GST on under-construction apartments explained
GST on under-construction apartments is an indirect tax charged at 1% for affordable homes and 5% for standard flats without any tax credit to the builder. The law taxes these flats because buying before completion counts as hiring a building service. Completed apartments that already have an official completion certificate (CC) or occupancy certificate (OC) do not attract any GST at all.
The law automatically removes one-third of the total flat cost as the price of the land. That means you only pay tax on the remaining two-thirds of the property price. Buying an under-construction home changes your payment dates, your upfront cash needs, and the total money you pay out of pocket.
When Does a Flat Attract GST?
GST applies to a residential flat only when you pay money or sign an agreement before the local municipal office issues a completion or occupancy certificate. Once the builder gets this completion paper, the flat turns into finished real estate and becomes completely tax-free under GST laws.
- Buying Early: Any booking made while construction is going on attracts 1% or 5% tax based on the size and price of the flat.
- Buying After Completion: Flats bought after the completion certificate is granted carry 0% GST.
- Resale Homes: Buying an old flat from an existing individual owner never attracts GST.
Simple GST Rates: Affordable vs Non-Affordable Flats
The government divides under-construction flats into two clear groups: 1% for small affordable flats and 5% for all other standard flats, with no tax credits passed to buyers. A flat gets the lower 1% rate only if it meets both the size limit and the price cap at the same time:
| Flat Type | Maximum Size | Maximum Price | Final GST Rate | Builder Tax Credit |
|---|---|---|---|---|
| Affordable (Metro Cities) | Up to 60 sq. m. (~646 sq. ft.) | Up to ₹45 Lakhs | 1% | No |
| Affordable (Non-Metro Cities) | Up to 90 sq. m. (~968 sq. ft.) | Up to ₹45 Lakhs | 1% | No |
| Standard / Luxury | Bigger than metro limits | Above ₹45 Lakhs | 5% | No |
| Shops Inside Buildings | Any size | Any price | 12% | Yes |
Metro areas include Chennai, Bengaluru, Delhi-NCR, Mumbai, Hyderabad, and Kolkata. If a flat in Chennai is small at 55 sq. m. but costs ₹50 Lakhs, it crosses the ₹45 Lakh mark and gets taxed at 5%.
How the One-Third Land Rule Works in Simple Numbers
The tax department treats one-third (33.33%) of the flat price as the land value. GST is then charged on the remaining two-thirds (66.67%) of the price. This calculation is used to work out the taxable value of an under-construction flat.
- Agreement Price: ₹1,00,00,000 (₹1 Crore)
- Land Value Taken Out (33.33%): ₹33,33,333
- Taxable Construction Part (66.67%): ₹66,66,667
- GST on Construction (7.5% on taxable part = 5% overall): ₹5,00,000
- Total Cost Before State Stamp Duty: ₹1,05,00,000
State stamp duty and registration fees are separate state government charges. You must pay them on top of the GST amount.
Real Example: GST on Prestige Park Street in Velachery, Chennai
Prestige Park Street is an under-construction luxury project by Prestige Group at 140 Velachery 100 Ft Road in Chennai, spread over 3.48 acres with 252 large apartments across 4 towers. The project offers 3 BHK and 4 BHK layouts starting from 2,280 sq. ft., with launch prices beginning at ₹4 Crores, placing every home firmly in the 5% GST bracket.
- Total Tax on Booking: A starting 3 BHK flat priced at ₹4.00 Crores carries an exact 5% GST of ₹20,00,000, bringing the agreement total to ₹4.20 Crores.
- Step-by-Step Payments: With site work beginning in October 2026 and keys promised for October 2030, buyers pay this ₹20,00,000 in small parts as each floor slab is poured.
- No Input Tax Credit: The builder must pay full taxes on raw materials like steel and cement, but cannot deduct these costs from the buyer's 5% GST bill.
- Saving Tax at Completion: Any apartment in the 4 towers left unsold until the local planning body issues the completion certificate will be sold at 0% GST.
FAQs
No, you do not pay a single rupee of GST on a ready flat. Once the builder gets the completion certificate from the city office, the building is legally finished. The government sees this as buying an existing property, not paying for construction work, so it is completely tax-free under GST.
No, regular homebuyers cannot claim back the GST they pay. When the government dropped the tax down to 1% and 5%, it removed tax credits for buyers and builders. What you pay in GST is an outright cost and cannot be set off or claimed back.
Yes, you will. Extra costs like car parking, club access, or a higher-floor fee are bundled right into your main flat deal. Because they are part of the same purchase, they carry the same GST rate as your flat either 1% or 5%.
Yes, a GST refund may be possible if you cancel an under-construction flat booking. The builder can cancel the tax invoice and refund the GST collected from you. The refund depends on the applicable GST rules and the builder's process.
