New GST on Builder and Construction Services: What Buyers Should Know
- GST applies to properties under construction, but not to completed properties with a Completion Certificate.
- New GST rates effective after September 22, 2025, are 1% for affordable housing and 5% for non-affordable housing, with no Input Tax Credit (ITC) allowed.
- Commercial properties under construction have a 12% GST rate with ITC, while ready-to-move properties have 0% GST.
- Buyers pay GST to builders as part of the property agreement, which builders then remit to the government.
- GST on raw materials like cement and steel ranges from 5% to 28%, but builders can't claim ITC under the 1% or 5% schemes for residential properties.
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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New GST Rate on Under-Construction Property in India
The Government of India is updating GST rates effective after 22 Sep 2025. Below are the expected new GST rates for under-construction and related property categories (no compensation cess).
New GST on Under Construction Property
| Type of Property | Old 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) | 5% | Allowed | ITC allowed for commercial spaces |
| Ready-to-move property (with CC) | 0% | Not applicable | GST not applicable post CC issuance |
Type of Property
Old GST Rate
Input Tax Credit (ITC)
Remarks
Type of Property
Old GST Rate
Input Tax Credit (ITC)
Remarks
Type of Property
Old GST Rate
Input Tax Credit (ITC)
Remarks
Type of Property
Old GST Rate
Input Tax Credit (ITC)
Remarks
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Old GST on Under Construction Property
(Old GST Rates – Applicable Until 21st September)
| Type of Property | New 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 |
Type of Property
New GST Rate
Input Tax Credit (ITC)
Remarks
Type of Property
New GST Rate
Input Tax Credit (ITC)
Remarks
Type of Property
New GST Rate
Input Tax Credit (ITC)
Remarks
Type of Property
New GST Rate
Input Tax Credit (ITC)
Remarks
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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% |
Input
GST Rate
Input
GST Rate
Input
GST Rate
Input
GST Rate
Input
GST Rate
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 |
Service Type
GST Rate
Service Type
GST Rate
Service Type
GST Rate
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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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.
