Residential
Understanding GST on Under-Construction vs Ready-to-Move-in Apartments
December 12, 2025
According to the latest reforms that have come about regarding taxation, Goods and Services Tax (GST) has emerged as one of the largest upheavals with uniform indirect taxation across various industries. Yet in the world of real estate, it's payment of tax on housing projects that arise relative to under construction vs. ready to move in apartments and what a buyer should justifiably believe their responsibility to be.
Thus, one of the biggest issues buyers have before such transactions is will they have to pay GST on property purchase and will it be different for an under construction or ready to move in apartments. There exists great levels of ambiguity concerning under construction and ready to move in apartments in terms of taxation and cost and stamping procedures that extend beyond a simple transaction that adds another hurdle to an already complex challenge facing first time homebuyers trying to carve their niche in India's buying landscape.
Thus, the following homebuyers' guide to GST hopes to distinguish the difference between under construction and ready to move in apartments for taxation, cost and stamping procedures as it relates to expert opinions and anecdotal experience that provide properly supported decisions in an ever changing world of residential options.
What is GST in Real Estate?
Goods and Services Tax or GST is an indirect tax on the goods and services supply, manufacture, and consumption of goods and services within India. GST aims to supplant indirect taxes like VAT, service tax, and excise with a simpler system of one nation one tax.
In real estate, GST in real estate India refers to the indirect tax required by the Indian government for buying under-construction properties. For instance, if a person buys an under-construction flat from the developer, a sale has taken place where per GST law is required as buyers and sellers are transacting with the builder/developer. However, if a person buys a fully constructed property with a completion certificate to show their title for ownership of "immovable property," then GST will not be applied.
Furthermore, GST will NOT apply to resale properties because it is two persons selling/buying properties that are completed already that do not apply because they are not "goods and services" of commercial offerings but instead, personal offerings with value of completed properties already existing. Thus, it is important for buyers to know this because there are many expenses that come with any property.
When Is GST Applicable?
GST is applicable to:
- For buying under-construction apartments per builders/developers
- For works contract services from builder/developer/contractors rendered
- Construction of residential complex prior to acquiring a completion certificate/certificate of occupancy
GST will NOT be applicable to:
- For ready-to-move-in apartments (if completion certificate received)
- For resale of current residential properties.
Importance of GST for Homebuyers and Developers
For home buyers, GST is an issue of revenue for costing out properties and financial planning and reassurance; not knowing means more money spent at time of closing. In addition, GST is a fixed percentage that can affect decision-making based on pricing between under-construction and finished units.
For builders, GST is an issue of revenue for costing out projects and accounting efforts; using a percentage based on a formulaic approach instead of fixed tax amount like before gives builders a new avenue of assessment for over construction 2023/newer changes as of 2025 which involve input tax credit (ITC).
GST on Under Construction Flats
Regarding GST on under construction property based on current legislation (2025), these are the relevant percentages:
- 5% on Non-Affordable Housing (not applicable to input tax credit)
- 1% on GST on affordable housing (not applicable to input tax credit)
Here is what classifies Affordable Housing:
- Maximum Carpet area of 60 sq.m (645 sq.ft) in Metropolitan Areas
- Maximum Carpet area of 90 sq.m (969 sq.ft) in Non-Metropolitan Areas
- Maximum Property Value is ₹45 lakh
Here is what classifies Non-Affordable Housing:
- Minimum Carpet area of above 60 sq.m in Metropolitan Areas
- Minimum Carpet area of above 90 sq.m in Non-Metropolitan Areas
- Minimum Property Value of ₹45 lakh
Note that the new rates do not apply to input tax credit (ITC) meaning that builders cannot take credit for taxes paid on applicable input purchases like cement, steel, etc. Therefore, this cost will either be incurred by the buyer directly or factored into a total cost analysis.
Read our Latest Blog on “Impact of New GST 2.0 Reforms on Real Estate”
When is GST Payable?
GST is applicable while the flat is under construction since the builder asks for construction-linked payments. Thus, as GST is charged on every payment, it is applicable during the course of the installments. However, it must be noted that the base price of the unit is only applicable to GST, not to other charges such as registration and stamp duty and maintenance.
Example
He purchases an under construction flat for 50 lakhs.
- GST= 5% of 50,00,000= 2,50,000
- Total Amount Payable= 52,50,000
For affordable housing
- GST= 1% of 50,00,000= 50,000
- Total Amount Payable= 50,50,000
Price Breakup in Case of GST (note includes Stamp duty and registration charges):
- Base Price: 50,00,000
- GST: 2,50,000
- Registration & Stamp Duty: 3,00,000 (Approx.)
- Maintenance Charges (Not Applicable): 50,000
- Total= 55,00,000
GST on Ready-to-Move-in Apartments
Ready to move in flats are exempt from GST. Transfer of possession where the project has a completion certificate before the purchase made by the buyer has occurred will be treated as transfer of immovable property and not liable to GST. This is an advantage to ready to move in flats as they are exempt from GST.
What is Ready to Move In?
- Construction is complete in all respects
- The completion certificate is obtained from local municipal bodies
- The buyer can occupy the property immediately.
This is why Completion certificate and GST applicability becomes necessary.
Hypothetical Transaction
The buyer purchases a flat worth ₹60 lakh for a project that already has received a completion certificate. For this transaction:
- GST = 0%
- Total Amount Payable = ₹60,00,000 + registration and stamp duty
Impact on Resale Transactions
Such properties are not subject to GST because these are resale properties sold by people who have their completion certificates. Therefore, they are subject to usual state charges like stamp duty, registration charges.
Difference Between Under Construction and Ready to Move Apartments
The difference between under construction and ready to move Apartments is imperative to understand to have proper knowledge and make better choices.
| Aspect | Under-Construction | Ready-to-Move-In |
|---|---|---|
| GST Liability | 5% or 1% GST on under-construction flats applicable | No GST applicable |
| Completion Status | Ongoing construction | Fully completed |
| Legal Certification | No completion certificate | Completion certificate issued |
| Cost Implication | Higher due to GST | Relatively lower (GST exemption for ready-to-move flats) |
| Input Tax Credit | Not available | Not applicable |
| Booking Flexibility | Stage-wise payments | Full payment on purchase |
| Possession Timeline | Future delivery | Immediate possession |
| Risk Factor | Construction delays possible | Minimal risk |
Pros and Cons for Homebuyers
Under-Construction Apartments
Advantages:
- Booking amount lesser and payments spread out
- More options in terms of units, floors, layouts
- Possibly get early bird/ pre-launch rates
- Appreciation opportunity before possession
Disadvantages:
- GST involved increasing total project cost
- Chance of delayed construction/delayed possession
- Builder has a chance to change the project
- Less tax benefits under GST
Ready-to-Move-in Apartments
Advantages:
- GST not applicable
- In-hand and usable right away
- Complete transparency of design, fittings, and facilities
- Perfect for self-use or instant leasing
Disadvantages:
- More expensive since payment made in one go
- Less stock or option
- May be more expensive than what it's worth since it's already constructed
Legal and Tax Implications Buyers Should Know
- Make sure to check the completion certificate for GST exemption.
- Verify if the builder is registered under GST law.
- Ensure the sale agreement states if pricing is inclusive or exclusive of GST.
- Input Tax Credit cannot be passed on to buyers; it applies to developers only in certain cases.
- Do not sign agreements before completion if you do not want to incur GST.
Insider Advice for Buyers of Homes
- Assess ownership costs over a lifetime, not just the basic price of either property.
- Assess value for money over a lifetime, not just savings now.
- Assess legal certainty and quicker possession as a driver for decision making.
- Get legal help for sale agreement reviews.
- Understand how the affordable housing category works to get the lower GST.
Conclusion
GST impact must be noted whether the house is constructed or not. In the case of under construction, there will be GST on the property but less consideration value since it's at the initial stage. In the case of constructed, there is no GST to worry about but higher consideration value likely from the onset to make up for no GST. Therefore, it seems the considerations make sense over what will be ultimately gained which must be substantiated through legal means for the right percentages and consideration values.
FAQs
1. Is GST Applicable On Under Construction Flats In India?
Yes, all under-construction residential properties purchased directly from a builder or developer require GST. In such scenarios, the GST applicable is 5% for a regular house and 1% for affordable housing projects.
2. What Is The GST Rate On Residential Property?
The GST rate on residential property is 5% or 1%, depending on affordability and area standards. While under construction, regular homes get 5% GST while homes that are affordable (as per area and valuation standards provided by the government) get a mere 1%.
3. Do I Need To Pay GST On Ready To Move Apartments?
No. If the ready-to-move apartment is verified to have a completion certificate issued before the sale agreement gets signed, then there is no GST. This is because ready-to-move apartments are in the scope of the sale of immovable property where GST is not applicable. However, state charges like stamp duty and registration fees will be applicable regardless, as they differ from GST.
4. What Documents Validate A Property to Be GST Exempt?
The only document required to prove that a building is exempt from GST is the Completion Certificate (CC) issued by the local competent authority, certifying that a structure was made in line with proper construction standards and approved plans and is livable/livable. Any property without a CC before the sale agreement is subjected to potential GST requirements. A buyer should ensure that they check for completion certificates before entering into any agreements for clarity and avoidance of taxes.
5. Can GST Increase The Cost Of Buying A Flat?
Yes, it can substantially increase the overall cost of acquiring an under-construction flat. For example, if a flat costs ₹50 lakh, for 5% it would mean a ₹2.5 lakh GST is imposed. This is over and above the price, registration, stamp duty, and any other fees or potential calculations that may be brought upon. Although with the advent of GST various taxes have been removed, with input tax credit nonexistent within the new regime, it is likely that developers will push on some or all their taxes to the buyer.
6. Does GST Impact Stamp Duty?
No, stamp duty and registration charges are additional statutory costs implemented by the state governments so they do not encompass GST. Whether under construction or ready to move in, it is expected that stamp duty (of at least 5%-7% of property value) and registration (about 1% of property value) will apply to any property taking the higher valuation between sale value or guidance value. This is in addition to any applicable GST.
7. What Happens If The Builder Delays The Project After Paying GST?
In the event that a buyer has paid an applicable GST for an under-construction apartment only for the builder to delay, there will be no provision for GST return as it was already a fee. However, under RERA compensation may be claimed if there has been an infraction with respect to project times set forth in the timeline with respect to Project Completion Date. Buyers should look carefully at agreements pertaining to fees and timelines relevant to compliance, delay fines and refund policies, if any. Otherwise, legal implication may be sought if delays are significant that it disrupts someone's financial expectations.
8. Does GST Apply On Resale Flats?
No, resale flats/apartments are not subject to GST. This is because resale transactions occur between two individuals and as per supply of goods/services in conjunction with GST law, this falls outside the realm of anticipated taxation. Only initial sales from builders/developers are subject to it. Therefore, a buyer need only pay stamp duty, registration charges and any other incidentals as related by appreciation or devaluation of property sold between two legitimate private entities.
MUST READ
Looking for something specific?
We'd be delighted to help you.
