Two buyers in Bengaluru looked at flats of the same size and similar price, one still under construction and one ready to move into with its paperwork complete. The under construction flat quietly carried a tax the ready one did not: goods and services tax on the purchase. That single difference, a few lakh rupees on a large flat, changed which deal was actually cheaper once everything was added up. GST is one of the least understood costs a home buyer faces, and it turns almost entirely on one question: is the home finished in the eyes of the law?

The short answer. You pay GST when you buy an under construction home, but not when you buy a ready property for which a completion certificate has been issued. Since April 2019, under construction residential property is taxed at 1 percent for affordable housing and 5 percent for other homes, in both cases without input tax credit for the builder. A ready to move home with its completion certificate, a resale flat, and the land itself are outside GST under the law. The trade off is that the GST on an under construction flat is a real, additional cost that a buyer must add to the price, stamp duty, and registration when comparing it against a ready home.

Do you pay GST when buying a flat?

You pay GST on an under construction flat, but a ready to move home that has received its completion certificate is outside GST. The tax applies while a property is still being built and sold as a work in progress, because that is treated as a supply of construction service. Once the building is complete and a completion certificate has been issued, a sale of that finished property is not subject to GST, and neither is the resale of a flat later. This is why the ready flat in our example carried no GST while the under construction one did. For a buyer, the practical lesson is that the GST status of a home is not a detail but a headline cost difference, and it should be established early when you are weighing an under construction project against a finished one.

What are the GST rates on under construction property?

Since April 2019, under construction residential property is taxed at 1 percent for affordable housing and 5 percent for other residential homes, both without input tax credit. The 1 percent rate applies to homes that meet the affordable housing definition, while everything else residential attracts 5 percent. The important phrase is without input tax credit: the builder cannot offset the GST paid on cement, steel, and other inputs against the GST charged to you, which is a change from the earlier regime. These rates have been the framework for residential property for several years and, as of the most recent reviews, remain in place. Because tax rates and definitions are set by the GST Council and can change, a buyer should confirm the current rate on the official tax portal rather than assume, but the 1 and 5 percent structure is the one to plan around.

What counts as affordable housing for the 1 percent rate?

Affordable housing for the 1 percent rate is defined by both a size limit and a price limit, and a home must meet both. The size test is a carpet area of up to 60 square metres in metropolitan cities and up to 90 square metres in non metropolitan areas, and the price test is a value of up to 45 lakh rupees. A home has to satisfy the applicable area limit and the price cap to qualify for the concessional 1 percent rate, so a flat that is small enough but priced above the cap, or priced within the cap but larger than the area limit, would fall into the 5 percent category. For a buyer, this matters because the difference between 1 and 5 percent on a large purchase is substantial, so it is worth checking whether a home genuinely qualifies as affordable under both tests rather than taking a label at face value.

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

There is no GST on a ready to move home because, once a completion certificate has been issued, the sale is treated as a transaction in immovable property rather than a supply of construction service. Under Schedule III of the central GST law, the sale of a building after the completion certificate has been issued, and the sale of land, are outside the scope of GST. That is the legal basis for the exemption a ready home enjoys and that a resale flat enjoys too, since a resale is a transfer of a completed property. For a buyer, this creates a genuine cost distinction: an under construction flat adds 1 or 5 percent GST to the price, while an otherwise similar completed flat with its completion certificate does not. It is one of the concrete financial reasons some buyers prefer a ready home, alongside the certainty of moving in. Set against that, an under construction home is often priced lower per square foot and paid for in stages, so the right comparison is not GST alone but the full picture of price, GST, and the time and risk of waiting for the building to be completed.

What does no input tax credit mean for a buyer?

No input tax credit means the builder cannot recover the GST paid on construction inputs, and that cost tends to be built into the price you pay. Under the current residential regime, because the concessional 1 and 5 percent rates come without input tax credit, the tax a builder pays on materials and services is a cost to the project rather than something offset against the GST collected from buyers. The practical effect is that this embedded cost is generally reflected in the price of the home, even though you do not see it as a separate line. For a buyer, the takeaway is not to expect a builder to pass on input tax savings, because under this regime there are none to pass on, and to focus instead on the total price plus the applicable GST as the number that matters.

GST scenarios for a home buyer at a glance

The GST outcome depends on the type of purchase, so here is how the common situations compare.

Reading down the table, the pattern is clear: GST attaches to buying construction in progress, not to buying a finished home or land.

What should a buyer check about GST?

A buyer should establish the GST status early and fold it into the total cost comparison. Work through these checks when a project is under construction.

1. Confirm whether the home is under construction or completed with a completion certificate issued.
2. If it is under construction, identify whether it qualifies for the 1 percent affordable rate or the 5 percent rate.
3. Check the affordable tests, both the carpet area limit and the price cap, rather than trusting a label.
4. Add the applicable GST to the price when comparing an under construction flat with a ready one.
5. Ask the builder for a clear breakup showing how GST is charged on your payments.
6. Remember that a resale flat and a ready home with a completion certificate do not attract GST.
7. Confirm the current rates and definitions on the official tax portal before you finalise your budget.

Doing this turns GST from a surprise on the payment schedule into a known number you have already accounted for when choosing between homes.

Frequently asked questions

Do you pay GST on a ready to move flat?

No. A ready to move home for which a completion certificate has been issued is outside GST, and so is a resale flat. Under Schedule III of the central GST law, the sale of a completed building after the completion certificate is issued, and the sale of land, are not subject to GST. GST applies only while a property is under construction.

What is the GST rate on under construction property?

Since April 2019, under construction residential property is taxed at 1 percent for affordable housing and 5 percent for other homes, both without input tax credit for the builder. The 1 percent rate applies only to homes meeting the affordable definition. Because rates are set by the GST Council and can change, confirm the current figure on the official tax portal.

What is affordable housing for the 1 percent GST rate?

Affordable housing for the 1 percent rate is defined by both a size and a price limit. The carpet area must be up to 60 square metres in metropolitan cities or up to 90 square metres in non metropolitan areas, and the price must be up to 45 lakh rupees. A home must meet both tests to qualify, otherwise it attracts the 5 percent rate.

Does the builder pass on input tax credit to buyers?

Under the current residential regime, no. The concessional 1 and 5 percent rates come without input tax credit, so the builder cannot offset the GST paid on inputs, and there is no input tax credit to pass on. That embedded cost is generally built into the price, so a buyer should focus on the total price plus applicable GST rather than expect a credit.

Weigh the choice with our comparison of a ready to move versus under construction flat, and check the financing side with our guide to an APF approved project and home loan. If you are comparing projects, our overview of Arvind Sylva in Kodathi shows what a ready to occupy home looks like. Confirm current rates on the official CBIC GST portal.

Last updated 2026-07-13. PropNewz Team.