New GST on Builder and Construction Services: What Buyers Should Know
- GST applies to under-construction properties where consideration is received before the Completion Certificate or first occupation, whichever is earlier.
- Under-construction homes attract 1% GST for qualifying affordable housing and 5% for other residential apartments, without ITC.
- Commercial apartments in an RREP attract 5% GST without ITC, while those in other REPs generally attract 12% with ITC.
- GST does not apply to the sale of completed or ready-to-move properties where the entire consideration is received after the Completion Certificate or first occupation, whichever is earlier.
- GST on cement was reduced from 28% to 18% from 22 September 2025, while steel generally attracts 18% GST. Builders paying 1% or 5% GST on residential apartments cannot claim ITC under these schemes.
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 GST applies 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 Rate on Under-Construction Property in India
GST on under-construction property depends on the type of apartment and real estate project. The standard 1%, 5% and 12% rates remained unchanged from 22 September 2025.
| Type of Property | GST Rate From 22 Sep 2025 | Rate Before 22 Sep 2025 | Input Tax Credit (ITC) | Remarks |
|---|---|---|---|---|
| Qualifying affordable residential apartment | 1% | 1% | Not allowed | Subject to prescribed affordable-housing conditions |
| Other residential apartment | 5% | 5% | Not allowed | Applies under the current residential scheme |
| Commercial apartment in an RREP | 5% | 5% | Not allowed | RREP generally means commercial carpet area does not exceed 15% of total apartment carpet area |
| Commercial apartment in a REP other than an RREP | 12% effective | 12% effective | Allowed | Applies to qualifying commercial apartments outside the RREP category |
| Completed/ready-to-move property | GST not applicable | GST not applicable | Not applicable | Where the entire consideration is received after Completion Certificate or first occupation, whichever is earlier |
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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. GST also does not apply where the entire consideration is received after first occupation, whichever is earlier.
GST for Builders on Raw Materials & Services
| Input | GST Rate From 22 Sep 2025 | Rate Before 22 Sep 2025 |
|---|---|---|
| Cement | 18% | 28% |
| Steel and iron | 18% | 18% |
| Paints and hardware | Generally 18% | Generally 18% |
| Natural sand | 5% | 5% |
| Sand lime bricks | 5% | 12% |
| Other specified building bricks | 6% without ITC / 12% with ITC | 6% without ITC / 12% with ITC |
| Rough building stone | Generally 5% | Generally 5% |
| Worked or processed building stone | Generally 18% | Generally 18% |
| Labour/works-contract services | Generally 18% | Generally 18%, subject to specified exceptions |
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Even though builders cannot claim ITC under the 1% or 5% GST scheme for residential property, they still pay applicable GST on raw materials and subcontractor services.
GST on Builders and Developers
| Service Type | GST Rate From 22 Sep 2025 | Rate Before 22 Sep 2025 | ITC |
|---|---|---|---|
| Qualifying affordable residential apartments | 1% | 1% | Not allowed |
| Other residential apartments | 5% | 5% | Not allowed |
| Commercial apartments in an RREP | 5% | 5% | Not allowed |
| Commercial apartments in a REP other than an RREP | 12% effective | 12% effective | Allowed |
| Apartments constructed under a Joint Development Agreement | 1%, 5% or 12%, depending on apartment/project type | Same applicable rate | Depends on category |
| Redevelopment or reconstruction projects | Depends on property/project type | Same applicable rate | Depends on category |
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Note: A Joint Development Agreement itself should not simply be assigned a 1%, 5% or 12% rate. These rates apply to the relevant construction/apartment supply under the project; TDR/FSI under a JDA can have separate GST provisions.
Builders generally cannot claim Input Tax Credit (ITC) on apartment supplies taxed at the 1% or 5% rates.
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.
