zero GST, only stamp duty plus registration, which often makes the resale option ₹3–6 lakh cheaper on total tax outgo for equivalent pricing. This tax differential is a legitimate buying-decision input alongside builder delivery risk, capital appreciation potential, and customisation flexibility. Brickplot factors this into the Value and Price Trajectory axis when comparing under-construction projects against ready-to-move alternatives in the same micro-market.
Frequently Asked Questions
Is GST refundable if my flat possession is delayed?
GST is not directly refundable to the buyer merely because possession is delayed. The tax was paid on the supply of construction service at the time each instalment fell due, and the GST law does not contain a buyer-side refund mechanism for delayed handover. Your remedy lies under RERA Section 18 — you can claim refund of the entire amount paid (principal plus interest at MCLR + 1%) if you choose to withdraw from a delayed project. If you do withdraw and the builder refunds your principal, the GST element is part of the consideration the builder must return as a contractual matter, not as a tax refund from the government. Always file the RERA complaint promptly once the committed possession date slips beyond the grace period.
Do I pay GST on parking allotted separately?
Yes. Covered and stilt parking sold as part of an under-construction flat is treated as a composite supply along with the apartment and attracts the same GST rate (5% non-affordable, 1% affordable). The CBIC has clarified through circulars that preferential location charges, floor rise, club membership at booking, and parking are all part of the consideration for the construction service and cannot be carved out to escape GST. Open or surface parking that is part of common areas is not separately invoiced. If a builder issues a separate "parking sale deed" post-OC, that transaction would be a sale of immovable property after completion and would not attract GST — but this structure is rare and legally fragile.
How is GST calculated if I pay in instalments?
GST is charged on each instalment as and when it becomes due under the construction-linked or time-linked payment plan. The applicable rate is the rate in force on the date of the invoice or the date payment is received, whichever is earlier. The taxable value for each demand letter is one-third of the gross amount excluded (because the land component is deemed to be one-third and is not taxable), so effectively your 5% headline rate is applied on two-thirds of the price — this is already built into the 5% notified rate, not something you compute separately. If you prepay multiple instalments in advance, GST is triggered on the full prepaid amount on the date of receipt. Always demand a proper GST invoice for each payment showing the supplier GSTIN, taxable value, and tax charged.
Is GST applicable on resale apartment?
No. A resale apartment is a sale of immovable property between two individuals (or an individual and a company) after the building has received its Occupancy Certificate. Such a transaction is outside the scope of GST entirely because it is neither a supply of construction service nor a supply of goods — it is a transfer of immovable property covered by stamp duty under the relevant state Stamp Act. The buyer of a resale flat pays stamp duty (typically 5–7% depending on state) and registration fee (around 1%), but zero GST. This is one of the structural reasons a ready-to-move resale flat often works out cheaper on total tax outgo than an equivalently priced under-construction flat, and it is a legitimate buying-decision input alongside builder risk and capital appreciation.