A couple comparing two similar flats in Chembur in 2026 could not understand why one quote was nearly 4 lakh higher than the other for the same price on paper. Both flats were listed at 80 lakh. The difference was that one was under construction and the other was ready to move in with its occupancy certificate. On the under-construction flat, a 5 percent GST added 4 lakh to the cost. On the ready flat, GST was zero. Same price, very different final cheque.

GST is the tax most buyers underestimate, because it depends entirely on when in a building's life you buy. Get the timing and the category right and you know your bill to the rupee. Here is exactly how GST works on a home purchase in 2026 and when you pay nothing at all.

The short answer. GST applies only to under-construction homes: 5 percent for a standard flat and 1 percent for an affordable one, both without any input tax credit for you, as the current rate structure in force since April 2019 sets out. A ready-to-move flat that already has its occupancy or completion certificate, a resale flat, and a plain plot of land all attract no GST at all, because completed property sits outside GST under Schedule III of the CGST Act, 2017. The trade-off: an under-construction flat can be cheaper or newer, but the 5 percent GST is a real cost a ready flat simply does not carry.

Whether you pay GST at all comes down to one thing: is the flat under construction when you buy it. GST is a tax on the supply of construction services, so it attaches while the developer is still building and selling you an incomplete home. The moment a building is legally complete, the sale becomes a transfer of finished property rather than a construction service, and it falls outside GST. This single distinction decides everything, so the first question to ask about any flat is not just the price, but its construction status on the day you will register it.

What are the GST rates on an under-construction flat?

There are two rates for homes. A standard under-construction residential flat is taxed at 5 percent, and an affordable one at 1 percent, in both cases without input tax credit for the buyer. Commercial units are taxed differently and at a higher rate, so this guide sticks to residential homes.

The rate is charged on the value of the flat, so it scales directly with price. On a standard flat, 5 percent of an 80 lakh flat is 4 lakh of GST. On an affordable flat at the 1 percent rate, the tax is a small fraction of that. Because the rate is fixed by category, your only real variables are the flat's price and whether it qualifies as affordable.

Which flats attract no GST at all?

Completed homes, resale homes and land are all outside GST. Once a developer has the occupancy or completion certificate, the flat is treated as finished immovable property under Schedule III of the CGST Act, 2017, and no GST applies. Resale flats and the purchase of a plot of land are outside GST for the same reason. The table below sets out who pays what.

The pattern is simple to hold in your head: if the building is finished or the flat has changed hands before, you are almost certainly outside GST. If a builder is still constructing and selling you an incomplete unit, you are inside it.

What counts as affordable housing for the 1 percent rate?

An affordable home must meet both a size and a price test. The carpet area must be up to 60 square metres in a metro city such as Mumbai, or up to 90 square metres in a non-metro, and the total price must be up to 45 lakh. Both conditions have to be satisfied, so a compact flat priced above 45 lakh does not qualify, and a cheaper flat larger than the size cap does not either.

For Mumbai buyers this matters because prices often push flats just past the 45 lakh line even when the size fits. If your under-construction flat qualifies as affordable, your GST drops from 5 percent to 1 percent, which on a 45 lakh flat is the difference between roughly 2.25 lakh and 45,000. It is worth checking the exact carpet area and price against both limits before assuming which rate applies.

In practice the affordable rate is easier to reach in the outer suburbs and in redevelopment or smaller projects than in central Mumbai, where prices for even compact flats usually clear 45 lakh. Do not take a sales team's word for the category. Ask them, in writing, whether they are charging you 1 percent or 5 percent, and confirm it against the flat's registered carpet area and agreement value. A single misclassification on a large purchase can quietly cost you lakhs, and it is the sort of thing you can only fix cleanly before you sign, not after.

Why can I not claim input tax credit, and what does that mean for me?

Since April 2019, the 5 percent and 1 percent rates come without input tax credit for the home buyer. Under the older structure, higher rates of 8 and 12 percent allowed builders to claim credit for the tax paid on their inputs, and that benefit was meant to flow through. The current lower headline rates were introduced in exchange for removing that credit.

For you as a buyer, the practical meaning is straightforward: the 5 percent or 1 percent you pay is a flat, final cost with no offset to look forward to. Do not let a builder tell you a separate credit will come back to you on a residential flat, because at these rates it will not. Budget the GST as money spent, not money partly recoverable.

It is also worth knowing that GST is charged only on the construction value, not on the land portion of your deal. This is already built into the effective 5 percent and 1 percent rates you are quoted, so you do not need to compute it separately. What you should do is make sure the tax appears as one clear line on your cost sheet, at the correct rate, and matches the category the flat actually falls into.

How should a buyer plan for GST on a home purchase?

Treat GST as a line item you fix before you commit, not a surprise at booking. Follow this sequence so the tax is never a shock:

1. Confirm the construction status of the flat: under construction, or ready with an occupancy or completion certificate.
2. If it is ready, resale, or a plot, expect no GST and confirm the certificate exists.
3. If it is under construction, identify whether it is standard at 5 percent or affordable at 1 percent.
4. Check the carpet area and price against both affordable limits before assuming the 1 percent rate.
5. Ask the builder for a written cost sheet that shows GST as a separate, clearly stated line.
6. Do not expect any input tax credit back on a residential flat at these rates.
7. Add the GST to your stamp duty, registration and other charges to see your true all-in cost.

GST sits alongside the other statutory costs of a purchase, so plan it together with them. Our guide on BMC property tax for new Mumbai flat buyers covers the recurring cost, and our guide on the occupancy certificate versus completion certificate explains the exact document that flips a flat from taxable to GST-free.

What mistakes do buyers make with GST?

The most common mistake is not asking the construction status early, then discovering a 5 percent charge on an under-construction flat that a ready flat down the road would not have carried. The second is assuming a small or cheap flat automatically gets the 1 percent affordable rate, without checking both the size and the 45 lakh price limit.

The third mistake is believing a builder's promise of an input tax credit that does not exist for residential buyers at these rates. And the fourth is forgetting GST entirely when comparing an under-construction flat with a ready one, so two flats look equally priced on paper while one carries several lakh of extra tax. Always compare homes on their all-in cost, GST included, not just the headline price.

Frequently asked questions

Is there GST on a ready-to-move flat?

No. A ready-to-move flat that already has its occupancy or completion certificate attracts no GST, because completed property falls outside GST under Schedule III of the CGST Act, 2017. The same applies to resale flats and to the purchase of a plot of land. GST is charged only while a home is still under construction.

What is the GST rate on an under-construction flat in 2026?

A standard under-construction residential flat is taxed at 5 percent, and an affordable one at 1 percent, both without input tax credit for the buyer. The rate is charged on the flat's value, so 5 percent of an 80 lakh flat is 4 lakh of GST. Commercial units are taxed separately at a higher rate.

What qualifies as affordable housing for the 1 percent rate?

An affordable home must meet both tests: a carpet area up to 60 square metres in a metro like Mumbai, or 90 square metres in a non-metro, and a total price up to 45 lakh. Both conditions must be satisfied, so a flat priced above 45 lakh does not qualify even if its size fits within the limit.

Can I get input tax credit on a flat purchase?

No. Since April 2019, the 5 percent and 1 percent residential rates apply without any input tax credit for the buyer. The GST you pay is a final cost with no offset, so treat any promise of a credit coming back to you on a residential flat as incorrect and budget the tax as money fully spent.

Last updated 2026-08-22. PropNewz Team.