GST on Real Estate: Rules for Under-Construction and Ready Properties
GST applies to under-construction properties but not to ready-to-move flats. Understand the current GST rates, input tax credit rules, and how GST affects your property purchase.
KASDEALS Editorial
December 30, 2025·5 min read
Introduction
GST on real estate was introduced in 2017 and significantly revised in 2019. The tax applies primarily to under-construction properties, while ready properties with OC are exempt. Understanding GST implications is crucial when buying new property.
GST Rates on Property
Current Rates (After April 2019)
| Property Type | GST Rate | ITC |
|---|---|---|
| Affordable housing (≤₹45 lakh) | 1% | No |
| Regular residential (under-construction) | 5% | No |
| Commercial property | 12% | Yes |
| Ready property with OC | 0% | N/A |
| Resale property | 0% | N/A |
Before vs After April 2019
| Aspect | Before April 2019 | After April 2019 |
|---|---|---|
| Affordable housing | 8% with ITC | 1% without ITC |
| Regular housing | 12% with ITC | 5% without ITC |
| Builder's choice | Could pass ITC | Must price accordingly |
What is Affordable Housing?
Definition for GST
Criteria (both must be met):
| City Category | Carpet Area | Property Value |
|---|---|---|
| Metro cities | ≤60 sq m (645 sq ft) | ≤₹45 lakh |
| Non-metro | ≤90 sq m (968 sq ft) | ≤₹45 lakh |
Metro cities: Delhi-NCR, Mumbai-MMR, Chennai, Kolkata, Bangalore, Hyderabad, Pune, Ahmedabad
If Either Condition Fails
Property treated as non-affordable, GST at 5% applies.
When GST Applies
Taxable Transactions
- Sale of under-construction property
- Sale of property without OC
- Sale by builder/developer
- Part-payment before OC
Non-Taxable Transactions
- Sale of ready property (with OC/CC)
- Resale by individual (not builder)
- Sale of land only
- Sale of property after OC obtained
GST Calculation
On Agreement Value
For ₹80 lakh under-construction flat:
Agreement value: ₹80 lakh
Land value (1/3 of total, exempt): ₹26.67 lakh
Construction value (2/3): ₹53.33 lakh
GST at 5% on construction = ₹2.67 lakh
Total payable: ₹80 lakh + ₹2.67 lakh = ₹82.67 lakh
Practical Application
Most builders now include GST in the advertised price. Verify if price is "inclusive" or "exclusive" of GST.
Input Tax Credit (ITC) Rules
What Changed in 2019
Before April 2019:
- Builders could claim ITC on inputs
- GST rate was higher (12%)
- Net cost similar after ITC adjustment
After April 2019:
- No ITC available to builders
- Lower GST rate (5%)
- Simplified structure
Impact on Buyers
- Prices should have reduced marginally
- Simpler calculation
- No ITC benefit to claim
GST on Different Components
Construction-Linked Payment
| Component | GST |
|---|---|
| Booking amount | 5% (included) |
| Milestone payments | 5% on each |
| Final payment before OC | 5% |
| Payment after OC | No GST |
Other Charges
| Charge | GST Treatment |
|---|---|
| Preferential location | Taxable at 5% |
| Floor rise | Taxable at 5% |
| Parking | Taxable at 5% (if under-construction) |
| Club membership | 18% (separate service) |
| Maintenance advance | Exempt (if society collects) |
GST on Composite Contracts
What's Composite
- Turnkey projects
- Works contract (construction + materials)
- EPC contracts
Rates
| Type | GST Rate |
|---|---|
| Construction service | 12% |
| Works contract for government | 12% |
| Original works for government | 12% |
GST and Land Value
Land is Exempt
GST doesn't apply to land portion of property.
Valuation Rule
For residential, land value is deemed 1/3 of total.
Effective calculation:
GST = 5% of Agreement Value × (2/3)
Effective rate = 3.33% of Agreement Value
Commercial Property GST
Higher Rate Applies
- 12% GST on commercial
- ITC available to builder
- ITC available to buyer (if registered)
For Business Buyers
- Can claim ITC on GST paid
- Requires GST registration
- Offset against GST liability
GST Credits for Builders
New Rules (80:20)
Builders must source:
- 80% of inputs from registered suppliers
- If not, pay tax on shortfall
Purpose:
- Formalize construction sector
- Ensure proper tax chain
- Reduce cash transactions
Documentation for GST
What Buyer Should Get
- GST invoice from builder
- Builder's GSTIN
- SAC code for service
- Breakup showing GST
Verify
- Builder is GST registered
- GST shown matches 5%/1%
- GSTIN is valid (verify on GST portal)
Common Questions
Q: GST on Stamp Duty?
A: No. Stamp duty is state levy, separate from GST.
Q: GST on Resale?
A: No GST on resale by individuals (not dealers).
Q: GST Refund if Project Delayed?
A: GST paid is not refundable, but included in any refund amount.
Q: GST on EMI?
A: GST is on property value, not on loan. Interest paid to bank has no GST.
Q: Can I Claim GST Paid as Deduction?
A: No separate deduction. It's part of property cost for capital gains purposes.
Tips for Buyers
1. Check Affordable Housing Eligibility
If borderline, ask builder to structure for ₹45 lakh to get 1% rate.
2. Negotiate Post-OC Payment
Payments after OC don't attract GST. Negotiate timing if possible.
3. Verify Invoice
Ensure GST rate charged matches eligible category.
4. Factor in Total Cost
When comparing builders, factor GST into total cost.
Conclusion
GST has simplified taxation on new property, but buyers must understand when it applies. Under-construction attracts 5% GST (1% for affordable), while ready properties with OC are exempt. Always verify builder's GST registration and ensure proper invoicing for your records.
Written by
KASDEALS Editorial
Expert contributor at KASDEALS, providing insights and analysis on India's real estate market.
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