5 Percent or Nothing: GST on an Under Construction Flat in Bengaluru

A couple comparing two Whitefield flats could not understand why one quote was lakhs higher than the other for almost the same carpet area. The flats were similar, the locations a few minutes apart, the builders both reputable. The difference was not the flat at all. One was an under construction unit still months from completion, and the other had already received its occupancy certificate. On the first, the couple would pay 5 percent GST. On the second, none. That single line changed which flat was actually cheaper.

The short answer. In Bengaluru you pay GST at 5 percent on an under construction flat, or 1 percent if it qualifies as affordable housing, with no input tax credit in either case. You pay no GST at all on a ready to move flat that has received its occupancy certificate, or on a resale flat. Stamp duty and registration still apply to every purchase. The trade-off is real. An under construction flat can carry a lower headline price and a longer payment runway, but the GST adds a genuine cost that a ready flat avoids, so compare the all in numbers, not the sticker price.

When does GST apply to a Bengaluru flat, and when not?

GST applies only while a home is under construction and sold before its occupancy certificate is issued. That is the single rule that decides whether you pay this tax. If you buy into a project that is still being built and sign your agreement before the occupancy certificate is granted, the sale is treated as a supply of construction services and GST is charged. If the flat is complete and has its occupancy certificate, or if it is a resale flat, no GST is charged on the purchase.

This is why the timing around the occupancy certificate matters so much to your total cost. The same physical flat is taxed differently depending on whether the agreement is signed before or after that certificate. It also explains why sale of land carries no GST, since land is excluded from GST entirely under the law. The tax attaches to the construction, not to the ground beneath it or to a finished, certified home.

A practical consequence follows for anyone eyeing a flat that is close to completion. If the project is weeks away from its occupancy certificate, the question of whether you sign before or after that date is not a formality, it is a difference in what you owe. It is worth asking the builder where the occupancy certificate stands and, if it is imminent, understanding how the timing of your agreement interacts with the tax. Do not expect a builder to delay a sale for your benefit, but do go in knowing that the certificate is the switch that turns GST on or off.

What are the actual GST rates for a buyer?

The rate is 5 percent for a normal under construction home and 1 percent for an affordable one, in both cases without input tax credit. These rates have applied since the GST rate notification for real estate took effect on 1 April 2019. The lower 1 percent rate is reserved for affordable housing, which is defined by both a price ceiling and a size ceiling, so a flat has to meet both tests to qualify.

Affordable housing means a home priced up to 45 lakh rupees with a carpet area up to 60 square metres in a metro, and Bengaluru is treated as a metro for this purpose. A flat that breaches either the price or the size limit is taxed at the normal 5 percent rate, even if it feels modest. Because these thresholds and rates can be revised, confirm the current position on the official GST portal or with a chartered accountant before you sign, rather than relying on a builder's assurance.

One subtlety trips up buyers of larger homes. The 45 lakh price test and the 60 square metre size test both have to be met for the 1 percent rate, so a compact flat that is expensive, or a cheap flat that is large, does not qualify. In much of Bengaluru, apartment prices have moved past the 45 lakh mark even for modest sizes, which means most buyers here fall under the 5 percent rate in practice. Treat the 1 percent rate as the exception rather than the expectation, and verify eligibility rather than assuming it.

How do the different property types compare?

The clearest way to see the effect is to line up the common cases. The table below shows what a Bengaluru buyer pays in GST across the situations you are most likely to face.

Why can you not claim input tax credit?

Since April 2019, a home buyer cannot claim input tax credit on the GST paid for a residential flat, so the tax is a straight cost. Under the earlier system builders could pass on credits for the tax they paid on cement, steel, and services, which in theory reduced the buyer's effective rate. The 2019 change set the lower headline rates of 5 percent and 1 percent but removed that credit for residential sales. The number you see is the number you pay.

For your budget, this means the GST is not a recoverable tax you get back later. It sits alongside your stamp duty and registration as part of the real cash you need at purchase. Our guide on the extra charges beyond the base price of a Bengaluru flat walks through the other line items that stack on top of the headline rate, and GST is one of the larger ones on an under construction home.

How should a Bengaluru buyer handle GST in a purchase?

Run these steps as you compare flats and move toward signing. Each keeps the tax visible instead of letting it surface as a surprise at the agreement stage.

1. Confirm whether the flat is under construction or has already received its occupancy certificate.
2. For an under construction flat, ask the builder in writing which GST rate applies to your unit.
3. Check whether your flat meets both the 45 lakh price limit and the 60 square metre carpet area limit for the 1 percent rate.
4. Verify the current rate and affordable limits on the official GST portal or with a chartered accountant.
5. Remember that no input tax credit is available, so treat the GST as a straight cost in your budget.
6. Add stamp duty and registration charges on top, since these apply to every purchase regardless of GST.
7. When comparing an under construction flat with a ready one, compare the all in cost, not the base price.

Done this way, GST stops being a mystery line and becomes just another number you can plan for. A buyer who runs these checks is never ambushed by the tax at the agreement desk.

How does GST change the under construction versus ready decision?

GST tilts the comparison in favour of a ready flat more than most buyers expect. On a 90 lakh rupee under construction home the 5 percent GST is 4.5 lakh rupees that a comparable ready flat would not attract. That is real money, and it can outweigh the lower headline price or the softer payment schedule that draws buyers to under construction projects in the first place. It does not mean under construction is a bad choice, only that the tax belongs in the maths. A useful habit is to build a simple all in figure for each flat you shortlist, adding the base price, the GST if any, the stamp duty, the registration charges, and the other extras, then compare those totals rather than the numbers on the brochures. Two flats that look a lakh apart on the sticker can be several lakh apart once the tax and charges are in.

Weigh it against what an under construction flat offers, such as a newer building, a longer payment runway, and sometimes a lower base rate. A new launch like Brigade Calista at Budigere Cross is the kind of under construction project where a buyer should price the GST in from the start. And whichever route you choose, stamp duty and registration still apply, as covered in our guide on Bengaluru stamp duty, registration and the guidance value floor.

What do Bengaluru buyers ask most about GST on flats?

Do I pay GST on a ready-to-move flat in Bengaluru?

No. GST does not apply to a ready-to-move flat that has received its occupancy certificate, or to a resale flat. GST applies only while a home is under construction and sold before the occupancy certificate. You still pay stamp duty and registration charges on a ready flat, but not GST on the purchase.

What is the GST rate on an under-construction flat?

For most under-construction homes the rate is 5 percent of the price, with no input tax credit. For an affordable home the rate is 1 percent. Affordable here means a price up to 45 lakh rupees and a carpet area up to 60 square metres in a metro like Bengaluru. Confirm the current rate before you sign.

Why is there no GST on a ready flat but 5 percent on an under-construction one?

GST is a tax on the supply of construction services, so it applies while the builder is still constructing and selling the home. Once the occupancy certificate is issued, the home is treated as a finished immovable property rather than a service, and its sale falls outside GST. That is why timing around the occupancy certificate matters.

Can I claim input tax credit on the GST I pay for a flat?

No. Since April 2019, a home buyer cannot claim input tax credit on the GST paid for a residential flat. The 5 percent or 1 percent you pay is a straight cost with no offset or refund. Factor it into your budget as a real part of the price, not a recoverable tax.

Last updated 2026-09-13. PropNewz Team.