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 how the headline GST rate works with the one-third land deduction, and fail to plan for when GST stops applying entirely.
This guide covers GST on under construction flats in 2026: applicable rates, how the land deduction is built into those rates, how to calculate what you owe, affordable housing criteria, when GST stops applying, and the total cost beyond GST.
GST Rates on Under Construction Flats in 2026
The GST rate structure for residential apartments in real estate projects has applied since 1 April 2019 (Notification 3/2019-Central Tax (Rate), amending Notification 11/2017-Central Tax (Rate)). The GST 2.0 rate changes from 22 September 2025 did not alter these rates, so they remain in force in 2026.
| Property Type | GST on total price (land deduction already applied) | ITC for the builder |
|---|---|---|
| Affordable residential apartment (under construction) | 1% | No |
| Other residential apartment (under construction) | 5% | No |
| Ready-to-move flat, entire price paid after completion certificate or first occupation | No GST | Not applicable |
| Resale of a completed flat | No GST | Not applicable |
| Sale of land or plots | No GST | Not applicable |
Commercial units (shops, offices) follow different rules and are outside the scope of this guide.
Important: Since 1 April 2019, developers of new residential projects taxed at 5% or 1% cannot claim Input Tax Credit (ITC) on inputs or services used in construction. This means the builder's tax paid on materials is a cost built into the flat price, and no ITC benefit is passed on to buyers. (For projects already ongoing on 1 April 2019, builders had a one-time option to stay on the older 8%/12% rates with ITC.)
The One-Third Land Deduction: How Effective GST Works
This is the most misunderstood aspect of GST on under construction flats. GST is a tax on construction, not on land. The rate notification therefore deems the value of land to be one-third of the total amount charged for the flat, and taxes the remaining two-thirds.
The notified rates are 1.5% (affordable) and 7.5% (other residential) on that two-thirds value. Two-thirds of 1.5% is 1%, and two-thirds of 7.5% is 5%. So the 1% and 5% rates you see quoted are already the effective rates on the full agreement price. A builder should charge 5% (or 1%) on the full price, not 5% on two-thirds of it, and not a further deduction on top.
Effective GST Rates After Land Deduction
| Category | Notified rate on two-thirds value | Effective rate on total price |
|---|---|---|
| Other residential | 7.5% | 5% |
| Affordable | 1.5% | 1% |
Example: GST Calculation on a Rs. 80 Lakh Flat
| Component | Amount |
|---|---|
| Total agreement value (excluding stamp duty and registration) | Rs. 80,00,000 |
| Less: Deemed land value (1/3) | Rs. 26,66,667 |
| Value of construction (2/3) | Rs. 53,33,333 |
| GST @ 7.5% on construction value | Rs. 4,00,000 |
| Effective GST on total price | 5%, i.e. Rs. 4,00,000 |
The quick way: 5% x Rs. 80,00,000 = Rs. 4,00,000.
Affordable Housing: The 1% GST Rate
To qualify for the 1% GST rate, a flat must meet both conditions:
| Condition | Metro Cities* | Non-Metro Cities |
|---|---|---|
| Maximum carpet area | 60 sq m | 90 sq m |
| Maximum gross amount charged | Rs. 45 lakh | Rs. 45 lakh |
*Metro cities for this purpose: Bengaluru, Chennai, Delhi-NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurugram and Faridabad), Hyderabad, Kolkata and Mumbai (whole of the Mumbai Metropolitan Region).
Example: An under-construction flat in Bengaluru with 55 sq m carpet area priced at Rs. 42 lakh qualifies for 1% GST (Rs. 42,000). The same flat priced at Rs. 48 lakh would not qualify; it would attract 5% GST (Rs. 2,40,000).
When Does GST Stop Applying?
GST applies to construction supplied as a service, that is, where consideration is received before the completion certificate is issued or before first occupation, whichever is earlier. A sale of a building where the entire consideration is received after that point is neither a supply of goods nor services (Schedule III, CGST Act).
Timeline of GST Applicability
| Stage | GST Applicability |
|---|---|
| Booking an under-construction flat | GST applies (5% or 1%) |
| Instalments during construction | GST applies on each payment received |
| Payments after completion certificate or first occupation | No GST |
| Resale of completed property | No GST |
| Sale of land or plots | No GST |
Practical takeaway: Buying a ready-to-move flat with a completion or occupancy certificate avoids the 1% or 5% GST. 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 | Rate | Basis |
|---|---|---|
| GST (under construction) | 5% or 1% | Total agreement value (land deduction already built in) |
| Stamp duty | Set by each state | Agreement value or government guideline value, whichever is higher |
| Registration charges | Set by each state | As per state rules |
| TDS (Section 194-IA; Section 393 of the Income-tax Act 2025 from 1 April 2026) | 1% | Deducted from the price when consideration is Rs. 50 lakh or more; not an extra cost |
Check your state's stamp and registration department for current rates before budgeting.
GST 2.0: What Changed in 2025?
From 22 September 2025, the GST 2.0 changes recommended by the 56th GST Council meeting moved most goods to 5% and 18% slabs. For real estate:
| Item | Before 22 Sep 2025 | From 22 Sep 2025 |
|---|---|---|
| Affordable residential apartment | 1% (no ITC) | 1% (no ITC), unchanged |
| Other residential apartment | 5% (no ITC) | 5% (no ITC), unchanged |
| Cement | 28% | 18% |
What this means for homebuyers: The GST 2.0 reforms did not change the rates on residential flats. Lower GST on some building materials such as cement may reduce developer costs, but whether that reaches buyers depends on the builder's pricing.
Buyer's Checklist: GST on Under Construction Flats
Use this checklist before signing an agreement for an under-construction flat:
- Check affordable housing status: carpet area (60 or 90 sq m) and price (up to Rs. 45 lakh)
- Confirm the GST rate: 1% (affordable) or 5% (other residential) on the full agreement value
- Check the builder's calculation: GST should be 1% or 5% of the price, not a higher or double-counted figure
- Check if a completion certificate is already issued: if yes, and you pay after it, no GST applies
- Calculate total cost: GST + Stamp Duty + Registration (TDS is deducted from the price, not added)
- Get a GST invoice: the developer must issue a tax invoice for each payment received
- Keep all payment records: with dates, to show which payments were made before and after the certificate
Common Mistakes Homebuyers Make
1. Applying the land deduction twice
The 5% (or 1%) already reflects the one-third land deduction. Calculating 5% on only two-thirds of the price (about 3.33%) understates the GST the builder must charge, and a quote on that basis will be revised later.
2. Not checking affordable housing status
Many flats priced just above Rs. 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 entire price is paid after the completion certificate or first occupation, no GST is payable. Verify the certificate and its date before paying.
4. Confusing GST with stamp duty
GST (CGST and SGST) is charged on construction services; stamp duty is a state levy on the transfer document. They are separate and both apply to an under-construction purchase.
5. Forgetting TDS on property purchase
If the consideration (or stamp duty value, if higher) is Rs. 50 lakh or more, the buyer must deduct 1% TDS from each payment and deposit it. For payments up to 31 March 2026 this is Section 194-IA with Form 26QB; from 1 April 2026 the Income-tax Act 2025 applies and the challan-cum-statement is Form 141. This is separate from GST.
6. Not planning for the total cost
GST is just one component. Budget for your state's stamp duty and registration charges on top of the base price and GST.
Where Tax Garden Helps
Buying an under-construction flat involves several tax calculations: GST, stamp duty, registration and TDS. Tax Garden helps you:
- Check the GST charged on your flat purchase
- Verify affordable housing status and the applicable GST rate
- Review the developer's GST invoice for correctness
- Plan for total cost including stamp duty, registration and TDS
- File TDS on property (Form 26QB, or Form 141 from 1 April 2026) on time
Sources: CGST Act 2017, Schedule II para 5(b) and Schedule III para 5; Notification 11/2017-Central Tax (Rate) as amended by Notification 3/2019-Central Tax (Rate) dated 29 March 2019; 56th GST Council recommendations effective 22 September 2025. This article is general information on GST for under construction flats and not a substitute for advice on your specific situation.
Frequently Asked Questions
How much GST will I pay on an Rs 80 lakh under-construction flat?
For a flat that does not qualify as affordable housing, GST is 5% of the agreed price, excluding stamp duty and registration, so Rs 4 lakh on an Rs 80 lakh flat. The one-third deduction for land is already built into this 5% effective rate, so the builder should not apply 5% to only two-thirds of the price.
Does my flat qualify for the 1% affordable housing GST rate?
It must meet both tests: carpet area up to 60 sq m in a metro city or 90 sq m elsewhere, and a value up to Rs 45 lakh. Hyderabad, Bengaluru, Chennai, Delhi-NCR, Kolkata and the Mumbai region are metros. A 55 sq m Bengaluru flat at Rs 42 lakh pays 1%, but the same flat at Rs 48 lakh pays 5%.
Do I pay GST on instalments paid after the occupancy certificate is issued?
No. GST applies to consideration for construction received before the completion or first occupation certificate. Payments made after the certificate is issued, and purchases of flats that already have it, are sales of a completed building and fall outside GST. Keep a copy of the certificate and its date with your payment receipts.
Did the September 2025 GST changes increase or reduce GST on flats?
Neither for buyers directly. The 1% and 5% rates on residential units in real estate projects, both without input tax credit, were not changed. Lower GST on some building materials, such as cement moving from 28% to 18%, may reduce developer costs, but whether that reaches buyers depends on pricing, not on the tax rate on your flat.
What should I budget for besides GST when buying an under-construction flat?
Plan for stamp duty and registration charges set by your state, and deduct 1% TDS from each payment to the builder if the total price is Rs 50 lakh or more. TDS is not an extra cost, since it is part of the price paid on the builder's behalf, but it must be deposited on time. Brokerage, if any, carries 18% GST.
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