Discover how GST impacts under-construction property prices in India. Learn updated rates, calculation tips, buyer checklists, and smart ways to save on your real estate investment.
Buying an under-construction property in India? Then you need to understand how Goods and Services Tax (GST) affects your purchase. GST can impact your total cost significantly, and knowing how it works can help you plan better and save more.
In this guide, we’ll explain GST on under-construction homes in simple terms, share calculation examples, and offer pro tips to manage your costs smartly.
What is GST on Under-Construction Property?
GST is a unified tax system launched in 2017, replacing multiple indirect taxes like VAT, service tax, and excise duty. It applies to various goods and services—including under-construction properties.
Important: GST is applicable only on properties under construction. If you're buying a ready-to-move-in home (i.e., one with an Occupancy Certificate), GST does not apply.
Initially, under-construction properties attracted 12% GST (after land cost deduction). But after the 33rd GST Council meeting, the government reduced GST to:
-
5% for regular residential properties (without Input Tax Credit)
-
1% for affordable housing (also without ITC)
How is GST Calculated on Property?
GST is charged only on the construction cost, not the land. To calculate it:
GST = (Property value × 2/3) × GST rate
Why 2/3? Because 1/3rd of the property's cost is considered the land value—which is exempt from GST.
Example 1: Affordable Housing (1% GST)
- Property Value: ₹42,00,000
- Taxable Value: ₹42,00,000 × 2/3 = ₹28,00,000
- GST (1%): ₹28,000
- Total Cost: ₹42,28,000
Example 2: Standard Residential Housing (5% GST)
- Property Value: ₹75,00,000
- Taxable Value: ₹75,00,000 × 2/3 = ₹50,00,000
- GST (5%): ₹2,50,000
- Total Cost: ₹77,50,000
Current GST Rates on Property
| Property Type | GST Rate | Input Tax Credit (ITC) |
|---|---|---|
| Affordable Housing | 1% | Not available |
| Standard Residential | 5% | Not available |
| Commercial Property | 12% | ITC available |
Key Points Buyers Must Check
1. Know Your Property Type
Check whether your property falls under “affordable housing” or standard housing to calculate the correct GST.
2. Separate Construction from Land
GST is only charged on the construction portion. Make sure your builder has clearly separated land cost in the breakdown.
3. Check Construction Status
GST does not apply if the property is complete and has an Occupancy Certificate. Always confirm this before making payments.
4. Negotiate Smartly
Developers may absorb some or all of the GST cost as part of the deal. Always try negotiating—it could save you lakhs.
5. Plan GST in Your Budget
Many buyers overlook GST during budget planning. Add it to your property cost calculations to avoid last-minute surprises.
Why GST is Better Than the Old System
✅ Transparent Taxation
No confusion between VAT, service tax, and other levies—everything is covered under one rate.
✅ Clear Cost Breakdown
It’s easier to understand how much you're paying for construction and taxes.
✅ Lower Burden on Affordable Homes
The 1% rate has made buying budget homes more accessible to middle-income families.
Financial Planning Tips for GST on Property
💡 Pay Based on Construction Stages
GST is typically collected in phases—linked to the progress of construction. Pay only after receiving the builder's invoice.
💡 Avoid Late Payments
Delays in GST payment may attract penalties. Be prompt to avoid unnecessary charges.
💡 Keep Every Receipt
Maintain all invoices and GST payment receipts. These are crucial during resale, loan processing, or disputes.
💡 Choose GST-Registered Developers
Always check if your builder is GST-registered. It ensures you're dealing with a legitimate party and avoids legal issues.
Are There Any GST Exemptions?
Technically, no blanket exemptions. However, the following enjoy reduced or special GST treatment:
- Affordable Housing: 1% GST without ITC
- Government Schemes: Projects under PMAY and other affordable housing missions may receive additional reliefs
Must-Have Documents for GST Compliance
- PAN Card
- Property Sale Agreement
- GST Invoices from Developer
- Payment Receipts
- Bank Statements
- GST Registration Certificate (of the builder)
Final Thoughts
Understanding GST on under-construction properties can help you save money, avoid confusion, and make a smarter purchase. With the current rates—5% for standard homes and 1% for affordable housing buying an under-construction home remains a value-for-money choice for many Indians.
Always consult a tax advisor for property-specific guidance before making a purchase decision.
FAQs: GST on Under-Construction Properties
1. Is GST charged on ready-to-move-in homes?
No, such homes with a completion certificate are GST-exempt.
2. Can homebuyers claim Input Tax Credit (ITC)?
No, ITC is not available for residential property buyers.
3. What qualifies as affordable housing under GST?
Properties priced up to ₹45 lakhs and meeting carpet area criteria.
4. Is GST applicable on resale property?
No, GST is not charged on resale transactions.
5. Do I pay GST on car parking in a housing project?
Yes, it attracts the same GST rate as the main property.
6. Are Preferential Location Charges (PLC) taxed under GST?
Yes, PLC also falls under GST charges.
7. Does GST apply to RWA maintenance fees?
Yes, if the monthly fee exceeds ₹7,500, it attracts 18% GST.
8. Do I pay GST if buying directly from a landowner?
No, if the landowner isn't a registered developer, GST does not apply.