Two flats in Thane sat at almost the same price on a buyer's shortlist in 2026. One was in a tower still under construction, the other was ready to move into, keys available that week. On paper the under construction flat looked a touch cheaper, until the cost sheet arrived with a line the ready flat did not have. Goods and services tax, charged at 5 percent of the flat value, quietly closed the gap and then some. The buyer had assumed GST applied to every home the same way. It does not, and understanding when it applies is worth real money in a market like Mumbai.

The short answer. GST applies to under construction homes but not to ready to move homes that have received their completion certificate. An under construction flat carries GST at 5 percent for standard housing, or 1 percent for affordable housing, in both cases without input tax credit for the buyer. A completed flat with its certificate carries no GST at all. The trade off is that a ready flat spares you the tax and the wait, while an under construction flat may be priced lower but adds the GST and the risk that comes with buying before completion.

These rates and the ready to move exemption are set under the goods and services tax rules, as platforms such as Razorpay summarise. Here is how a Mumbai buyer should read them.

When does GST apply to a home purchase?

GST applies only while a home is still under construction, because at that stage the law treats the sale as a supply of construction services. Once the building is finished and has its completion certificate from the local authority, the flat is treated as a completed property rather than a service, and no GST is charged on its sale. This single distinction, service versus finished product, is the whole reason an under construction flat and a ready flat are taxed so differently even when they sit side by side at a similar price.

That is why the timing of your purchase matters as much as the price. Buy before the certificate and GST is part of your cost. Buy after it and that line disappears.

For a buyer, that turns the choice into a genuine cost comparison rather than a simple price one. The finished flat you can walk through carries no GST, while the tower you are trusting to be built on time carries the tax now and the completion risk until it is done. Neither is automatically the better buy, but they are not the same deal at the same price.

What are the GST rates on an under construction flat?

The standard rate is 5 percent of the flat value, and affordable housing is taxed at just 1 percent, both without input tax credit. For most Mumbai flats, which sit above the affordable threshold, the 5 percent rate applies. On a 2 crore under construction flat that is 10 lakh rupees of GST on top of the price, which is why the tax cannot be treated as a rounding item. The rate is charged on the value of the flat, and it is collected by the developer and paid to the government.

Because there is no input tax credit for the buyer under these rates, you cannot offset this GST against anything. It is a straight cost, so it belongs in your budget from the first calculation rather than as a surprise on the final cost sheet, the way it surprised the Thane buyer.

It also helps to see where GST sits among the other costs of buying. GST is separate from stamp duty and registration, which you pay to the state, and separate again from the 1 percent TDS a buyer may have to deduct on a deal of 50 lakh rupees or more, which our guide to TDS on property purchase sets out. Taken together, GST, stamp duty, registration, and any applicable TDS can add well over a tenth of the flat value, so mapping each of them before you commit is what keeps a Mumbai budget honest rather than optimistic.

What counts as affordable housing for the 1 percent rate?

Affordable housing for the 1 percent rate is defined by both a price limit and a size limit, and a flat must meet both. The price must not exceed 45 lakh rupees, and the carpet area must not exceed 60 square metres in metro cities such as Mumbai, or 90 square metres in non metro locations. If a flat crosses either the price or the size limit, it falls into the standard 5 percent category rather than the 1 percent one. In central Mumbai the 45 lakh price ceiling is hard to meet, so most buyers there will be looking at the 5 percent rate.

The carpet area used for this test is the RERA carpet area, the same defined figure builders must price on. Our guide to RERA carpet area and how to verify it explains how that number is measured, which matters here because it can decide whether a borderline flat qualifies for the lower rate.

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

There is no GST on a ready to move flat because, once it has a completion certificate, it is no longer a service being supplied but a finished property being sold. The law does not levy GST on the sale of completed property, so a certified ready flat carries a zero percent GST charge. For a buyer, this can make a ready flat meaningfully cheaper in total than an under construction flat at the same headline price, once the 5 percent is added to the latter.

This is also why the completion certificate is worth confirming for yourself rather than taking on trust. A flat marketed as ready but without its certificate may still attract GST, so the certificate, not the marketing, is what settles the question.

Consider two flats near each other at 2 crore rupees. The under construction one adds 5 percent GST, so its real cost is closer to 2.1 crore before stamp duty. The ready flat at the same 2 crore adds no GST, which makes it effectively 10 lakh rupees cheaper on tax alone, while also letting you see the finished home and move in at once. The under construction flat can still be the better buy if it is genuinely priced lower or offers something the ready one cannot, but the comparison has to begin after the GST is added, not before.

Can a buyer claim input tax credit?

No, a buyer cannot claim input tax credit on an under construction flat under the current rates. The developer may claim credit on the materials and services used to build, but since April 2019 the buyer gets no such credit and is not required to be passed the developer's benefit either. In practice this means the 5 percent or 1 percent you pay is a final cost to you, with nothing to reclaim later.

This is a change from the older, higher GST rates that came with input tax credit, and it is why comparing quotes from different years or different sources can be confusing. For any flat you are considering today, treat the GST as a cost you absorb in full.

How should a Mumbai buyer weigh the two options?

Weigh the GST saving of a ready flat against the lower headline price and future potential of an under construction one. The table below sets the two side by side on the points that decide total cost and risk, so you can compare them honestly rather than on the sticker price alone.

What should you check before you pay?

Run through these seven steps so the GST line never catches you off guard.

1. Confirm whether the flat is under construction or has its completion certificate.
2. Ask for the GST rate in writing, 5 percent for standard or 1 percent for affordable.
3. Check whether the flat meets both the 45 lakh price and the carpet area limit for the 1 percent rate.
4. Add the GST amount into your total budget, since you cannot claim it back.
5. Remember that a certified ready to move flat carries no GST at all.
6. Do not confuse GST with stamp duty and registration, which are paid separately to the state.
7. Get the completion certificate confirmed before treating any flat as GST free.

Do I pay GST on a ready to move flat?

No, provided it has its completion certificate. GST applies only to under construction homes, which are treated as a supply of construction services. Once a flat is completed and certified, it is a finished property, and its sale carries no GST. Always confirm the completion certificate exists before assuming a flat is GST free.

What is the GST rate on an under construction flat?

It is 5 percent for standard residential flats and 1 percent for affordable housing, both without input tax credit for the buyer. Most Mumbai flats fall under the 5 percent rate because they exceed the affordable limits. The GST is charged on the flat value and collected by the developer on the government's behalf.

Which flats qualify for the 1 percent affordable rate?

A flat qualifies only if it meets both limits. The price must not exceed 45 lakh rupees, and the carpet area must not exceed 60 square metres in a metro city like Mumbai or 90 square metres elsewhere. If it crosses either limit, the standard 5 percent rate applies instead of the 1 percent affordable rate.

Can I claim input tax credit on the GST I pay?

No. Since April 2019, buyers cannot claim input tax credit on under construction flats under the 5 percent and 1 percent rates. The developer may claim credit on construction inputs, but that benefit does not have to be passed to you. Treat the GST you pay as a final cost with nothing to reclaim.

Last updated 2026-07-20. PropNewz Team.