Two Bengaluru buyers compared what looked like identical flats in the same corridor, one still under construction and one ready to move with its keys waiting. On paper the under construction flat was a little cheaper, but once GST was added it ended up costing more, because the ready flat carried no GST at all. The five percent the first buyer paid on an under construction home simply did not apply to the completed one. Whether a flat attracts GST, and at what rate, can quietly swing a comparison that price alone would not reveal.

The short answer. An under construction residential flat attracts 5 percent GST for regular homes and 1 percent for affordable housing, in both cases without input tax credit for the builder. A ready to move property attracts no GST once the developer has obtained the occupancy or completion certificate. Affordable housing means a home priced up to 45 lakh rupees with a carpet area up to 60 square metres in metros such as Bengaluru. The trade off worth knowing is that construction stage decides the tax: buying under construction adds GST that a completed, certified home does not carry.

GST is one of the largest costs that separates an under construction purchase from a ready one, yet buyers often leave it out of the comparison. This guide explains the rates, what counts as affordable, why a completed flat escapes GST, and how to factor the tax into your decision.

What GST do I pay on an under construction flat?

You pay 5 percent GST on a regular under construction residential flat and 1 percent if it qualifies as affordable housing, and in neither case does the builder pass on input tax credit. These are the concessional rates that apply to residential construction, and because input tax credit is not available under them, the rate you see is effectively the GST cost embedded in your purchase. For most Bengaluru flats, which sit above the affordable threshold, the 5 percent rate is the one that applies.

The buyer bears this GST. Although the developer collects it and remits it to the government, it forms part of your total outlay, typically paid across the construction linked instalments as you fund the build. So when you budget for an under construction home, the GST is not an optional extra; it is a real cost sitting on top of the price, and one that a ready to move home in the same area may not carry.

Which flats count as affordable for the 1 percent rate?

A flat qualifies for the 1 percent affordable rate only if it meets both a price and a size test: a value up to 45 lakh rupees and a carpet area up to 60 square metres in metro cities, or up to 90 square metres in non metro cities. Bengaluru is treated as a metro, so the 60 square metre carpet area limit applies here alongside the 45 lakh price ceiling. Both conditions must be satisfied together, not just one.

This matters because the difference between 1 percent and 5 percent is large on any property value. A flat that just crosses the price or size limit falls into the 5 percent band, so it is worth checking both figures precisely rather than assuming a modestly priced flat automatically qualifies. Because the size test is on carpet area, the same measure RERA uses, our guide to carpet versus super built up area helps you read the figure that decides your GST band.

Why does a ready to move flat carry no GST?

A ready to move flat carries no GST because, once the developer has obtained the occupancy or completion certificate, the property is treated as completed immovable property, which falls outside GST. GST applies to the supply of under construction property as a service of construction; a finished, certified home is no longer that supply, so the tax does not attach. This is why a completed flat with its certificate can be effectively cheaper on tax than an otherwise similar under construction unit.

The certificate is the pivot. The presence of a valid occupancy or completion certificate is what marks the property as ready and removes the GST, which is one more reason the certificate matters so much to buyers. For what that certificate proves and why you should insist on it, see our guide to the occupancy certificate versus the completion certificate.

How does GST change an under construction versus ready comparison?

GST can reverse a comparison, because an under construction flat that looks cheaper on the base price may cost more once its 5 percent GST is added, while a ready flat carries none. To compare fairly, add the applicable GST to the under construction option and set that total against the all in cost of the ready home. Only then are you comparing the true outlay rather than a base price that hides a large tax on one side.

This does not mean a ready flat is always the better buy; under construction homes can offer other advantages such as choice, payment staging and newer construction. It means GST must be in the comparison, not left out of it. A buyer who ignores the tax can conclude an under construction flat is cheaper when, on a full cost basis, it is not. For the wider choice between the two, our guide to ready to move versus under construction sets out the full set of trade offs.

When and how do I pay the GST?

You pay the GST to the developer as part of your instalments during construction, and the developer is responsible for remitting it to the government. Because the tax is tied to the construction service, it is collected as the build progresses rather than in a single lump, which spreads the cost across your payment schedule but does not reduce it. Keep the developer's invoices, which should show the GST charged, as part of your purchase records.

The practical planning point is to include the GST in your funding from the outset. Since a 5 percent tax on a large flat is a substantial sum, treating it as part of the base cost rather than a surprise keeps your budget honest. Confirm the rate that applies to your flat, whether the affordable 1 percent or the standard 5 percent, and build that figure into the total you plan to spend.

What GST mistakes do Bengaluru buyers make?

The common mistakes are leaving GST out of a price comparison, assuming a modestly priced flat is automatically affordable, and forgetting that a ready certified flat carries none. Each distorts the real cost. Ignoring GST makes an under construction flat look cheaper than it is. Assuming affordability without checking both the price and carpet area limits can leave a buyer expecting 1 percent and paying 5. And overlooking the ready to move exemption misses a genuine tax saving.

Avoiding them is a matter of checking the facts for your specific flat. Confirm whether it is under construction or ready with a valid certificate, apply the correct rate, verify affordability against both the price and carpet area tests, and add the GST into every comparison. Done this way, GST becomes a known line in your budget rather than the reason a purchase costs more than you planned, and the comparison between an under construction flat and a ready one finally reflects what each will truly cost you.

GST on residential property at a glance

A GST checklist for Bengaluru buyers

1. Confirm whether the flat is under construction or ready to move with a valid certificate.
2. Apply 5 percent GST for a regular under construction flat, or 1 percent if affordable.
3. Check affordability against both the 45 lakh price and the 60 square metre carpet area limits.
4. Remember that a ready flat with an occupancy or completion certificate carries no GST.
5. Add the applicable GST to any under construction option before comparing prices.
6. Budget the GST from the start, since it is paid across your construction instalments.
7. Keep the developer's invoices showing the GST charged as part of your records.

Frequently asked questions

What is the GST rate on an under construction flat?

An under construction residential flat attracts 5 percent GST for regular homes and 1 percent for affordable housing, both without input tax credit for the builder. The buyer bears this cost, paid across the construction instalments. For most Bengaluru flats, which sit above the affordable threshold, the 5 percent rate applies.

Is there GST on a ready to move flat?

No. Once the developer has obtained the occupancy or completion certificate, the property is treated as completed immovable property and falls outside GST, so a ready to move flat carries no GST. This can make a certified, completed home effectively cheaper on tax than an otherwise similar under construction unit.

Which flats qualify for the 1 percent affordable GST rate?

A flat qualifies for the 1 percent rate only if it meets both tests: a value up to 45 lakh rupees and a carpet area up to 60 square metres in metro cities such as Bengaluru, or up to 90 square metres in non metros. Both conditions must be satisfied together for the affordable rate to apply.

Who pays the GST on a property purchase?

The buyer bears the GST on an under construction property. The developer collects it as part of the instalments and is responsible for remitting it to the government, but it forms part of your total outlay. Because it is a real cost on top of the price, it should be included in your budget and in any price comparison.

Last updated 14 August 2026. PropNewz Team.