GST on under-construction apartments explained

GST on under-construction apartments is a property tax set at 1% for affordable homes and 5% for regular flats, with zero input tax credit (ITC) allowed. Under Schedule II of the CGST Act 2017, work on a building counts as a service until the city gives it an Occupancy Certificate (OC) or Completion Certificate (CC). To keep land free from tax, the law cuts out 33.33% (one-third) of the total deal value under Notification No. 11/2017-Central Tax (Rate). Because of this rule, GST applies only to two-thirds of the cost of actual construction work. You pay this 1% or 5% tax in small parts as the building goes up, but a ready home with an OC carries a flat 0% GST rate.

Knowing these tax rates and relief rules helps you plan your home budget and dodge surprise costs on your demand notes.

1. Statutory GST Rates for Under-Construction Residential Properties

The GST rate on an under-construction flat is 1% for affordable homes and 5% for other homes. Buyers cannot claim input tax credit on these flats. Shops in a housing project have an 18% GST rate, but builders can claim input tax credit for them. Once a project gets its official Completion Certificate (CC) or Occupancy Certificate (OC), GST is generally not charged on the sale of a completed flat, as per Schedule III of the CGST Act.

• Affordable Housing (1% GST): Total flat cost must stay under ₹45 Lakhs. Carpet area must be under 60 sq. metres (646 sq. ft) in big cities or under 90 sq. metres (969 sq. ft) in smaller towns.
• Non-Affordable Homes (5% GST): Any home priced above ₹45 Lakhs or bigger than the city size caps.
• Shops in Housing Societies (18% GST): Covers daily grocery stores, milk booths, and retail shops inside the project gates.
• Ready Homes with an OC (0% GST): Fully free from GST because selling a finished flat counts as an immovable property sale, not a construction service.

2. 1/3rd Land Abatement Rule: Tax Separation for Construction and Land

The one-third land rule drops 33.33% from your total flat bill. You pay tax only on the work and raw materials like bricks and steel. The rule comes from Notification 11/2017 because the law says land cannot carry GST. This cut takes the old 1.5% and 7.5% rates down to a clean 1% and 5% in cash.

If you buy a flat that is still under construction for ₹1.20 crore, ₹40 lakh is counted as the land cost. GST is charged only on the remaining ₹80 lakh. At 7.5%, the tax comes to ₹6 lakh, which is equal to 5% of the full flat price. The builder cannot charge GST separately on the land cost.

3. GST Calculation on Under-Construction Properties Across Pricing Slabs

Your GST bill depends on the flat price and city size, which changes your final payment across standard home budgets:

4. GST Application on an Under-Construction Project: Case Study of Purva Cityspire

Purva Cityspire is a luxury apartment project by Puravankara Limited in Bellandur, East Bangalore (PIN 560103). It covers 6 acres along the Outer Ring Road and is still under construction. The project has two tall towers with G+35 and G+38 floors. It also offers 55% open green space, a 20,000 sq. ft. clubhouse, an infinity pool, and parking for 650 cars across two basement levels.

Helios Business Park is just 900 metres away, while the upcoming Kadubeesanahalli Metro Station on the Blue Line is 1.7 km away. The project follows a 10:80:10 payment plan. Since construction is still in progress, bookings are subject to the applicable GST rules for under-construction homes.

The project offers 1, 2, 3, and 4 BHK flats starting from ₹13,000 per sq ft. Every unit costs more than the ₹45 Lakh affordable housing cap, so the standard 5% GST rate applies across the entire project:

• 1 BHK (700 to 800 sq ft): Base price starts at ₹97.5 Lakhs, which adds a 5% GST of ₹4,87,500, making the pre-registration cost ₹1,02,37,500.
• 2 BHK (1,150 to 1,400 sq ft): Base price starts at ₹1.50 Crore, which adds a 5% GST of ₹7,50,000, bringing the cost to ₹1,57,50,000.
• 3 BHK (1,700 to 2,100 sq ft): Base price starts at ₹2.21 Crore, which adds a 5% GST of ₹11,05,000 across work stages, making the total ₹2,32,05,000.
• 4 BHK (2,600 to 3,200 sq ft): Base price starts at ₹3.38 Crore, which adds a 5% GST of ₹16,90,000, bringing the cost to ₹3,54,90,000.

Under Purva Cityspire's 10:80:10 plan, you do not pay all the GST on day one. You pay 10% on booking, 80% with 5% GST across basement, floor slab, and wall plastering milestones, and the last 10% on key handover. If Puravankara gets the Occupancy Certificate before asking for that final 10%, that last payment is completely tax-free.

5. GST Billing Across Milestone-Based Payment Schedules

GST on an under-construction flat is usually paid in parts as construction moves forward. The builder sends payment notices based on the work completed, rather than asking for the full tax at once. Section 13 of the CGST Act sets out when you must pay GST. The due date falls on the day the builder sends the bill or gets your cash, whichever comes first. Under a Construction-Linked Payment (CLP) plan, you pay the tax in small parts across each work stage.

• Booking and Sale Agreement (10% to 20%): You pay 5% GST on the first down payment when you sign the sale agreement.
• Basement and Foundation (10% to 15%): GST applies only to the demand note sent after engineers finish the basement raft.
• Building Floor Slabs (35% to 40%): The tax splits across floor slab stages as the towers rise.
• Plastering, Pipes, and Wiring (15% to 20%): You pay GST as workers put in pipes, wires, wall plaster, and floor tiles.
• Possession Notice Before OC (Final 5% to 10%): Incurs 5% GST if the builder gives keys before getting the OC; if the OC comes first, this last part carries zero GST.

6. GST Treatment of Bundled and Ancillary Builder Charges

Extra charges billed with an under-construction flat count as "composite supplies" under Section 2(30) of the CGST Act and take the same 5% tax rate as the main flat. Any required extra cost bundled into your sale contract takes this same 5% rate:

• Floor and View Charges (PLC): Extra fees for park views, lake views, or top floors carry 5% GST.
• Car Parking Slots: Buying a set slot in the basement or stilt area carries 5% GST when listed on the main flat allotment.
• Clubhouse and Gym Fees: One-time charges to build and set up the clubhouse are subject to 5% GST.
• Water and Power Setup Fees: Work done by the builder to link cables and water lines carries 5% GST.
• Govt Utility Deposits (0% Tax): Pure safety deposits paid to state boards like BESCOM or BWSSB carry 0% GST when the builder passes them on as a pure agent.

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