New GST on Under Construction Property: What Buyers Should Know
If you’re planning to buy a house or office space that’s still being built, it’s important to understand how GST affects the final cost. This blog will simplify everything about gst on under construction property, including how rates vary for different types of projects.
Is GST Applicable on Under Construction Property?
Yes. GST is applicable when you purchase a flat, apartment, or commercial space that is still under construction. The GST is calculated on the sale value of the property (excluding land cost).
Once the building is complete and the builder obtains a Completion Certificate (CC) or Occupancy Certificate (OC), no GST is charged on the sale.
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New GST Rate on 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 Construction Property and related outerwear (no compensation cess).
| Type of Property | New GST Rate | Input Tax Credit (ITC) |
|---|---|---|
| Affordable housing (under construction) | 1% | Not available |
| Other residential flats (under construction) | 5% | Not available |
| Ready-to-move-in flats (with OC) | 0% | Not applicable |
GST Rates for Residential Property
| Type of Property | Old GST Rate | Input Tax Credit (ITC) |
|---|---|---|
| Affordable housing (under construction) | 1% | Not available |
| Other residential flats (under construction) | 5% | Not available |
| Ready-to-move-in flats (with OC) | 0% | Not applicable |
Criteria for Affordable Housing:
- Carpet area: up to 60 sq. m. in metro cities or 90 sq. m. in non-metros
- Property value: up to ₹45 lakhs
This means gst for under construction flat is 1% if it qualifies as affordable housing, and 5% otherwise.
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GST on Apartments Under Construction
All types of apartments—whether luxury or budget—are covered under GST when sold before completion. The gst on apartments under construction is:
- 5% for standard units
- 1% for affordable units
The builder cannot claim Input Tax Credit (ITC) under the new GST regime (post-April 2019). So, all project-related GST costs are absorbed in the base selling price.
Old GST on Commercial Property Under Construction
(Old GST Rates – Applicable Until 21st September)
For commercial properties like offices, shops, or retail units under construction, the applicable GST rate is:
- 12% with Input Tax Credit
This applies to:
- Commercial buildings
- Business parks
- Co-working spaces
- Under construction malls or showrooms
So, the gst on commercial property under construction is higher, but allows ITC claims, which can benefit businesses in the long run.
GST on Under Construction Buildings (Mixed Projects)
Builders working on mixed-use buildings—for example, residential towers with retail shops on the ground floor—must apply different GST rates:
- Residential portion: 1% or 5% (based on classification)
- Commercial portion: 12% with ITC
Correct documentation and bifurcation in invoicing are essential to ensure GST is applied properly to each unit.
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When is GST Not Applicable?
You won’t pay GST if:
- You buy a completed property after the Occupancy/Completion Certificate is issued
- You buy land (GST does not apply to land sales)
- You purchase from a seller who is not a builder (resale property)
Conclusion
Understanding the gst on under construction property helps you calculate the actual cost of your dream home or office space. Always check the builder’s GST registration and ensure you receive a valid invoice to stay fully compliant.
As a Chartered Accountant with over 12 years of experience, I am not only skilled in my profession but also passionate about writing. I specialize in producing insightful content on topics like GST, accounts payable, and income tax, confidently delivering valuable information that engages and informs my audience.
Frequently Asked Questions
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Is GST charged on all under-construction flats?Yes. GST for under construction flat is charged at 1% (affordable) or 5% (others).
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What is the GST on under construction buildings with shops and flats?Residential units attract 1%/5%, and shops attract 12% GST with ITC.
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Can I claim ITC if I buy a flat under construction?No. Buyers cannot claim Input Tax Credit on under-construction flats post-April 2019.
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What is the GST on commercial property under construction?It is 12% with ITC available.
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Is GST applicable on resale flats or ready-to-move-in homes?No. If the property has a Completion Certificate, GST is not applicable.