GST on Under-Construction Property in India
GST (Goods and Services Tax) applies to the purchase of under-construction residential properties in India. The current effective rate is 5% without Input Tax Credit (ITC) for non-affordable housing (properties above ₹45 lakh or larger than specified carpet area limits). No GST is charged on ready-to-move-in properties that have received an Occupancy Certificate (OC).
GST replaced a patchwork of indirect taxes (VAT, service tax, etc.) that previously applied to real estate. While the intent was simplification, the structure of GST on property can still be confusing for homebuyers. Understanding when and how much GST you pay is essential for accurate budgeting.
Current GST Rates on Residential Property
| Property Type | GST Rate | ITC Available? |
|---|---|---|
| Under-construction (non-affordable, above ₹45L) | 5% | No |
| Under-construction (affordable, up to ₹45L) | 1% | No |
| Ready-to-move-in (with OC/CC) | 0% | N/A |
| Resale property | 0% | N/A |
Important: The 5% rate is without ITC, meaning the developer cannot claim credit for GST paid on construction inputs (cement, steel, etc.) and pass the benefit to buyers. This was a change made in April 2019 to simplify the tax structure.
How GST is Calculated on Property
What is included in the taxable value?
GST is charged on the total consideration payable to the developer, minus the value attributable to the land. The government mandates a standard deduction of one-third of the total amount as land value. So effectively, GST is charged on two-thirds of the total agreement value.
Example for Fab Luxe Residences
For a 3 BHK apartment with a total consideration of ₹3.25 Cr:
- Effective GST value = 2/3 of ₹3.25 Cr = ₹2.17 Cr (approximately)
- GST at 5% = approximately ₹10.8 lakh
However, many developers include GST in the quoted BSP or total price. Always confirm with the developer whether the quoted price is inclusive or exclusive of GST.
When is GST Payable?
- GST is payable on each instalment as per the payment plan — not as a lump sum
- The developer collects GST along with each demand letter / milestone payment
- GST stops applying once the property receives its OC — any payments made after OC are GST-free
- If you buy a unit that already has OC, no GST is applicable at all
GST vs Stamp Duty: Are They Different?
Yes. GST and stamp duty are entirely separate charges. GST is a central tax on the construction service. Stamp duty is a state tax on the property transfer. You pay both on under-construction property. On ready properties (with OC), you pay only stamp duty, not GST. This means buying early in an under-construction project involves higher overall tax outgo, but potentially lower BSP (early-bird pricing).
Key Points for Homebuyers
- Budget for GST separately: It adds approximately 3-4% to your total outgo (after the land deduction)
- Confirm GST inclusion: Ask if the developer's quoted price includes or excludes GST
- Keep invoices: The developer must issue a GST-compliant invoice for every payment
- No refund available: Homebuyers cannot claim GST refund or ITC on residential property purchases
Related Terms
Get a Transparent Cost Sheet
BSP, GST, stamp duty, registration — every cost itemised for Fab Luxe Residences.