GST on Builder and Construction Services: What Buyers Should Know
Buying a new home or investing in a property under construction? One major cost factor you can’t ignore is GST on builder and construction services. Whether it’s a residential flat, villa, or commercial unit, understanding how GSTapplies to builders and developers is key to planning your finances and avoiding hidden costs.
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Is GST Applicable on Builder Services?
Yes, GST (Goods and Services Tax) is applicable when you buy a property under construction from a builder or developer. However, if the property is completed and has a Completion Certificate (CC), then no GST is applicable.
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GST on Under Construction Property
| Type of Property | GST Rate | Input Tax Credit (ITC) | Remarks |
|---|---|---|---|
| Affordable housing project | 1% | Not allowed | Unit cost should be ≤ ₹45 lakhs |
| Non-affordable housing | 5% | Not allowed | No ITC under this scheme |
| Commercial property (under construction) | 12% | Allowed | ITC allowed for commercial spaces |
| Ready-to-move property (with CC) | 0% | Not applicable | GST not applicable post CC issuance |
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Who Pays GST: Builder or Buyer?
The buyer pays GST to the builder, which is included in the property agreement. The builder then remits this amount to the government. This applies only to new properties sold before completion.
No GST on Ready-to-Move Flats
If the builder completes the construction and obtains a Completion Certificate before the sale, the unit is considered ready-to-move-in, and no GST is charged. This makes ready properties more attractive to buyers looking to save on taxes.
GST for Builders on Raw Materials & Services
| Input | GST Rate |
|---|---|
| Cement | 28% |
| Steel and iron | 18% |
| Paints and hardware | 18% |
| Sand, bricks, and stone (non-branded) | 5% / 0% |
| Labour contractor services | 18% |
Even though builders cannot claim ITC under the 1% or 5% scheme for residential property, they still pay GST on raw materials and subcontractor services.
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GST on Builder and Developer Services
| Service Type | GST Rate |
|---|---|
| Developer constructing on own land | 1% / 5% |
| Joint development agreement with landowner | 5% (residential) / 12% (commercial) |
| Redevelopment or re-construction projects | Varies |
Conclusion
The gst on builder and developer also applies to joint development models, where the builder shares revenue or property units with landowners. Knowing the GST regime for builders is essential for both property buyers and developers. While GST has streamlined taxation in real estate, it still adds a significant cost—unless you’re buying a ready-to-move property. Always check project status and GST applicability before signing the dotted line.
I am a Chartered Accountant with over 20 years of experience and a finance content writer. I focus on educating people about finance and taxation. I have written many blog posts on finance, taxation, trading, and investment on the BUSY website. My goal is to increase financial understanding by making complex concepts easier to grasp and to support educational programs in India.
Frequently Asked Questions (FAQs)
- What is the GST on builder and developer services?
- 1% for affordable housing
- 5% for non-affordable housing
- 12% for commercial under-construction projects
- Is GST applicable on ready-to-move flats?No. GST is not applicable if the Completion Certificate is issued before the sale.
- Can builders claim Input Tax Credit?Only in the 12% GST category (commercial). ITC is not allowed for 1% or 5% residential projects.
- What counts as affordable housing under GST?A unit with carpet area ≤ 60 sq. m. (metro) or 90 sq. m. (non-metro) and price ≤ ₹45 lakhs.
- Is GST applicable on resale property?No. Resale of already owned/occupied property is exempt from GST.
