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  3. GST on Under-Construction Properties: Homebuyers Must Know (2025)

GST on Under-Construction Properties: Homebuyers Must Know (2025)

By Ritu SharmaMay 31, 2025
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The Goods and Services Tax (GST) has changed the way we handle property transactions in India. Especially if you’re investing in an under-construction property, understanding how GST works can help you save money, avoid legal issues, and plan your finances better.

In this comprehensive, SEO-rich guide brought to you by Housivity.com, we’ll dive deep into the implications of GST on under-construction properties in India. Whether you’re a first-time homebuyer or a seasoned investor, this blog will answer all your burning questions.

GST on Under-Construction Properties: Homebuyers Must Know (2025)

What is GST on Under-Construction Properties?

Introduced in 2017, GST subsumed various indirect taxes into one unified system. When it comes to real estate, the government levies GST only on under-construction properties, not on ready-to-move-in homes.

Initially, GST on under-construction properties was charged at 12%, but after the 33rd GST Council amendment, it was revised:

  • 5% GST for non-affordable under-construction residential properties (without Input Tax Credit)
  • 1% GST for affordable under-construction residential properties (without ITC)

Note: No GST is applicable if the property has received a completion certificate.

How to Calculate GST on Under-Construction Properties?

To calculate GST, remember that land cost is exempted. Only two-thirds of the total property value is considered taxable.

How to Calculate GST on Under-Construction Properties?

Formula:
GST = (Total Property Value × 2/3) × Applicable GST Rate

Affordable Housing Example:

  • Property Value = ₹42,00,000
  • Taxable Value = 42,00,000 × 2/3 = ₹28,00,000
  • GST = 1% of ₹28,00,000 = ₹28,000

Non-Affordable Housing Example:

  • Property Value = ₹75,00,000
  • Taxable Value = 75,00,000 × 2/3 = ₹50,00,000
  • GST = 5% of ₹50,00,000 = ₹2,50,000

Key Details You Must Know About GST on Under-Construction Properties

Key Details You Must Know About GST on Under-Construction Properties

1. GST is NOT applicable on completed properties

If the builder has received a Completion Certificate (CC), you don’t have to pay GST.

2. Different slabs for affordable vs. regular housing

  • Affordable Housing (up to ₹45 lakhs): 1% GST
  • Others: 5% GST

3. Commercial Properties have 12% GST

If you’re investing in a shop, office, or any other commercial space, you’ll be charged 12% GST.

4. Land value is excluded

Builders should not charge GST on the land component. Ensure it is excluded.

5. GST is different from Stamp Duty & Registration Charges

These are mandatory and separate from GST. Usually, they add 5%-7% more to the total cost.

6. Negotiation is possible

Some builders agree to absorb GST, reducing your overall property cost. Always ask.

Financial Impact of GST on Under-Construction Properties

  • Saves money by excluding land value from the tax base.
  • Clearer tax structure with no confusion between VAT, service tax, etc.
  • Affordable homes benefit from just 1% GST, encouraging low-budget buyers.

However, remember:

  • You don’t get Input Tax Credit (ITC) under the new GST scheme.
  • Property cost = Base Price + GST + Stamp Duty + Registration

Tips for Managing GST Payments

Tips for Managing GST Payments

1. Pay GST on time

GST is charged on construction milestones. Delay in payment can result in penalties.

2. Collect proper invoices

Always get a GST invoice from the builder that includes:

  • GST number
  • Amount charged
  • Property details

3. Builder must be GST compliant

Ensure that the builder is registered under GST and is depositing the tax collected from you.

4. Keep all receipts

Receipts serve as proof during disputes or income tax returns.

Are There Any GST Exemptions on Under-Construction Properties?

Not really, but affordable housing gets major relief:

  • Only 1% GST
  • No ITC benefit, but overall cost remains low

Also, government housing schemes like PMAY (Pradhan Mantri Awas Yojana) offer GST benefits to EWS and LIG segments.

Documents Required for GST on Under-Construction Properties

Documents Required for GST on Under-Construction Properties

  1. PAN card (buyer and builder)
  2. Sale agreement
  3. GST Registration Certificate
  4. Builder’s GST Invoice
  5. Bank statements
  6. Payment receipts

Final Thoughts from Housivity

Buying an under-construction property? Make GST your best friend, not a hidden cost.

By understanding how GST on under-construction properties works, you can:

  • Budget accurately
  • Avoid overpayment
  • Negotiate smarter
  • Ensure legal compliance

Whether you’re buying your first home or your fifth, Housivity.com is here to simplify your real estate journey. From understanding property taxes to comparing investments, we’ve got your back.


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