Under-Construction Property GST: Rates and Rules for 2026

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 entire consideration is received after the Completion Certificate (CC) is issued or after first occupation, whichever is earlier, the sale is treated as a sale of a building. Under Schedule III of the CGST Act, 2017, the sale of land and, subject to Schedule II para 5(b), the sale of a building are neither a supply of goods nor of services. 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)

Tax Rate Chart

GST Rates on Property Purchase (Post-April 2019)

Rates effective from April 1, 2019 under the GST Council's revised residential real estate scheme

Affordable Housing (Metro) : up to 60 sqm, up to Rs. 45 lakh

No ITC for builder or buyer

1%

Affordable Housing (Non-Metro) : up to 90 sqm, up to Rs. 45 lakh

No ITC for builder or buyer

1%

Other Residential Under-Construction : above Rs. 45 lakh or larger area

No ITC for builder or buyer

5%

Commercial Under-Construction (shops, offices)

Depends on project classification; confirm with the builder

Varies

Plot / Land Only

Outside scope of GST under Schedule III

Nil

Ready-to-Move-In (full price paid after CC)

Sale of a building, outside GST under Schedule III

Nil

Source: CGST Act 2017, Schedule III; Notification 11/2017-Central Tax (Rate) as amended by Notification 03/2019-Central Tax (Rate), effective April 1, 2019

In early 2019 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. The GST 2.0 rate changes from 22 September 2025 did not alter these residential rates, so they remain in force in 2026.

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 (a one-time option for ongoing projects). 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

The rate notification deems one-third of the total amount charged for the flat to be the value of land, and taxes the remaining two-thirds (the construction component). The notified rates on that two-thirds value are 1.5% (affordable) and 7.5% (other residential). Two-thirds of 1.5% is 1%, and two-thirds of 7.5% is 5%. So the 1% and 5% rates on the cost sheet are the effective rates on the full agreement price, and the builder should not apply them to only two-thirds of the price.

This matters when you compare builder invoices. A flat priced at Rs. 80 lakh on the cost sheet at 5% GST will show Rs. 4 lakh of GST, not Rs. 2.67 lakh. Rs. 4 lakh is 7.5% of the two-thirds construction value (Rs. 53.33 lakh), which is the same as 5% of Rs. 80 lakh.

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.

Commercial units (shops, offices) follow a separate rate scheme that depends on how the project is classified, and whether ITC is available depends on that scheme and on the Section 17(5) restrictions. Commercial units are outside the scope of this guide; ask the builder which entry of the rate notification applies before you sign.

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. For FY 2025-26, only stamp duty and registration charges are deductible under Section 80C of the Income-tax Act 1961, within the overall Rs. 1.5 lakh cap and only under the old tax regime.

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 (or stamp duty value, if higher) is Rs. 50 lakh or more. This applies whether the property is under construction or ready to move in, residential or commercial. For payments up to 31 March 2026, the TDS is deposited with Form 26QB within 30 days from the end of the month of deduction, and the TDS certificate (Form 16B) is issued to the seller. From 1 April 2026, under the Income-tax Act 2025, the corresponding forms are Form 141 (in place of 26QB) and Form 132 (in place of 16B).

Two clarifications buyers often miss:

1. The Rs. 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 Rs. 50 lakh.
2. 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

1. 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. If the entire price is paid after the CC is issued or after first occupation, the sale falls under Schedule III and is outside GST.
2. 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.
3. Paying GST in cash without an invoice. This is a red flag. Insist on bank-channel payment and a corresponding invoice for every instalment.
4. Overpaying on affordable housing. If your flat meets the Rs. 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 the invoice should show the 1% rate.
5. Missing the Section 194-IA TDS deduction. Not deducting or not depositing the 1% TDS attracts interest under Section 201(1A) of the Income-tax Act 1961 (for FY 2025-26). 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, checks whether the flat qualifies for affordable housing, files the TDS statement (Form 26QB, or Form 141 from 1 April 2026) 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.

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The GST rules in this guide are based on the CGST Act, 2017, the relevant entries in Schedule III, Notification 11/2017-Central Tax (Rate) as amended by Notification 03/2019-Central Tax (Rate) effective April 1, 2019 on the new residential rate scheme. TDS on property purchase is governed by Section 194-IA of the Income-tax Act, 1961 for payments up to 31 March 2026, and by the Income-tax Act 2025 from 1 April 2026. For the latest position, refer to the CBIC GST portal and the Income Tax department. 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.

Frequently Asked Questions

Is GST payable on a flat bought after the occupancy certificate is issued?

No. If the entire price is paid after the completion certificate is issued or after first occupation, whichever is earlier, the sale is a sale of a building, which Schedule III keeps outside GST. You pay stamp duty and registration charges to the state, but no GST. If a builder shows GST on a flat that already has the certificate, ask for a corrected invoice.

How do I know if my under-construction flat qualifies for 1% GST?

Affordable housing at 1% needs a carpet area up to 60 sq m in metro cities or 90 sq m elsewhere, and a value up to Rs 45 lakh. Hyderabad, Bengaluru, Chennai, Delhi-NCR, Kolkata and Mumbai region count as metros. Flats that do not meet both tests are taxed at 5%, and in either case neither the builder nor the buyer gets input tax credit.

Is the 5% GST charged on the full flat price or only on construction cost?

On the full agreed price, excluding stamp duty and registration. The rate notification deems one-third of the price to be land and taxes the other two-thirds at 7.5% (or 1.5% for affordable housing), which works out to 5% (or 1%) of the full price. On an Rs 80 lakh flat at 5%, GST is Rs 4 lakh.

Can I claim GST paid on my new home as an income tax deduction?

No. GST paid to a builder on a residential flat is not deductible under any income-tax provision, and a home buyer cannot claim input tax credit on it either. For FY 2025-26, stamp duty and registration charges can be claimed within the Rs 1.5 lakh Section 80C limit of the Income-tax Act 1961, but only under the old tax regime, in the year they are paid.

Does the 1% TDS on property purchase apply along with GST?

Yes, they are separate. If the price (or stamp duty value, if higher) is Rs 50 lakh or more, the buyer deducts 1% TDS from each instalment paid to the builder and deposits it with the Income Tax Department, while GST is paid to the builder on top. TDS is worked out on the price, and interest applies if it is not deducted or deposited on time.