Two Bengaluru buyers look at flats a few streets apart at almost the same price. One flat is still under construction; the other is ready to move in, with its occupancy certificate in hand. On the under construction flat, a goods and services tax is added to the price; on the completed one, there is none at all. Same city, same budget, and yet one buyer pays a tax the other avoids entirely, purely because of the stage each home is at. Understanding when GST applies, and when it does not, is one of the clearest ways a buyer can see the true cost of a purchase before committing. The rule is simple once you see it, and it can shift the true cost of a home by a meaningful sum.

The short answer. GST applies to under construction homes but not to completed ones. On an under construction flat you pay 5 percent GST for a standard home and 1 percent for one that qualifies as affordable housing, in both cases without the builder passing on input tax credit. A ready to move flat where the developer already holds the completion or occupancy certificate is entirely outside GST. The trade off to weigh is real: buying under construction can mean a lower price or a preferred unit, but it adds a GST cost that a ready home, taxed at nothing, does not carry. That single fact is worth checking before you fall for either option.

What GST do you pay on an under construction flat?

You pay 5 percent on a standard under construction home and 1 percent if it is affordable housing. As HomeFirst sets out, the rate for a non affordable under construction residential flat is 5 percent without input tax credit, while affordable housing is taxed at 1 percent, again without input tax credit. The absence of input tax credit means the builder cannot offset the tax paid on inputs against your bill, so the headline rate is what you effectively bear. In other words, there is no hidden rebate that quietly lowers the rate you see.

These rates have been the settled position for residential property, applying to the sale of under construction homes rather than to completed ones. For most Bengaluru buyers looking at a standard apartment still being built, the 5 percent figure is the one to plan for, added on top of the price and separate from stamp duty and registration. Knowing it up front means the tax is part of your budget rather than a surprise in the cost sheet. On a flat of a crore, the 5 percent alone is five lakh rupees, so it is not a rounding error.

Which flats count as affordable housing?

Affordable housing is defined by both a size limit and a price limit, and a flat must meet both. According to HomeFirst, the property must have a carpet area of up to 60 square metres in a metro city or up to 90 square metres in a non metro city, and a total value of up to 45 lakh rupees. Only a flat that satisfies both the area and the price condition qualifies for the lower 1 percent rate.

Bengaluru is treated as a metro for this purpose, so the 60 square metre carpet area limit applies here alongside the 45 lakh price cap. This matters because a flat can miss the affordable category on either count, a slightly larger carpet area or a price just above the cap, and then attract the standard 5 percent rather than 1 percent. If your flat is near either threshold, it is worth checking the exact figures, because the difference between the two rates is significant. The two conditions are independent, so a compact flat in a premium area can still fail on price alone.

Why is there no GST on a ready to move flat?

Because once a building is complete and certified, it is treated as property rather than a service. HomeFirst explains that once the developer obtains a completion certificate or occupancy certificate, the flat is classified as immovable property and falls entirely outside the scope of GST, and this holds regardless of when the buyer takes physical possession. GST attaches to the construction service, so a home that is already built and certified is simply not within it. It also means the certificate is worth confirming, since it is what removes the tax.

This is why the certificate status of a property changes its tax treatment so sharply. A ready to move flat with its completion or occupancy certificate carries no GST at all, while an under construction flat at a similar price carries 5 percent. For a buyer comparing the two, that difference is a real part of the total cost, and it is worth putting on the same line as the price when you weigh a completed home against one still being built.

How do the options compare?

The tax depends on the stage of the home and, for under construction flats, on whether it is affordable. The table below sets it out.

The pattern the table shows is that two things decide your GST: whether the home is complete, and if not, whether it is affordable. A ready home is untaxed, an affordable under construction home is lightly taxed, and a standard under construction home carries the full 5 percent. Placing your specific flat into one of these rows tells you the tax before you commit. Once you know which row your flat sits in, the GST figure is no longer a mystery.

How should GST shape your comparison?

Treat GST as part of the price, not a footnote, when you compare homes at different stages. An under construction flat that looks cheaper than a ready one may narrow or lose that gap once you add 5 percent GST to it, so the fair comparison is the price plus the applicable tax against the completed home's price with no tax. This does not make under construction a bad choice, but it makes the choice an informed one. The number simply belongs in the comparison, where it can change which home is genuinely cheaper.

There are of course other factors in the under construction decision, including price, the specific unit available and the wait for possession, so GST is one input among several rather than the whole story. The point is simply to include it. A buyer who compares a certified ready flat and an under construction flat without accounting for the 5 percent is not comparing like with like, and that gap is exactly where a budget can slip. A minute of arithmetic protects you from that slip.

How does this fit your other Bengaluru costs?

GST sits alongside, but separate from, the state charges on your purchase. It is distinct from the stamp duty and registration we set out in our guide to stamp duty and registration charges in Karnataka, which are state levies you pay regardless of GST, so an under construction flat can carry both. Seeing them as separate lines keeps your total cost sheet honest. Adding them separately is the only way to see what the purchase truly costs.

Because the GST exemption turns on the completion or occupancy certificate, it connects directly to those documents, which we explain in our guide to the occupancy certificate against the completion certificate. If you are weighing a specific project, a registered development such as Aratt Ayatana Residences will have a clear construction status that tells you at once whether GST applies to your purchase.

What should a Bengaluru buyer do?

Put GST on the cost sheet from the start:

1. Check whether the flat is under construction or ready to move with a certificate.
2. For a ready flat with an occupancy or completion certificate, expect no GST.
3. For a standard under construction flat, budget 5 percent GST on the price.
4. For an affordable under construction flat, the rate is 1 percent instead.
5. Confirm affordable status by checking both the carpet area and the 45 lakh price limit.
6. Keep GST separate from stamp duty and registration in your budget.
7. Compare an under construction and a ready flat on price plus applicable GST together.

Frequently asked questions

What is the GST rate on an under construction flat?

An under construction residential flat is taxed at 5 percent GST for a standard home and 1 percent for one that qualifies as affordable housing, in both cases without input tax credit for the builder. The rate is added on top of the price and is separate from stamp duty and registration.

Is there GST on a ready to move flat?

No. Once the developer holds a completion certificate or occupancy certificate, the flat is treated as immovable property and falls entirely outside the scope of GST, regardless of when you take possession. This is why a ready to move flat with its certificate carries no GST, while an under construction flat at a similar price carries 5 percent.

Which flats qualify as affordable housing for the 1 percent rate?

A flat qualifies as affordable housing if it meets both a size and a price limit: a carpet area of up to 60 square metres in a metro like Bengaluru or 90 in a non metro, and a total value of up to 45 lakh rupees. Missing either condition moves it to the standard 5 percent rate.

Is GST separate from stamp duty and registration?

Yes. GST is a central tax that applies to under construction homes, while stamp duty and registration are state charges you pay on the sale deed regardless of GST. An under construction flat can therefore carry both GST and stamp duty, so you should budget them as separate lines rather than assuming one covers the other.

Last updated 2026-07-24. PropNewz Team.