GST on under construction apartments explained
For many first-time buyers, GST on under construction apartments comes as a surprise. Understanding GST on flat purchase can save you from this confusion.
Why Does GST Apply to Under Construction Properties?
When you buy an under-construction flat, you are paying for an ongoing “construction service,” and it is within GST’s scope. Once the developer gets a Completion Certificate (CC) or Occupancy Certificate (OC), the property is no longer in progress. It becomes immovable property, and it is outside GST’s limit. It also depends on when the OC is issued, and not when you move in.
What is GST for an Under Construction Flat?
Calculating GST is easy once you know the base price. A ₹75 lakh non affordable flat has GST at 5% that costs ₹3.75 lakh, and the total cost is ₹78.75 lakh. The amount is calculated on the base price. It is separate from stamp duty charges for the property.
What is the GST on Under Construction Property?
Under the current pricing, GST rates depend on the type of unit you are buying.
| Category | GST Rate |
|---|---|
| Affordable Housing | 1% |
| Non affordable | 5% |
| Commercial | 12% |
To qualify as affordable housing, a property must have a carpet area of up to 60 sq. m and a total value not exceeding ₹45 lakhs.
Will Under-Construction Flats become Expensive with GST?
Developers price under construction units lower than ready to move in, and buyers wait for possession. Construction linked payment plans spread out the cost and the GST charge over time. It eases the financial burden when compared to a lump sum payment for any ready flat.
Tips for Buyers Before Booking Under-Construction Flats
Here are the tips for buyers before booking an under-construction flat:
- Confirm that your builder is listed under GST and issues tax invoices.
- Ask the builder for a break down of GST, stamp duty charges, and registration charges in the cost sheet.
- Budget 10% over the base price to cover tax on property purchase
- If financing your purchase, add GST into your home loan, since lenders disburse against the GST inclusive cost of each instalment.
Sattva Courtyard, which is an emerging luxury apartment project on Varthur-Gunjur Road, has complete pricing transparency. The cost sheets clearly outline GST and every other applicable charge, so that buyers know what they are paying for at each stage of construction.
FAQs
GST is charged at 1% for affordable housing. It is 5% for other residential properties, calculated on the base price of the flat.
Yes, GST applies to all the under construction flats because the purchase is treated as an ongoing construction service, which falls within the scope of GST.
No, ready to move in flats with a CC or OC are exempt from GST, as they are classified as immovable property.
