GST on Buying an Under-Construction Flat in Bangalore

Two buyers look at the same project in Bengaluru. One books a flat while the tower is still under construction and pays GST on top of the price. The other waits until the building has its occupancy certificate, buys a ready unit, and pays no GST at all. On a 90 lakh rupee flat, that timing difference alone can be worth roughly three lakh rupees. GST on a home is one of the few costs that depends less on what you buy than on when you buy it.

The short answer. An under-construction flat bought from a builder attracts 1 percent GST if it qualifies as affordable housing and 5 percent otherwise, in both cases without input tax credit. A ready-to-move flat that already has its completion or occupancy certificate attracts no GST, and neither does a resale of a completed flat. The trade-off to weigh: an under-construction unit may be cheaper or offer more choice, but the GST is a real, non-recoverable cost that a ready flat avoids entirely.

What GST rate applies to an under-construction flat?

It is 1 percent for affordable housing and 5 percent for other residential flats, both without input tax credit. As Piramal Realty's GST explainer sets out, the 1 percent notified rate applies to affordable housing and the 5 percent notified rate to non-affordable housing, and in both cases developers cannot claim input tax credit on inputs or pass it on to buyers. These rates have applied since April 2019, when they replaced the earlier higher rates. Because the builder cannot hand you any credit, the GST you pay is a genuine addition to your cost rather than something that comes back to you later. This is a change from the pre-2019 structure, when higher headline rates came with input tax credit that developers could in principle pass through. The current design trades that credit for a much lower rate, which is simpler for a buyer to reckon with but means there is no offset to chase; what you see on the invoice is what it costs.

The rate you fall into depends entirely on whether your flat meets the affordable housing definition, which is where buyers most often guess wrong.

What counts as affordable housing for the 1 percent rate?

A flat qualifies as affordable only if it meets both a size limit and a price limit. Per the same explainer, the carpet area must be up to 60 square metres in a metro city or up to 90 square metres in a non-metro, and the total price must not exceed 45 lakh rupees. Both conditions have to hold at once. Bengaluru is a metro for this purpose, so the size test here is the tighter 60 square metre carpet area, which is roughly 645 square feet. A flat priced at 40 lakh rupees but larger than 60 square metres does not qualify, and nor does a compact flat priced above 45 lakh rupees. Miss either limit and the rate is 5 percent, not 1 percent. The price test is a hard cliff rather than a sliding scale, which is what surprises people. A flat at 44 lakh rupees that meets the size limit is taxed at the effective 0.67 percent, while an otherwise identical flat priced at 46 lakh rupees jumps to the 5 percent slab on the whole value, a difference far larger than the two lakh rupee gap in price. That cliff is worth knowing when a flat is quoted just above the threshold, because the GST step can quietly erode the apparent saving of a slightly cheaper unit nearby that sits above the line.

Why is the effective rate lower than the headline rate?

Because GST is charged on only two-thirds of the agreement value, with one-third deemed to be the land. The law allows a standard one-third deduction for land, on which GST is not levied, so the 1 percent and 5 percent rates apply to the remaining two-thirds of the price. That brings the effective rate on the total consideration to about 0.67 percent for affordable housing and about 3.33 percent for other flats. The distinction matters when you read your invoice: some builders quote the headline rate and apply it correctly to the two-thirds base, while a loose summary might make it sound like the full 5 percent hits the whole price. Ask the builder to show how the GST on your invoice is computed, so you are comparing the effective cost, not the label.

When does a flat attract no GST at all?

When it is sold after the project has received its completion or occupancy certificate, and on any resale of a completed flat. Once a project gets its occupancy certificate, selling the flat is treated as a sale of immovable property, which is outside GST, so no GST applies even though stamp duty and registration still do. This is the single biggest lever a buyer has over the GST line: a ready-to-move flat with its certificate, or a resale unit, simply does not carry GST. It is also why the under-construction versus ready decision is a tax decision as much as a convenience one. For a buyer weighing the two, the GST saved on a ready flat offsets part of the usual premium ready units command.

Stamp duty and registration are separate state charges and are not part of GST, so they apply to every purchase regardless of GST status. Keeping the two taxes mentally separate stops double counting when you build your budget. Our guide to stamp duty and registration charges in Bangalore sets out those state costs, which stack on top of any GST. And because the affordable limit is measured in carpet area, not the super built-up figure on the brochure, it is worth reading our explainer on carpet area versus super built-up area before you assume a flat qualifies; a unit marketed as compact can still exceed 60 square metres of carpet. When you are weighing an under-construction launch against a near-ready tower such as Assetz Canvas and Cove, the GST line belongs in that comparison.

How do the options compare for a buyer?

The table below sets the common cases side by side so you can see which one carries GST and at what effective rate. The affordable and non-affordable rows assume an under-construction purchase from the builder.

How should I plan around the GST on a purchase?

You work out early whether your flat is under construction or ready, and whether it meets the affordable limits, then build the correct GST into your total. The steps below turn that into a simple check.

1. Confirm whether the flat is under construction or already has its completion or occupancy certificate.
2. If it is ready with a certificate, or a resale of a completed flat, record GST as nil and move on.
3. If it is under construction, check the carpet area against the 60 square metre metro limit for Bengaluru.
4. Check the total price against the 45 lakh rupee affordable cap, remembering both tests must pass.
5. Apply 1 percent if both affordable tests pass, otherwise 5 percent, on two-thirds of the agreement value.
6. Ask the builder for a written breakup showing how GST is computed on your invoice.
7. Add stamp duty and registration separately, since those state charges are not part of GST.

Doing this comparison before you shortlist, rather than after you have fallen for a show flat, changes which projects make your list. A ready-to-move unit that looked a little dearer per square foot can turn out cheaper all-in once the under-construction rival's GST is added, and the reverse can be true where the under-construction flat is affordable-rated at the lower effective rate. The point is not that one is always better; it is that GST is a line you can estimate precisely from two facts, the construction stage and the affordable status, so there is no reason to leave it as a vague worry. Settle those two facts and the GST on your purchase stops being a surprise and becomes just another number in a clear budget.

Frequently asked questions

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

It is 1 percent for affordable housing and 5 percent for other residential flats, in both cases without input tax credit. These rates apply to two-thirds of the agreement value because one-third is deemed to be land, so the effective rate on the total price is about 0.67 percent for affordable housing and about 3.33 percent otherwise.

Is there GST on a ready-to-move flat?

No. A flat sold after the project has received its completion or occupancy certificate attracts no GST, because it is treated as a sale of immovable property. A resale of a completed flat is also outside GST. Stamp duty and registration still apply to these purchases, since they are separate state charges.

What qualifies as affordable housing for the 1 percent GST rate?

The flat must meet both limits: a carpet area up to 60 square metres in a metro city such as Bengaluru, or up to 90 square metres in a non-metro, and a total price up to 45 lakh rupees. Both conditions must hold at once. If the flat misses either limit, the 5 percent rate applies instead of 1 percent.

Can the builder give me input tax credit on GST?

No. Under the current structure, developers cannot claim input tax credit on their inputs and cannot pass it on to buyers, for either the 1 percent or 5 percent rate. The GST you pay on an under-construction flat is therefore a real cost to you, not something that is later credited back.

The short version: GST depends on timing. Under construction means 1 or 5 percent with no credit; ready with a certificate, or resale, means none. Check the stage and the affordable limits before you budget.

Last updated 2026-10-08. PropNewz Team.