GST on Under-Construction Property: 5 Essential Facts for 2025

If you are buying a flat that is still being built, you will pay GST on it. Many buyers in India are surprised by this. They focus on the property price and miss the tax that gets added on top. Understanding GST on under-construction property before you sign any agreement can save you from a shock later.

This is not just a small amount. On a ₹50 lakh flat, the GST alone can add up to ₹2.5 lakh or more. For first-time buyers, that is a significant sum. Knowing how this tax works, when it applies and when it does not, helps you plan your budget correctly. This guide covers the 5 most essential facts every Indian buyer must know in 2025.

Why GST on Under-Construction Property Matters Right Now

Right now, thousands of families across India are booking flats in projects that are still under construction. Builders are launching new phases. Banks are approving home loans faster. But many buyers sign the sale agreement without fully understanding the tax structure.

The GST Council has kept the current rates in place since 2019. But confusion still remains about what is taxable and what is not. Many buyers ask: "Does GST apply after I get the keys?" The answer is no. If the builder has received a completion certificate, no GST applies. The tax applies only during the construction phase.

A buyer in Tambaram once paid an advance for a flat in a new project. She assumed GST was included in the quoted price. It was not. When the builder sent the first demand letter, the GST amount was listed separately. She had not budgeted for it. This kind of situation happens regularly across Tamil Nadu and other states.

That is why understanding GST on under-construction property is not optional. It is essential.

Fact 1: The GST Rate on Under-Construction Property in 2025

The GST on under-construction property rate depends on whether the flat qualifies as affordable housing or not.

Standard Housing: 5% GST

For most residential projects, the GST rate is 5% of the property value. This applies without the benefit of input tax credit (ITC). Builders cannot pass on ITC to buyers in this category.

Affordable Housing: 1% GST

If the flat qualifies as affordable housing, the rate drops to just 1%. A flat is considered affordable if:

• The carpet area is up to 60 sq. metres in metro cities
• The carpet area is up to 90 sq. metres in non-metro cities and towns
• The price does not exceed ₹45 lakh

Cities like Chennai, Mumbai, Delhi and Bengaluru are classified as metros. Most Tamil Nadu towns outside Chennai follow the non-metro rule.

Fact 2: GST on Under-Construction Flat Does Not Apply After Completion

This is one of the most important rules to understand. GST on under-construction property applies only when the flat is sold before the builder receives an occupancy certificate or completion certificate.

Once the builder gets the completion certificate from the local authority, the property is treated as ready-to-move. No GST is charged on such properties. This is why many buyers in Tamil Nadu prefer to wait and buy after the project is complete. But waiting comes with its own trade-off. Ready-to-move flats are priced higher because they carry no GST.

So buyers often face a choice: pay a lower base price with GST or pay a higher price with no GST.

The total cost can end up being similar. Work out the full math before deciding.

Read Also: Home Loan for Under-Construction Property – Eligibility, Process & Best Banks

Fact 3: Input Tax Credit and Why Buyers Cannot Claim It

Before 2019, builders could claim input tax credit (ITC) on raw materials, construction services and other inputs. They were expected to pass this benefit to buyers by reducing the property price.

In practice, that did not happen consistently. The government removed ITC for residential projects from April 2019. The revised GST rates of 5% and 1% were introduced at the same time.

This means:

1. Builders no longer claim ITC on construction inputs
2. Buyers cannot claim any ITC on the GST they pay
3. The tax paid is a straight cost with no offset

For a ₹60 lakh flat under a standard project, the GST at 5% works out to ₹3 lakh. That ₹3 lakh is a direct additional cost with no refund or credit available to the buyer.

Fact 4: How GST Applies to the Sale Agreement

The GST on under-construction property is calculated on the agreement value. This includes the base price of the flat. It also includes charges for car parking, club membership and any other amounts mentioned in the sale agreement.

Some builders split the agreement into two parts: construction cost and land cost. GST applies only on the construction portion in such cases. This is called a composite supply or works contract arrangement.

However, the government has clarified that if the land component is not shown separately with a proper undivided share (UDS) agreement, GST applies on the full value.

Always ask your builder:

• Is GST calculated on the full amount or only on construction?
• Is the land component shown separately in the agreement?
• What is the exact GST amount in rupees?

Get the answer in writing. Do not rely on verbal assurances.

Fact 5: GST on Under-Construction Property in Tamil Nadu - What Local Buyers Must Check

If you are buying in Tamil Nadu, there are a few extra points worth knowing.

CMDA or DTCP Approval

Always confirm that the project has approval from CMDA (Chennai Metropolitan Development Authority) or DTCP (Directorate of Town and Country Planning). Only RERA-registered projects with proper approvals give you legal protection. Without this, your flat purchase has no regulatory cover and GST paid cannot be recovered in case of a dispute.

RERA Registration Matters

GST on under-construction flat purchases must involve a RERA-registered project. The builder must display the RERA number on all agreements and marketing material. Check this on the Tamil Nadu RERA portal before booking.

Stamp Duty Is Separate

GST and stamp duty are two different charges. Buyers in Tamil Nadu often confuse the two. Stamp duty is paid to the state government at the time of registration. GST is paid to the builder as part of the construction agreement. Both apply on an under-construction purchase.

GST Council Notification Updates

Check the latest GST Council notification before finalising your flat. Rates have been stable since 2019 but policy reviews do happen. Ask your builder or legal advisor to confirm the current applicable rate for your specific project.

You can browse under-construction properties in Tamil Nadu to compare projects and understand how pricing is structured across different builders and locations.

Common Mistakes Buyers Make with GST

Not Including GST in the Budget

Many buyers plan their budget based on the advertised price. GST is not included in most builder advertisements. A ₹50 lakh flat at 5% GST adds ₹2.5 lakh. Add stamp duty on top and the total outgo rises sharply.

Assuming GST Is Negotiable

GST is a statutory charge. It is not negotiable. Any builder who says they will "adjust" or "absorb" the GST must be asked to put it in writing. In most cases, it simply gets hidden within the flat price.

Ignoring the Affordable Housing Threshold

A flat priced at ₹44 lakh with 90 sq. metre carpet area in a non-metro Tamil Nadu town qualifies for 1% GST. Buyers sometimes overlook this and do not ask the builder to confirm eligibility. Always check against the affordable housing criteria.

Not Verifying the Completion Certificate Status

Some builders mark a project as "ready to move" in advertisements before they actually receive the completion certificate. Legally, GST still applies until the certificate is officially issued. Ask for the certificate number and date before signing.

GST on Under-Construction Property: A Step-by-Step Buyer Guide

Follow these steps when buying an under-construction flat in India:

1. Confirm the project is RERA-registered and has CMDA or DTCP approval
2. Ask the builder for the GST rate applicable to your specific flat
3. Check whether your flat qualifies for the affordable housing rate of 1%
4. Get the GST amount mentioned clearly in the sale agreement
5. Confirm whether the land value is shown separately or included in the total
6. Verify that the completion certificate has not yet been issued (to understand why GST is applicable)
7. Factor GST and stamp duty into your total purchase budget before applying for a home loan

What Happens If the Builder Charges Wrong GST?

This is a real concern. Some builders charge 5% GST on a flat that qualifies for 1% under the affordable housing scheme. If you have paid excess GST, you can raise a complaint with the GST authorities.

The builder is responsible for depositing the correct GST with the government under CGST and SGST rules. A GST Council notification from 2019 clearly defines the criteria. Keep all your payment receipts. Maintain a copy of the sale agreement. These documents will support any complaint or refund claim.

Conclusion

GST on under-construction property is a fixed cost that every buyer must plan for. The rate is 5% for standard housing and 1% for affordable housing in India. No GST applies once the builder receives the completion certificate. Buyers cannot claim input tax credit on GST paid. Always verify RERA registration, confirm the correct GST rate in writing and factor in both GST and stamp duty when planning your budget. Take your time, read the sale agreement carefully and consult a legal advisor if anything is unclear. You can also explore verified flats direct owner listings to find transparent property options that clearly show all applicable charges.

Frequently Asked Questions

1. Is GST applicable on ready-to-move flats in India?

No. If the builder has received the completion certificate or occupancy certificate, no GST applies. GST is charged only on under-construction properties where the sale happens before the certificate is issued. Always confirm the certificate status before buying.

2. What is the GST rate on under-construction property in 2025?

The GST on under-construction property is 5% for standard residential flats and 1% for affordable housing units. The affordable housing rate applies only if the flat meets the carpet area and price criteria set by the GST Council notification of 2019.

3. Can I get a refund if my builder charged extra GST?

Yes. If the builder charged a higher rate than applicable, you can raise a complaint under the GST rules. Keep all payment receipts and a copy of the sale agreement. The builder is responsible for depositing the correct amount of CGST and SGST with the government. Contact a GST practitioner for help with the refund process.

4. Does GST apply on the full flat price or only the construction cost?

It depends on how the agreement is structured. If the land and construction values are shown separately, GST applies only on the works contract or construction portion. If the agreement shows a single price, GST may apply on the full amount. Ask your builder to clarify this in writing before signing.

5. Is stamp duty separate from GST in Tamil Nadu?

Yes. Stamp duty is a state government charge paid at the time of property registration. GST is a central tax paid to the builder during construction. Both apply when buying an under-construction flat in Tamil Nadu. Plan for both costs in your total budget before applying for a home loan.