Key Takeaways on GST for Under Construction Flats
- GST on under construction flats in India: 5% for non-affordable residential properties, 1% for affordable housing—both without Input Tax Credit (ITC) (verify current rates on cbic.gov.in).
- The effective GST rate is lower: after a mandatory one-third deduction for land, the effective rate is ~3.33% for the 5% category and ~0.67% for the 1% category.
- Ready-to-move flats with an Occupancy Certificate (OC) or Completion Certificate (CC) attract 0% GST—no tax on the transaction[reference:16].
- Affordable housing qualification: carpet area ≤60 sq m in metros (≤90 sq m elsewhere) and price ≤₹45 lakh[reference:17].
- GST is separate from Stamp Duty (5-7%), Registration (~1%), and TDS (1% under Section 194-IA)—budget roughly 11-13% over the base price[reference:18].
If you are buying an under-construction flat in 2026, GST is one of the largest additional costs you will pay—after the base price, stamp duty, and registration charges. Many homebuyers misunderstand the headline GST rate, miss the one-third land deduction that lowers the taxable base, and fail to plan for when GST stops applying entirely[reference:19].
This guide covers everything about GST on under construction flats in 2026: applicable rates, the land deduction that reduces your tax, how to calculate what you owe, affordable housing criteria, when GST stops applying, and the total cost breakdown beyond just GST.
Looking for expert help with GST on under construction flats, under construction flat GST calculator, GST on flat purchase India? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
GST Rates on Under Construction Flats in 2026
The GST rate structure for under-construction residential properties has been in place since 1 April 2019, when the GST Council updated the rates. This structure remains fully operative in 2026[reference:20][reference:21].
| Property Type | GST Rate | ITC Available |
|---|---|---|
| Affordable housing (under construction) | 1% | ❌ No |
| Non-affordable residential (under construction) | 5% | ❌ No |
| Commercial property (under construction) | 18% | ✅ Yes (ITC available) |
| Ready-to-move (with OC/CC) | 0% | Not applicable |
| Resale property | 0% | Not applicable |
| Sale of land/plots | 0% | Not applicable |
Verify current rates on cbic.gov.in before calculating deductions.
⚠️ Important: Since 1 April 2019, developers of residential projects taxed at 5% or 1% cannot claim Input Tax Credit (ITC) on inputs or services used in construction[reference:22][reference:23]. This "no-ITC" regime simplifies the final tax calculation for homebuyers but means developers cannot pass on ITC benefits to buyers.
The One-Third Land Deduction: How Effective GST Works
This is the most misunderstood aspect of GST on under construction flats. The 5% and 1% rates apply to the property's taxable value—which is two-thirds of the total agreement price after a mandatory one-third deduction for land[reference:24].
Why? GST is a tax on construction services, not on land. Since most transactions do not clearly separate the land component, the law allows a standard one-third deduction for land and imposes GST on the remaining two-thirds[reference:25].
Effective GST Rates After Land Deduction
| Category | Notified Rate | Taxable Value | Effective Rate on Total Price |
|---|---|---|---|
| Non-affordable | 5% | 2/3 of agreement value | ~3.33% |
| Affordable | 1% | 2/3 of agreement value | ~0.67% |
Example: GST Calculation on a ₹80 Lakh Flat
Facts:
- Flat price: ₹80,00,000
- Category: Non-affordable (5% GST)
- Land deduction: 1/3 of ₹80,00,000 = ₹26,66,667
- Taxable value: ₹80,00,000 - ₹26,66,667 = ₹53,33,333
- GST @ 5% on taxable value: ₹2,66,667
- Effective GST on total price: ~3.33%
| Component | Amount |
|---|---|
| Total agreement value | ₹80,00,000 |
| Less: Land deduction (1/3) | (₹26,66,667) |
| Taxable value | ₹53,33,333 |
| GST @ 5% | ₹2,66,667 |
| Effective GST rate | ~3.33% |
Affordable Housing: The 1% GST Rate
To qualify for the 1% GST rate, a property must meet both conditions[reference:26]:
| Condition | Metro Cities* | Non-Metro Cities |
|---|---|---|
| Maximum carpet area | 60 sq m | 90 sq m |
| Maximum price | ₹45 lakh | ₹45 lakh |
*Metro cities include: Mumbai (entire metropolitan region), Delhi-NCR, Bengaluru, Chennai, Hyderabad, and Kolkata[reference:27].
Example: An under-construction flat in Bengaluru with 55 sq m carpet area priced at ₹42 lakh qualifies for 1% GST. The same flat priced at ₹48 lakh would not qualify—it would attract 5% GST.
⚠️ Note: Verify current affordable housing criteria on cbic.gov.in, as definitions may be updated periodically.
When Does GST Stop Applying?
GST applies only to construction supplied as a service—that is, where consideration is received before a Completion Certificate (CC) or Occupancy Certificate (OC) is issued[reference:28].
Timeline of GST Applicability
| Stage | GST Applicability |
|---|---|
| Booking an under-construction flat | ✅ GST applies (5% or 1%) |
| During construction period | ✅ GST applies on each payment |
| After OC/CC is issued | ❌ No GST (0%) |
| Resale of completed property | ❌ No GST (0%) |
| Sale of land/plots | ❌ No GST (0%) |
Practical takeaway: Buying a ready-to-move flat with a valid OC/CC saves the entire 1-5% GST[reference:29]. The trade-off is usually a higher sticker price and the loss of construction-linked payment flexibility.
GST vs Stamp Duty vs Registration: The Full Cost Breakdown
GST is only one component of the total cost of buying a flat. Here is how the costs break down:
| Cost Component | Applicable Rate | On What Basis |
|---|---|---|
| GST (under construction) | 5% or 1% (effective ~3.33% or ~0.67%) | Taxable value (after land deduction) |
| Stamp Duty | 5-7% (varies by state) | Agreement value or circle rate (higher) |
| Registration Charges | ~1% | Agreement value |
| TDS (under Section 194-IA) | 1% | Consideration exceeding ₹50 lakh |
Total additional cost: Budget roughly 11-13% over the base price on a non-affordable flat[reference:30].
GST 2.0: What Changed in 2025?
Effective 22 September 2025, the GST 2.0 reforms brought changes to the real estate sector[reference:31]:
| Change | Before GST 2.0 | After GST 2.0 |
|---|---|---|
| Commercial under-construction | 12% with ITC | 18% with ITC |
| Residential (non-affordable) | 5% without ITC | 5% without ITC (unchanged) |
| Affordable housing | 1% without ITC | 1% without ITC (unchanged) |
| Cement GST rate | 28% | 18% (developer cost saving) |
What this means for homebuyers: The GST 2.0 reforms did not touch residential output rates[reference:32]. The 5% and 1% rates remain unchanged. However, lower GST on construction materials (cement 28% → 18%) may reduce developer costs, potentially benefiting buyers through competitive pricing.
Buyer's Checklist: GST on Under Construction Flats
Use this checklist before signing an agreement for an under-construction flat:
- Verify if the property qualifies as affordable housing — check carpet area and price against the ₹45 lakh cap
- Confirm the GST rate — 1% (affordable) or 5% (non-affordable) (verify current rates on cbic.gov.in)
- Ask the developer for the land deduction — ensure the one-third land deduction is applied correctly
- Check if OC/CC is already issued — if yes, GST is 0%
- Calculate total cost — GST + Stamp Duty + Registration + TDS
- Verify no ITC is being passed on — for residential under-construction, ITC is not available
- Get a GST invoice — the developer must issue a tax invoice for each payment
- Keep all payment records — for future reference and potential claims
Common Mistakes Homebuyers Make
1. Assuming the 5% rate applies to the full agreement value
The 5% (or 1%) applies to the taxable value after the one-third land deduction. The effective GST is ~3.33% or ~0.67% of the total price[reference:33].
2. Not checking affordable housing status
Many flats priced just above ₹45 lakh or with slightly larger carpet area miss the 1% rate. Verify both conditions before assuming you qualify.
3. Paying GST on ready-to-move flats
If the property has an OC or CC, no GST is payable. Some developers may incorrectly charge GST—verify the certificate before paying[reference:34].
4. Confusing GST with Stamp Duty
GST is charged by the central government on construction services; Stamp Duty is charged by the state government on property transfer[reference:35]. They are separate and both apply.
5. Forgetting TDS under Section 194-IA
If the consideration exceeds ₹50 lakh, the buyer must deduct 1% TDS and deposit it with the government[reference:36]. This is separate from GST.
6. Not planning for the total cost
GST is just one component. Budget for Stamp Duty (5-7%), Registration (~1%), and TDS (1%) on top of the base price and GST[reference:37].
Where Tax Garden Helps
Buying an under-construction flat involves multiple tax calculations: GST after land deduction, Stamp Duty, Registration, and TDS. Tax Garden's CAs help you:
- Calculate exact GST on your flat purchase after the land deduction
- Verify affordable housing status and applicable GST rate
- Review the developer's GST invoice for correctness
- Plan for total cost including Stamp Duty, Registration, and TDS
- Ensure GST compliance for your transaction
Looking for expert help with GST on under construction flats, under construction flat GST calculator, GST on flat purchase India? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
GST on Under Construction Flats: FAQs
What is the GST rate on under construction flats in India in 2026?
Under construction flats attract 5% GST for non-affordable residential properties and 1% GST for affordable housing. Both are without Input Tax Credit (ITC). Verify current rates on cbic.gov.in before calculating.
What is the effective GST rate after the land deduction?
After the mandatory one-third land deduction, the effective GST is ~3.33% for the 5% category and ~0.67% for the 1% category. For example, on an ₹80 lakh flat, the effective GST is ~₹2.67 lakh (~3.33%).
What qualifies as affordable housing for 1% GST?
A property qualifies if it meets both conditions: carpet area ≤60 sq m in metros (≤90 sq m elsewhere) and price ≤₹45 lakh. Verify current criteria on cbic.gov.in.
Do I pay GST on ready-to-move flats?
No. Ready-to-move flats with an Occupancy Certificate (OC) or Completion Certificate (CC) attract 0% GST. The transaction becomes a sale of immovable property, which is outside GST.
What is the difference between GST and Stamp Duty?
GST is charged by the central government on construction services (under-construction flats). Stamp Duty is charged by the state government on property transfer. Both apply separately.
When does GST stop applying on an under-construction flat?
GST stops applying once the builder receives the Occupancy Certificate (OC) or Completion Certificate (CC) from the competent authority. After that, the sale is treated as a transfer of immovable property and is exempt from GST.
Can I claim Input Tax Credit (ITC) on GST paid for my under-construction flat?
No. For residential under-construction properties (both affordable and non-affordable), ITC is not available. The no-ITC regime has been in place since 1 April 2019.
What is the total additional cost beyond the base price for an under-construction flat?
Budget roughly 11-13% over the base price: GST (5% or 1%, effective ~3.33% or ~0.67%), Stamp Duty (5-7%), Registration (~1%), and TDS (1% if consideration exceeds ₹50 lakh).
Did GST 2.0 change the rates for residential under-construction flats?
No. GST 2.0 (effective 22 September 2025) did not change residential output rates. The 5% and 1% rates remain unchanged. However, commercial under-construction rates increased from 12% to 18% with ITC.
Sources: CGST Act 2017; Notification 11/2017-CT(R); Notification 3/2019-CT(R); GST 2.0 revisions effective 22 September 2025; CBIC notifications dated 29 March 2019. Verify current rates, affordable housing criteria, and notifications on cbic.gov.in before acting, as rules may be updated periodically. This article is general information on GST for under construction flats and not a substitute for advice on your specific situation.
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