GST on an Under-Construction Chennai Flat: 1% or 5%, and the 60 Sq M and Rs 45 Lakh Test
The Finance Ministry's 2019 real estate FAQs set GST at 1 per cent for affordable flats and 5 per cent for others, both without input tax credit. In a metro like Chennai, affordable means up to 60 sq m carpet and Rs 45 lakh. Worked examples and checks for buyers.
Two flats in the same Chennai project, one floor apart. The first is a compact two-bedroom with 58 square metres of carpet area and a quoted price of Rs 44 lakh. The second has 62 square metres and costs Rs 47 lakh. On the payment schedule, the first shows GST of 1 per cent and the second shows 5 per cent. The difference is not a builder's whim. It comes from a definition the Central government set out in 2019, and two numbers in it, 60 square metres and Rs 45 lakh, decide which side of the line a Chennai flat falls on.
The Department of Revenue's Tax Research Unit explained the rules in its FAQs on real estate dated 7 May 2019, followed by Part II dated 14 May 2019, both hosted on the GST Council website. The FAQ itself says its answers do not have force of law and that gazette notifications take precedence in case of conflict. This guide reads those answers for a buyer comparing under-construction flats in Chennai. It is buyer guidance, not tax advice.
The short answer. According to the 2019 FAQ, construction of affordable residential apartments attracts an effective GST of 1 per cent without input tax credit on total consideration, and other residential apartments attract 5 per cent without input tax credit. In metropolitan cities, which the FAQ lists as including Chennai, an affordable apartment has a carpet area of up to 60 square metres and a gross amount charged of not more than Rs 45 lakh. Business Today's October 2025 report on that year's GST 2.0 changes still cited the same 1 and 5 per cent rates. The trade-off: a flat that just crosses either limit moves from 1 to 5 per cent, so a slightly larger or pricier unit can cost noticeably more in tax, even when the extra space is small.
What GST rate applies to an under-construction flat in Chennai?
Either 1 or 5 per cent of the total consideration, depending on the flat. The FAQ's first answer says that with effect from 1 April 2019, the effective rate after deduction of the value of land is 1 per cent without input tax credit for construction of affordable residential apartments, and 5 per cent without input tax credit for residential apartments other than affordable ones.
Those rates apply to projects starting on or after 1 April 2019. The FAQ says construction of residential apartments in such projects compulsorily attracts the new rate of 1 or 5 per cent without input tax credit, with no option to pay the older rates. A Business Today report from 10 October 2025 quoted a chartered accountant saying GST is 1 per cent for affordable housing and 5 per cent for other residential units, both without input tax credit, which is consistent with the 2019 structure.
What makes a flat affordable for GST purposes?
Two tests, both of which must be met. The FAQ defines an affordable residential apartment as one having a carpet area of up to 60 square metres in metropolitan cities and 90 square metres in cities or towns other than metropolitan cities, and for which the gross amount charged by the builder is not more than Rs 45 lakh.
Chennai is explicitly in the metropolitan list. The FAQ names Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon and Faridabad), Hyderabad, Kolkata and Mumbai (the whole of MMR) as metropolitan cities, with their geographical limits as prescribed by government. It also says cities or towns other than metropolitan cities include all other areas, such as villages.
So in the opening example, the 58 square metre flat at Rs 44 lakh meets both the carpet area test and the price test. The 62 square metre flat fails the carpet area test and the price test. Both tests use precise measures, so ask for the RERA carpet area in square metres and the gross amount charged, not just the saleable area in square feet. Our guide on comparing flat quotes on carpet area explains why those two figures often differ.
| Unit type | Effective GST rate in the 2019 FAQ | Input tax credit |
|---|---|---|
| Affordable residential apartment, up to 60 sq m carpet in a metro and up to Rs 45 lakh | 1% on total consideration | Not available |
| Other residential apartment | 5% on total consideration | Not available |
| Commercial unit in a Residential Real Estate Project | 5% on total consideration | Not available |
| Commercial unit in a project that is not a Residential Real Estate Project | 12% on total consideration | Available |
| Flat in an ongoing project where the builder opted for old rates by 10 May 2019 | 8% affordable or 12% other | Available, with benefit expected to pass to buyers |
How much tax does that mean on a real quote?
The arithmetic follows the FAQ's description of the rate as applying on total consideration. On the Rs 44 lakh affordable flat, 1 per cent works out to Rs 44,000. On the Rs 47 lakh flat, 5 per cent works out to Rs 2.35 lakh. The gap between the two units is Rs 3 lakh in price but about Rs 1.91 lakh in GST alone, which is why buyers near the limits should look at the all-in cost rather than the base price.
These figures are illustrations, not a quote. The FAQ describes the rates as effective rates after deduction of the value of land, so check how your builder's invoice states the GST and on what amount it is computed. If any line on the cost sheet is unclear, ask for it in writing before you pay the booking amount.
Does it matter if my flat is in a mixed project with shops?
It can, for the commercial units. The FAQ says a Residential Real Estate Project is one in which the carpet area of commercial apartments is not more than 15 per cent of the total carpet area of all the apartments in the project. Commercial units such as shops, godowns and offices in such a project attract 5 per cent without input tax credit. Commercial units in a project that is not a Residential Real Estate Project, or in an ongoing project where the promoter chose the old rates, attract 12 per cent with input tax credit. For a flat buyer, the residential rate of 1 or 5 per cent is what normally applies to your own unit.
Can I choose the GST rate as a buyer?
No. Answering a buyer who had paid 12 per cent on earlier instalments, the FAQ says the buyer cannot exercise the option to pay tax at the new or old rates; it is the builder who had to exercise the option. That option applied only to ongoing projects, and the FAQ says it had to be exercised by 10 May 2019. Where no option was exercised, the builder is deemed to have opted for the new rates.
For most Chennai flats being sold in 2026 in projects launched after April 2019, the question does not arise, because the FAQ says such projects compulsorily attract the 1 or 5 per cent rate. If you are buying a resale booking in an older project, ask the original allottee which rate was charged on past instalments and confirm what the builder is charging now. Part II of the FAQ also says that where a buyer booked before 1 April 2019 and the developer opts for the new scheme, no additional GST is required on payments made before that date.
What about PMAY beneficiaries and larger homes?
The FAQ answers one such case directly. A PMAY-CLSS beneficiary with a 150 square metre house being built in an ongoing project asked whether the 1 per cent rate applied. The answer was yes, subject to the condition that the developer had not opted to pay tax at the old rate of 8 per cent. This was tied to the specified housing schemes of the Central or State governments in ongoing projects. For the current PMAY-U 2.0 scheme, see our guide on PMAY-U 2.0 eligibility for Chennai buyers, and check its terms separately, because the 2019 FAQ answer was written for the earlier scheme.
Remember that GST is only one line of your cost. Stamp duty and registration charges in Tamil Nadu are separate state levies; our explainer on Tamil Nadu guideline value and registration charges covers that side.
A seven-point checklist on GST before you book
- Get the RERA carpet area of the flat in square metres, in writing.
- Get the gross amount the builder will charge, including all components on the cost sheet.
- Check both figures against the 60 square metre and Rs 45 lakh limits for metropolitan cities.
- Confirm the GST rate the builder will charge on each instalment, and whether it is 1 or 5 per cent.
- Ask how the invoice computes GST and on what amount.
- If the project is mixed use, ask whether it qualifies as a Residential Real Estate Project.
- For an older project or a resale booking, ask which rate was charged on past instalments.
Frequently asked questions
What is the GST rate on an under-construction flat in Chennai?
The 2019 Central government FAQ on real estate gives an effective rate of 1 per cent without input tax credit for affordable residential apartments and 5 per cent without input tax credit for other residential apartments, on total consideration. A Business Today report in October 2025 still cited these 1 and 5 per cent rates.
When does a Chennai flat qualify for 1 per cent GST?
The FAQ says an affordable residential apartment in a metropolitan city such as Chennai must have a carpet area of up to 60 square metres and a gross amount charged by the builder of not more than Rs 45 lakh. Outside metropolitan cities, the carpet area limit is 90 square metres.
Can a buyer choose between the old and new GST rates?
No. The FAQ says the buyer cannot exercise the option to pay tax at the new or old rates. Only the builder could choose, only for ongoing projects, and by 10 May 2019. Projects commencing on or after 1 April 2019 compulsorily attract the 1 or 5 per cent rate without input tax credit.
Is GST charged on shops in my residential project at the same rate?
Not always. The FAQ says commercial units in a Residential Real Estate Project, where commercial carpet area is not more than 15 per cent of the total, attract 5 per cent without input tax credit. In other projects, or where old rates were chosen, commercial units attract 12 per cent with input tax credit.
Last updated 2026-11-05. PropNewz Team.
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