Key Takeaways
- Ready-to-move-in property (where the builder has the Completion Certificate or Occupancy Certificate) is exempt from GST. So is a pure plot of land. Stamp duty and registration still apply, but those are state taxes, not GST.
- Under-construction residential property attracts 1% GST for affordable housing and 5% GST for everything else, both without input tax credit for the builder, under the scheme effective from April 1, 2019.
- Affordable housing is defined as carpet area up to 60 sqm in metros and 90 sqm in non-metros, with a sale price of ₹45 lakh or less, per the GST Council's definition.
- Under-construction commercial property (shops, offices, godowns) is taxed at 12% with ITC for the buyer if the buyer is a GST-registered business using it for taxable supplies.
- No ITC for residential buyers. The 1% and 5% rates are the final cost; the builder cannot pass on input credit and the homebuyer cannot claim any.
- The buyer also has a separate obligation under Section 194-IA (income tax): deduct 1% TDS if the property value exceeds ₹50 lakh, and file Form 26QB.
When Does GST Apply on a Property Purchase?
The single most important rule when buying property in India is also the one most often misunderstood: GST applies only to construction services, not to the property itself. The status of the property at the time you make the payment decides whether GST is charged.
If the builder has obtained the Completion Certificate (CC) or Occupancy Certificate (OC) before you book the flat, the sale is treated as a transfer of immovable property. Under Schedule III of the CGST Act, 2017, the sale of land and the sale of a fully constructed building (post-OC) are kept outside the scope of GST. No GST is collected, no GST is paid, no input credit is claimed.
If you book a flat while construction is still ongoing, the builder is supplying a construction service to you. That service is taxable, and the GST rate depends on whether the unit qualifies as affordable housing.
Land sold without a building on it is always outside GST. Stamp duty and registration charges still apply, and they are state subjects, not GST.
GST Rates on Residential Under-Construction Property (Post-April 2019)
In its 33rd and 34th meetings, the GST Council overhauled the rate structure for residential real estate, effective April 1, 2019. The aim was to simplify pricing for homebuyers by removing the input-tax-credit pass-through.
| Property type | Carpet area | Price ceiling | GST rate | ITC for buyer |
|---|---|---|---|---|
| Affordable housing (metro) | Up to 60 sqm | Up to ₹45 lakh | 1% | No |
| Affordable housing (non-metro) | Up to 90 sqm | Up to ₹45 lakh | 1% | No |
| PMAY / CLSS-linked housing | As notified under PMAY rules | Per scheme | 1% | No |
| Other residential under-construction | Any | Above ₹45 lakh, or larger carpet area | 5% | No |
| Commercial under-construction (shops, offices) | Any | Any | 12% | Yes (if buyer is registered) |
| Plot / land only | Any | Any | Exempt | NA |
| Ready-to-move-in (CC / OC received) | Any | Any | Exempt | NA |
For the purposes of this rule, "metro" covers Bengaluru, Chennai, Delhi-NCR (Delhi, Gurugram, Noida, Greater Noida, Ghaziabad, Faridabad), Hyderabad, Kolkata, and Mumbai (including the Mumbai Metropolitan Region). Anywhere else is "non-metro".
A small number of projects that registered under the pre-April 2019 scheme continued under the old rates of 8% (affordable) and 12% (others) with ITC. By 2026 most of these have either completed or migrated, but if you are buying in a long-running project, ask the builder for the project's RERA certificate and confirm which rate scheme applies before you sign.
The One-Third Land Value Rule
Government circulars require builders to notionally treat one-third of the total consideration as land value and apply GST only on the remaining two-thirds (the construction component). This abatement is built into the headline 1% and 5% rates under the new scheme, so the rate you see on the cost sheet already accounts for it. In other words, 5% on the full sale price is the effective rate, not 5% on the construction component on top of a 7.5% rate.
This matters when you compare builder invoices. A flat priced at ₹80 lakh on the cost sheet at 5% GST will show ₹4 lakh of GST, not ₹2.67 lakh. The builder is allowed to do this because the rate itself is the abated rate.
Why You Can't Claim ITC on a Home Purchase
Under the pre-2019 regime, builders could claim ITC on cement, steel, contractor services, and lift installation, and pass it on to homebuyers. Many did not pass it on transparently, which is why the GST Council switched to lower headline rates without ITC.
For residential property booked after April 1, 2019:
- The builder cannot claim ITC on inputs used for the project.
- The buyer cannot claim ITC on the GST paid to the builder.
- The 1% or 5% you pay is a final, sunk cost.
For commercial property at 12%, the chain is intact: the builder claims ITC on inputs, and a GST-registered buyer using the property for taxable business activity (renting it out, running an office, operating a shop) can claim ITC on the GST paid to the builder, subject to Section 17(5) restrictions.
If a builder tells you that you can "claim back" GST on your flat as an income-tax deduction, that is wrong. GST paid on a home purchase is not deductible under any section. Only stamp duty (and registration) is deductible under Section 80C, up to the overall ₹1.5 lakh cap.
TDS Under Section 194-IA: A Separate Obligation
GST is not the only tax in a property transaction. Under Section 194-IA of the Income Tax Act, the buyer must deduct 1% TDS at the time of payment if the sale consideration is ₹50 lakh or more. This applies whether the property is under construction or ready to move in, residential or commercial. The TDS is deposited in Form 26QB within 30 days from the end of the month of payment, and the TDS certificate (Form 16B) is issued to the seller.
Two clarifications buyers often miss:
- The ₹50 lakh threshold is on the total consideration, not on each instalment. If you are paying in tranches, deduct 1% TDS on every instalment, not just on the part above ₹50 lakh.
- The 1% TDS is separate from GST. You pay GST to the builder and deduct TDS from the builder's payment. Both happen in the same transaction but they answer to different statutes.
For the full mechanics, including how to handle joint buyers, NRIs, and home-loan disbursements, see the Section 194-IA TDS on property purchase guide.
Stamp Duty and Registration Are Not GST
Stamp duty and registration charges are state levies under the Indian Stamp Act and the Registration Act. The rates vary by state and by buyer category (women buyers often get a 1% concession). These charges apply to every property purchase, including ready-to-move-in flats and plots where no GST is collected.
A common confusion is treating the all-inclusive cost (price + GST + stamp duty + registration + brokerage) as one tax burden. They are different taxes with different governments behind them, and they need to be tracked separately for your records.
Five Mistakes Homebuyers Make
- Paying GST on a ready-to-move-in flat. If the builder shows GST on a flat that already has the OC, refuse and ask for an updated invoice. Once the CC or OC is in hand, the sale falls under Schedule III and is exempt.
- Not asking for a proper GST invoice. Builders are required to issue a tax invoice with the GSTIN, HSN/SAC code, rate, and GST amount. Without that invoice, you have no paper trail for RERA complaints, home-loan disbursements, or eventual resale.
- Paying GST in cash without an invoice. This is a red flag. Insist on bank-channel payment and a corresponding invoice for every instalment.
- Overpaying on affordable housing. If your flat meets the ₹45 lakh + 60/90 sqm test, the rate is 1%, not 5%. Some builders quote 5% by default; you have the right to ask for the affordable-housing rate where the flat qualifies, and you should see "1% under Notification 03/2019-CT(Rate)" or equivalent on the invoice.
- Missing the Section 194-IA TDS deduction. The penalty for not deducting or not depositing the 1% TDS is interest under Section 201(1A), and the assessing officer can also disallow the buyer's claim of cost on resale. Treat the TDS step as part of the payment process, not as an afterthought.
How Tax Garden Helps
For an SME founder, salaried professional, or NRI buying property in India, the GST and TDS questions usually arrive at the same time as the loan, the agreement to sell, and the registration date. Tax Garden's compliance team checks the builder's GST invoice for the correct rate, confirms whether the flat qualifies for affordable housing, files Form 26QB for the 1% TDS, and tracks the deposit so the registration is not held up. The same engagement handles the income-tax disclosure of the purchase in the next ITR.
FAQs on GST on Property Purchase
Frequently Asked Questions
Do I pay GST on a ready-to-move-in flat?
No. Once the builder obtains the Completion Certificate or Occupancy Certificate, the sale falls under Schedule III of the CGST Act and is exempt from GST. Only stamp duty and registration apply.
What is the GST rate on an under-construction affordable house in 2026?
1% with no input tax credit, provided the flat has a carpet area up to 60 sqm in a metro (or 90 sqm in a non-metro) and a total price up to ₹45 lakh.
Is GST applicable on a plot of land?
No. The sale of land is outside the scope of GST under Schedule III. This applies to bare plots, agricultural land, and residential layouts where no construction service is supplied.
Can I claim ITC on the GST I paid to the builder for my flat?
No, not for residential property booked after April 1, 2019. The 1% and 5% rates are without ITC for both the builder and the buyer. For commercial under-construction property at 12%, a GST-registered buyer using the property for taxable business can claim ITC, subject to Section 17(5).
How is the 1/3 land-value abatement applied?
The headline rates of 1% and 5% are already the abated rates, so 5% applies on the full sale consideration shown on the cost sheet. You do not deduct 1/3 separately and apply 7.5% on the rest.
Do stamp duty and registration come under GST?
No. Stamp duty and registration are state-level charges under the Indian Stamp Act and the Registration Act. They are separate from GST and apply on every property purchase, including exempt and ready-to-move transactions.
When do I need to deduct TDS under Section 194-IA?
If the total sale consideration is ₹50 lakh or more, the buyer must deduct 1% TDS on every instalment, deposit it in Form 26QB within 30 days of the end of the payment month, and issue Form 16B to the seller.
The GST rules in this guide are based on the CGST Act, 2017, the relevant entries in Schedule III, Notification 03/2019-Central Tax (Rate) effective April 1, 2019 on the new residential rate scheme, and subsequent GST Council clarifications. TDS on property purchase is governed by Section 194-IA of the Income-tax Act, 1961. For the latest position, refer to the CBIC GST portal, the Income Tax department, and explanatory guides from ClearTax and BajajFinserv. Rates, thresholds, and notifications can change with GST Council meetings, so buyers should confirm the current rate with their tax advisor before signing the agreement to sell.
