GST on Flats: 1% Affordable, 5% Others — and Why Ready-to-Move Homes Have No GST

GST on flats is generally 1% for affordable under-construction homes and 5% for other under-construction homes, without input tax credit to the builder under the current scheme. No GST applies to the sale of a completed flat where the entire consideration is received after the completion certificate, where required, or first occupation, whichever is earlier. For FY 2025-26, check the project’s tax scheme, payment history and completion documents before accepting the builder’s calculation.

When does GST apply to a flat purchase?

GST applies to construction services, not to a qualifying sale of a completed building.

The distinction follows paragraph 5(b) of Schedule II and paragraph 5 of Schedule III, read with Sec. 7 CGST Act:

• Under-construction purchase: GST normally applies where the builder receives any consideration before the completion certificate or first occupation, whichever is earlier.
• Completed-property purchase: No GST applies to the property sale if the entire consideration is received after that milestone.
• Ordinary resale of a completed flat: No GST applies, including a resale between individuals.

“Ready-to-move” is a marketing description, not conclusive tax evidence. Verify the competent authority’s completion documentation and any claimed first occupation. An occupancy certificate may be relevant evidence, but check its legal effect for that project.

A booking advance paid before completion can prevent the transaction from qualifying for the completed-property exclusion. Also, assigning booking rights in an unfinished flat is not necessarily an ordinary GST-free resale.

What are the GST rates on flats for FY 2025-26?

The standard effective rates remain 1% for affordable residential apartments and 5% for other residential apartments under the scheme introduced on 1 April 2019.

Property or transaction	Effective GST where the standard land deduction applies	Builder’s input tax credit
Affordable residential apartment under the current scheme	1%	Not available
Other residential apartment under the current scheme	5%	Not available
Commercial apartment in a residential real estate project, or RREP	5%	Not available
Commercial apartment in a real estate project other than an RREP	Generally 12%	Available, subject to conditions
Qualifying completed-flat sale or ordinary completed-flat resale	No GST on the property sale	Not applicable

An RREP is a project in which commercial apartments occupy not more than 15% of the total carpet area of all apartments.

These rates arise under Notification No. 11/2017-Central Tax (Rate), as amended, including Notification No. 03/2019-Central Tax (Rate).

The combined notified rates for current-scheme residential construction are 1.5% and 7.5%, applied after the standard one-third deduction for land, producing effective rates of 1% and 5% of the total consideration. Do not deduct land again from an already-effective rate.

Certain qualifying projects ongoing on 31 March 2019 could retain the old scheme through a timely option. Legacy rates can therefore differ, including effective 8% for specified affordable housing and 12% for other residential construction, with ITC subject to conditions.

Which flats qualify as affordable housing?

A residential apartment must meet both the carpet-area limit and the ₹45 lakh gross-value ceiling to qualify for the current 1% rate.

The limits are:

1. Carpet area: Up to 60 sq m in specified metropolitan locations, including Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata and Mumbai MMR, or 90 sq m elsewhere.
2. Gross amount charged: Not more than ₹45 lakh.

Use the notification’s geographical definitions rather than assuming every location marketed as a city suburb falls within them.

The value test includes land and relevant charges collected by the promoter, such as preferential location, parking and common-facility charges. A low advertised base price alone does not establish eligibility.

Thus, a 58 sq m Bengaluru flat priced at ₹48 lakh fails the value test and ordinarily attracts 5%, not 1%.

How much GST would an ₹80 lakh Bengaluru flat attract?

An ₹80 lakh under-construction flat under the current non-affordable scheme attracts ₹4 lakh GST.

Anil books an 85 sq m flat in Sarjapur for ₹80,00,000, including parking, with payments linked to construction milestones.

Cost component	Amount
Flat consideration, including bundled parking	₹80,00,000
GST at 5%	₹4,00,000
Total before stamp duty, registration and separate services	₹84,00,000

Assuming the applicable Bengaluru metropolitan boundary includes the project, it fails both the area and value tests. Even outside that boundary, its price independently disqualifies it from the affordable category.

For an instalment of ₹10,00,000 excluding GST, the corresponding GST is ₹50,000, subject to applicable invoicing and time-of-supply rules.

Stamp duty and registration are calculated separately under Karnataka law. Had Anil bought only after the qualifying completion milestone, with no earlier consideration paid, the property sale would carry no GST. However, a higher ready-home price could offset that saving.

Which additional charges attract GST?

Charges forming part of the apartment’s composite construction supply generally follow its GST rate, while independent services require separate treatment.

Base price, preferential location charges, bundled parking and bundled club membership ordinarily follow the flat’s rate. Genuinely independent club services or later memberships may differ.

Maintenance requires particular care:

• Builder-provided maintenance is generally taxable at 18%, subject to registration and other applicable rules.
• For qualifying RWA contributions, the exemption is ₹7,500 per month per member.
• Liability also depends on registration requirements, including the general ₹20 lakh aggregate-turnover threshold applicable in Karnataka.
• Under the tax department’s published position, where a taxable contribution exceeds ₹7,500, GST applies to the entire contribution, not merely the excess.

Statutory stamp duty and registration fees themselves do not attract GST. Separate brokerage, legal or facilitation services may attract GST even for a completed-property purchase.

Request a proper tax invoice complying with Rule 46 CGST Rules, rather than relying only on a payment-demand sheet.

Can you recover GST when a booking is cancelled?

GST may be recoverable following cancellation, but the route depends on statutory deadlines and supporting documents.

Under Sec. 34 CGST Act, a builder’s credit-note adjustment must generally be reported by 30 November following the financial year of the original supply, or the date of furnishing the relevant annual return, whichever is earlier. The deadline is not automatically measured from the cancellation year.

Write to the builder requesting the cancellation statement, credit note and GST refund calculation.

If the builder can no longer adjust its tax through a credit note, an unregistered buyer may use the prescribed refund procedure under Sec. 54 CGST Act and Circular No. 188/20/2022-GST. This generally involves temporary registration, Form GST RFD-01, supporting evidence and a two-year limitation linked to the cancellation letter for this category.

Refunds are not automatic. Cancellation deductions and any tax on separate cancellation services also require review.

What other tax checks should buyers make?

Buyers should separately examine ITC restrictions, property-purchase TDS and the treatment of GST in their acquisition cost.

Individuals buying homes for personal use cannot claim ITC. Business registration does not automatically help: Sec. 17(5)(c) and Sec. 17(5)(d) CGST Act generally block construction-related immovable-property credits, subject to statutory exceptions.

For FY 2025-26 / AY 2026-27, the Income-tax Act, 1961 still applies. Under Sec. 194-IA Income-tax Act, purchases from resident sellers generally require 1% TDS on the higher of consideration and stamp-duty value where either reaches ₹50 lakh. Separately indicated GST is generally excluded from the consideration component for TDS purposes. Non-resident sellers require separate analysis under Sec. 195 Income-tax Act.

Non-creditable GST attributable to acquisition generally forms part of acquisition cost for capital-gains purposes under Sec. 48 Income-tax Act.

How SP & SC helps

SP & SC reviews property documents and GST calculations before you commit or dispute a demand.

Our Bengaluru team examines builder agreements, cost sheets, completion evidence, cancellation terms and title documents. Fees are a fixed quote after reviewing the case, agreed before the engagement begins.

Explore our contracts and legal services and property title verification guide.

Frequently asked questions

Does every ready-to-move flat have zero GST?

No. The completion milestone and receipt of consideration determine treatment, not the advertisement.

Can a builder charge 5% and then add another land adjustment?

The effective 5% already incorporates the standard one-third land deduction. Check that the calculation does not duplicate or reverse it.

Can I claim ITC if I run my business from the flat?

Not automatically. Business use does not override the immovable-property credit restrictions.

Do joint-development agreements attract GST?

They can. Construction supplied to landowners, development rights, exemptions and reverse-charge obligations require separate analysis before signing.

Is GST paid on purchase relevant when I later sell?

Generally, non-creditable GST attributable to acquisition forms part of your acquisition cost. Preserve invoices and payment records.