GST on Under-Construction Property in India (2026 Rates)

The GST regime on under-construction property was overhauled on 1 April 2019 by the GST Council. Before that date, residential projects were taxed at 12% with Input Tax Credit (ITC) available to the developer. The new structure cut the headline rate but removed ITC entirely, with the stated aim of simplifying pricing for buyers and ending disputes over anti-profiteering pass-through.

Three slabs apply today under Notification 11/2017-CTR as amended by Notifications 3/2019 and 4/2019:

Non-affordable residential under-construction attracts 5% without ITC. Affordable residential under-construction attracts 1% without ITC. Commercial office or shop under-construction attracts 12% with ITC available to the builder.

These headline rates already factor in the one-third deemed land deduction. Under paragraph 2 of Notification 11/2017-CTR, one-third of the total agreement value is deemed to be the land component and is excluded from GST. The 5% rate is applied on the full consideration you pay the builder, with the land abatement already baked in. You do not deduct one-third yourself.

For luxury apartments in Gurgaon sectors like 65, 79, 95, 102, and 113, the 5% rate is what shows up on demand letters. Projects such as DLF Privana, M3M Golfestate, and Signature Global Twin Towers selling at Rs 25,000 per sqft and above fall squarely in the non-affordable bucket, so GST on a Rs 3 Cr agreement value is Rs 15 lakh.

GST is charged on each instalment demand you receive from the builder, not as a single payment at booking. If a demand of Rs 50 lakh is raised when a slab is cast, the GST portion of that demand is Rs 2.5 lakh, invoiced as a separate tax component. Builders must issue a tax invoice under Section 31 of the CGST Act for every stage. Keep these invoices for TDS reconciliation under Section 194-IA.

The 1% rate is tempting but the qualifying criteria are strict. The CBIC definition requires both conditions to be met at the same time.

The carpet area limit is up to 60 sqm (around 645 sqft) in metropolitan areas and up to 90 sqm (around 970 sqft) in non-metropolitan areas. The price cap is up to Rs 45 lakh of agreement value, uniform across the country.

Delhi NCR, including Gurugram, Faridabad, Noida, Ghaziabad, and Gautam Buddh Nagar, is classified as metropolitan for this notification. So in Gurgaon your flat must have a carpet area up to 60 sqm AND an agreement value up to Rs 45 lakh to attract the 1% rate.

Carpet area is defined under Section 2(k) of the RERA Act 2016 as the net usable floor area within a flat, excluding external walls, service shafts, exclusive balconies, and open terraces. In practice carpet area is roughly 65% to 75% of the super built-up area that developers advertise. A 1,000 sqft super built-up flat typically has a carpet area of 650 to 750 sqft, which already exceeds the 645 sqft affordable cap.

Add the Rs 45 lakh price cap, which is well below the base ticket size in any licensed Gurgaon sector. Even sub-affordable projects by Signature Global or ROF in Sohna and Sector 36A come in above Rs 45 lakh for a 2BHK in most current launches. The practical reality is that very little listed Gurgaon inventory qualifies for the 1% rate today.

The handful of projects that do qualify are typically EWS or LIG units under the Haryana Affordable Housing Policy 2013 or PMAY-linked schemes. Here, the builder opts into the new rate regime at project start and prices units specifically to stay under the Rs 45 lakh cap. Super-area, carpet area, and total consideration are all mentioned in the allotment letter so you can verify eligibility before signing.

If your flat crosses either threshold by even one rupee, it exits the 1% bucket and attracts 5%. Developers sometimes split the agreement to keep base price under Rs 45 lakh and bill the rest as separate services. This is a red flag under anti-abuse provisions and risks assessment by the GST department. Verify current rate interpretations with your CA before structuring an unusual deal.

Three common property transactions sit entirely outside the GST net.

Ready-to-move flats with an Occupation Certificate: Once the local authority, DTCP in Gurugram for licensed colonies or MCG for other areas, issues the Occupation Certificate, the flat ceases to be a works contract and becomes immovable property. Schedule III of the CGST Act specifically excludes the sale of a building where the entire consideration is received after the completion certificate is issued, or after first occupation. If you book a flat after OC, you pay zero GST but still pay full stamp duty and registration charges. Always ask for a copy of the OC and verify it on the dtcp.haryana.gov.in portal.

Resale property: Any transfer between two individuals, or between an individual and a company, where the seller is not a developer of a construction project, is outside GST. Resale carries stamp duty at 7% in Haryana for male buyers plus 0.5% registration, but no GST layer. This is a significant price advantage for resale in premium pockets like DLF Phase 1 to 5 or Golf Course Road, where OC-received stock often trades at a premium of around 10% to 15% over primary market pricing.

Plots and bare land: Entry 5 of Schedule III excludes sale of land from GST. For a pure plot transaction in a licensed Haryana colony, you pay stamp duty but no GST. There was ambiguity about developed plots sold with amenities, but CBIC Circular 177/09/2022-GST clarified that bare plot sales, even in licensed colonies with roads and sewage, do not attract GST. However, where a developer provides construction services or a bundled amenity package on the plot (club membership, water connection work, demarcation civil work), that service portion may attract 18% GST separately. Always ask for a line-item cost breakdown.

Rental of residential property: Renting your own flat to a tenant for residential use is exempt from GST. Commercial rent is taxed at 18%. Residential rent paid to a GST-registered entity, unless used as a dwelling by an employee, attracts reverse charge GST at 18% under a 2022 amendment. Verify the current reverse-charge position with your CA if you let a flat to a company.

Builders bundle several charges into the composite supply of a flat. Most line items track the main rate of 5% or 1%, but a few are billed separately at 18%.

Base selling price (BSP) is the core cost of the flat, taxed at 5% or 1% as applicable to the project.

Preferential Location Charges (PLC) cover park-facing, pool-facing, or corner units. These are treated as part of the composite supply so the same 5% or 1% rate applies. There is no separate 18% category for PLC under the current regime, contrary to what some older demand letters still claim.

Floor rise charges are the per-floor premium above a base floor, often ground or first. Composite supply, same rate as the flat.

Covered car parking sold with the flat under a sale deed is taxed at the same rate as the flat. Under HRERA norms and the Supreme Court ruling in Nahalchand Laloochand (2010), parking cannot be sold independently of the apartment, so it rides with the composite supply.

External Development Charges (EDC) and Internal Development Charges (IDC) are statutory charges collected by builders on behalf of the Haryana Town and Country Planning Department. The settled position after CBIC clarifications is that EDC and IDC billed as part of a flat sale invoice are part of the composite supply and attract the same 5% or 1% rate. Some builders still invoice EDC separately at 18% as a reimbursement, which is incorrect for composite transactions. Ask for a line-item breakdown and challenge excess charges in writing.

Club membership, Interest-Free Maintenance Security (IFMS), power backup installation, and gas pipeline connection are typically billed separately at 18% GST, since they are standalone services or security deposits, not part of the main construction supply. Verify treatment with your CA where the builder bundles them into the sale deed.

Consider a 3BHK apartment in Sector 102 Gurgaon with a super built-up area of 2,200 sqft, sold at Rs 15,000 per sqft base price. The agreement structure typically reads as follows.

Base selling price is 2,200 sqft at Rs 15,000, totalling Rs 3.3 Cr. Preferential Location Charges for a park-facing unit at Rs 500 per sqft add Rs 11 lakh. Floor rise at Rs 150 per sqft per floor for an 18th floor unit (ten floors above the base) adds roughly Rs 33 lakh. Covered car parking is Rs 6 lakh. EDC and IDC at prevailing Gurgaon rates add around Rs 15 lakh. Club membership is Rs 2 lakh and IFMS is Rs 2 lakh.

Composite supply (base, PLC, floor rise, parking, EDC and IDC) totals around Rs 3.95 Cr. GST at 5% is Rs 19.75 lakh.

Club membership and IFMS at 18% add roughly Rs 72,000.

Total GST is around Rs 20.5 lakh on a Rs 4 Cr all-in ticket.

The buyer also pays stamp duty at 7% on the circle rate or agreement value, whichever is higher. For a male buyer in Gurugram urban that works out to around Rs 28 lakh (verify the current rate with the sub-registrar at /stamp-duty-haryana-2026). Registration charges are capped at Rs 50,000 in Haryana. TDS at 1% under Section 194-IA on consideration above Rs 50 lakh is deducted at each payment stage and deposited with the Income Tax Department (see /tds-on-property-above-50-lakh for the stage-wise process).

GST applies to each payment demand as it is raised, not as a lump sum at booking. If the builder raises a 10% demand on booking, you pay the base amount plus 5% GST on that slice. By the time the project is complete, you will have paid the full Rs 20.5 lakh GST across the construction-linked schedule.

This calculation changes materially if you buy ready-to-move or OC-received stock in the same project. Zero GST then applies, saving around Rs 20 lakh on this ticket. The trade-off is a higher sticker price, since developers often price OC inventory at a premium of 10% to 15% over primary market rates. Many Gurgaon buyers find the OC premium cheaper than the GST they would otherwise owe.

Why was ITC removed in 2019? Pre-April 2019, developers claimed Input Tax Credit on cement (28%), steel (18%), tiles (18%), bathroom fittings (18%), lifts (18%), and other inputs. They offset this against the 12% output tax and the net cost was lower. In practice, enforcement under the anti-profiteering clause was patchy and buyers suspected ITC gains were not being passed on. The GST Council solved this by cutting the rate to 5% but removing ITC entirely.

The arithmetic broadly works out. On a project cost of Rs 100, inputs attract around Rs 10 to 12 of GST that developers can no longer recover. They either absorbed this into the base price or raised ticket prices in April 2019 to compensate. Most Gurgaon developers raised prices by 3% to 4% at that time and kept the headline GST at 5%.

Common buyer mistakes to avoid:

Confusing GST with stamp duty. Both are tax layers but go to different governments, GST to central and state and stamp duty entirely to Haryana. They are not interchangeable, and ready-to-move stock exempt from GST still pays full stamp duty.

Paying GST on OC-received flats. If the builder claims construction is ongoing after OC, verify by downloading the OC from the DTCP portal or asking for a copy. No OC-received flat should be invoiced with GST.

Ignoring EDC and IDC line items. Some developers overcharge GST on EDC by applying 18% instead of 5%. The composite supply position is 5% or 1%. Challenge excess charges in writing before you clear the demand.

Forgetting GST on cancellation refunds. If you cancel a booking, the builder refunds the base amount plus GST paid, less any cancellation deduction. Treatment of GST on the deduction amount is a grey area under Section 15 of the CGST Act. Negotiate full GST refund language in your termination letter.

Not checking RERA registration. Every GST invoice should carry the HRERA registration number. If a project is unregistered, the supply is in violation of HRERA Act 2016 and the invoice itself is suspect (/rera-haryana-registration-check).

For NRI buyers, GST treatment is identical to resident buyers. The additional layer is TDS at a higher rate (currently 20% plus surcharge and cess) under Section 195 for NRI sellers in resale transactions. Verify the current surcharge slab with your CA. See /nri-property-buying-rules-india for the full compliance checklist.