For most residential purchases made before the competent authority issues a completion certificate or before first occupation, GST is payable on the construction service. Under the post-1 April 2019 scheme, the effective rate is 1% without input tax credit (ITC) for qualifying affordable apartments and 5% without ITC for other residential apartments. A sale after the legally relevant completion or first-occupation point is generally outside GST.
The promoter is responsible for charging and paying the tax. Buyers should verify the project category, rate, taxable value, certificate status and invoice instead of relying on labels such as “ready to move” or on a possession letter.
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GST on an under-construction flat: the rules at a glance
| Situation | GST treatment | What to verify |
|---|---|---|
| Residential apartment sold before the completion certificate or before first occupation, whichever occurs earlier | Generally taxable as a construction service | Certificate issuer and date, first-occupation date and sale documents |
| Qualifying affordable residential apartment under the post-2019 scheme | 1% effective GST, without ITC | Carpet-area and ₹45 lakh gross-amount tests |
| Other residential apartment under the post-2019 scheme | 5% effective GST, without ITC | Project classification and invoice calculation |
| Sale after the completion certificate has been issued, or after first occupation if that happened earlier | Generally no GST on the sale of the building or flat | Legally recognised certificate or first-occupation evidence |
| Eligible ongoing project that used the one-time transition choice | Effective 8% for affordable or 12% for other apartments, with ITC | Project records proving eligibility and the promoter’s documented election |
The 1% and 5% figures are effective rates under the real-estate scheme after its prescribed land-value treatment. The invoice should show the applicable treatment and the project’s classification.
When does GST apply to the sale?
Before completion or first occupation
A sale of an under-construction apartment is generally a taxable construction service when the legally relevant completion point has not been reached. The Ministry of Finance’s 8 December 2018 Press Information Bureau release described the rule this way: “there is no GST on sale of complex/ building and ready to move-in flats where sale takes place after issue of completion certificate by the competent authority.” The same release states that GST applies to an under-construction property, including a flat marketed as ready to move in, when the completion certificate had not been issued at the time of sale.
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The practical test is not whether the unit appears physically usable. Check whether the competent authority has issued the completion certificate and whether the property has been first occupied. The exclusion generally begins at whichever of those legally recognised events occurs earlier. Use the certificate issuer, certificate date and the relevant sale or consideration dates in the agreement and invoice when checking the result.
After the certificate or first occupation
When the sale takes place after the competent authority’s completion certificate, the sale of the building or flat is generally outside GST. If first occupation occurred earlier, that earlier event is relevant to the same test. A builder’s possession letter, an advertisement calling a project “completed” or the availability of electricity does not by itself prove that the statutory completion certificate exists.
What are the current GST rates?
Affordable residential apartments: 1%
The post-1 April 2019 scheme provides an effective 1% GST without ITC for a qualifying affordable residential apartment. Both the area and price conditions must be satisfied.
Other residential apartments: 5%
An apartment that does not meet the affordable-housing definition is generally taxed at an effective 5% GST without ITC under the post-2019 scheme. The 5% category includes a unit that fails either the carpet-area test or the gross-amount test; it is not enough to satisfy only one of them.
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| Classification | Carpet-area limit | Builder-charged gross amount | Effective rate | ITC |
|---|---|---|---|---|
| Affordable residential apartment in a metropolitan city | Up to 60 sq m | Not more than ₹45 lakh | 1% | Not available under this scheme |
| Affordable residential apartment in another city or town | Up to 90 sq m | Not more than ₹45 lakh | 1% | Not available under this scheme |
| Other residential apartment | Does not meet the applicable affordable limit, or fails the price test | Not applicable to affordable classification | 5% | Not available under this scheme |
These are effective rates for the specified residential real-estate scheme, not a general rate for every property transaction. The promoter’s invoice should identify the taxable value and rate used.
How to determine whether a flat is affordable housing
Apply both tests
For GST purposes, affordable housing requires:
- Carpet area of no more than 60 square metres in a metropolitan city, or no more than 90 square metres in another city or town; and
- A gross amount charged by the builder of no more than ₹45 lakh.
The limit is a carpet-area measure, not the super built-up or saleable area printed in marketing material. Ask the promoter for the carpet-area figure used in the project’s GST classification. The ₹45 lakh condition concerns the gross amount charged by the builder; obtain the project’s written calculation rather than assuming that a quoted base price alone is the relevant figure.
Boundary examples
A flat with 60 sq m of carpet area in a metropolitan city and a builder-charged gross amount of exactly ₹45 lakh can meet the stated limits, subject to the other scheme conditions. A unit with the required area but a gross amount above ₹45 lakh does not qualify for the 1% category. Likewise, a unit priced within ₹45 lakh but above the applicable carpet-area ceiling does not qualify. In either case, the promoter should explain why the 5% classification applies.
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What happened to projects that began before April 2019?
The post-2019 rates are not the only possible figures in older projects. A qualifying ongoing project could make a one-time choice to continue under the earlier structure if construction had begun and bookings had taken place before 1 April 2019 and the project remained incomplete on 31 March 2019. The effective rates under that transition were 8% for affordable apartments and 12% for other apartments, with ITC.
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| Regime | Eligibility or timing | Affordable rate | Other-apartment rate | ITC |
|---|---|---|---|---|
| Post-1 April 2019 scheme | Projects using the current real-estate rate structure | 1% | 5% | Not available |
| One-time ongoing-project transition | Construction and booking before 1 April 2019; project incomplete on 31 March 2019; promoter made the permitted election | 8% | 12% | Available under the transition |
A buyer cannot select whichever rate is cheaper. Project records, the promoter’s election and the applicable notifications determine whether the transition was valid. If an older rate appears on an invoice, request the written basis, project dates and evidence of the election.
Who is responsible for charging and paying GST?
The promoter’s responsibility
The promoter, rather than the individual buyer, is responsible for charging and discharging construction GST. Under the official FAQ, the 1% or 5% tax must be discharged in cash; any ITC held by the promoter may be used for another service supply. That rule does not turn the buyer into the person responsible for remitting the tax to the government.
How instalment billing normally works
In ordinary project billing, the promoter issues a tax invoice showing GST on the taxable construction consideration and collects that amount with the contractual instalment or milestone payment. The agreement may link invoices to booking, construction stages, demand letters or possession. Each demand should be checked against the agreed rate and taxable-value calculation.
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1Repair Windows errors before they cause bigger problems2Scan for outdated or missing drivers - takes under a minute3Clear out junk files and repair common Windows errorsThe official material identified for this topic does not provide a complete CGST time-of-supply analysis for every advance, delayed instalment, cancellation, refund or balance paid after completion. Those cases can depend on the CGST Act and rules, the invoice date and the agreement. If a payment straddles completion or first occupation, obtain a written explanation from the promoter and advice from a qualified tax professional rather than assuming that the rate follows the date on which money left your bank account.
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Documents a buyer should request
- The promoter’s GSTIN and a tax invoice for each taxable demand.
- The GST rate and the taxable-value calculation used on the invoice.
- The project’s affordable or other-apartment classification, including the carpet area and gross-amount basis where 1% is claimed.
- The completion certificate’s issuing authority and date, or the documented first-occupation status.
- If 8% or 12% is charged, the project dates and written evidence supporting the eligible ongoing-project transition.
What exemptions affect land and development rights?
TDR, FSI and qualifying lease premiums
The rate notification exempts qualifying transfers of development rights (TDR), floor space index (FSI) and certain long-term lease premiums used for residential construction. These are primarily promoter-side components of the project’s GST computation. An exemption affecting development rights does not automatically mean that a buyer’s construction invoice is GST-free.
Unbooked apartments at completion
For residential apartments left unbooked at completion certificate or first occupation, the promoter can face proportionate reverse-charge tax on the relevant development rights or lease premium. The notification sets the calculation method and applicable caps. This liability is calculated at project level; it should not be presented as an unexplained extra charge to an individual buyer.
Registered procurement and cement
The 2019 CBIC update states that 80% of specified inputs and input services must come from registered suppliers. A shortfall can trigger reverse-charge tax. Cement purchased from an unregistered person also attracts reverse charge at the applicable rate. These are compliance obligations for the promoter and are not a separate buyer surcharge unless a valid invoice and contractual basis support the charge.
Illustrative calculations
The following examples show the arithmetic of the effective rates only. They assume the stated amount is the taxable total consideration to which the applicable scheme rate is applied; the project’s classification and land-value treatment must still be confirmed.
| Example | Rate | Illustrative GST |
|---|---|---|
| Qualifying affordable apartment with ₹40,00,000 taxable consideration | 1% | ₹40,000 |
| Other residential apartment with ₹80,00,000 taxable consideration | 5% | ₹4,00,000 |
| Eligible transitional affordable project with ₹40,00,000 taxable consideration | 8% | ₹3,20,000 |
| Eligible transitional other-apartment project with ₹80,00,000 taxable consideration | 12% | ₹9,60,000 |
Do not apply the transition examples unless the promoter can establish that the project met the pre-1 April 2019 conditions and that the permitted one-time choice was made.
Buyer checklist before paying a GST demand
- Identify the legal stage of the sale. Ask whether the competent authority has issued a completion certificate and whether first occupation has occurred. Record the dates and the authority involved.
- Confirm the project regime. Determine whether the promoter is using the post-2019 1%/5% scheme or a documented 8%/12% ongoing-project transition.
- Test affordable status. Compare the carpet area with the 60 sq m metropolitan or 90 sq m other-city limit and check whether the builder-charged gross amount is no more than ₹45 lakh.
- Reconcile the invoice. Match the GSTIN, rate, taxable value, apartment classification and instalment amount with the agreement and demand letter.
- Separate promoter adjustments from buyer tax. TDR, FSI, lease-premium, procurement and unbooked-unit rules are normally promoter computations. Request a legal and contractual explanation before accepting any additional line item.
- Escalate unusual timing. For advances, cancellations, delayed instalments or payments made around completion, obtain advice under the CGST Act and rules.
Common mistakes and how to resolve them
“Ready to move” is treated as proof of no GST
Marketing language is not the statutory test. Request the competent authority’s completion certificate and check first occupation. If neither legally relevant event had occurred at the sale, the construction service can remain taxable.
A possession letter is called a completion certificate
A possession letter records a handover or offer of possession; it does not, by itself, establish that the competent authority issued the required certificate. Ask for the certificate number, issuing authority and date.
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The promoter applies 1% without proving affordability
Verify both the carpet-area and ₹45 lakh conditions. If either fails, ask the promoter to explain the classification and issue a corrected invoice if necessary.
An old rate is quoted without project records
Request evidence that construction and booking began before 1 April 2019, that the project was incomplete on 31 March 2019 and that the promoter made the permitted one-time election. Without those records, the 8% or 12% figure is not self-justifying.
Every instalment is assumed to have the same answer
Milestone billing is common, but advances, cancellations and payments around completion can involve time-of-supply rules not resolved by the rate table alone. Reconcile each invoice and obtain professional advice for an exceptional payment pattern.
Bottom line for buyers
Start with the legal status of the project, then apply the rate classification. Before the completion certificate or earlier first occupation, a qualifying affordable apartment is generally 1% GST without ITC and another residential apartment is generally 5% without ITC. An eligible pre-1 April 2019 ongoing project may instead have a documented 8% or 12% transition rate with ITC. After the legally relevant completion or first-occupation point, the sale is generally outside GST. The promoter must support the charge with the correct invoice, project records and calculation.
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