GST on property under construction: What is it?
If you are considering buying an under-construction residential unit in 2025, one of the major cost considerations you need to remember is Goods and Services Tax (GST). While there are GST-free ready-to-move properties, under-construction properties have a GST slab, which is included in the overall cost of ownership. GST is levied on payments made to the developer or builder before the completion certificate is issued.
GST rates applicable in 2025
As of August 2025, GST rates for under-construction developments remain in line with the 2019 structure proposed. Following is a quick summary:
• Housing for the Poor: 1% GST without Input Tax Credit (ITC)
• Non-Affordable Housing: 5% GST without ITC
Affordable housing is defined by some standards:
• In cities: Carpet area not above 60 sq. m and price not above ₹45 lakh
• In non-metro cities: Carpet area of up to 90 sq. m and cost up to ₹45 lakh
All other projects, except these, have a GST of 5%. These are not ITC rates, and thus developers are not able to take back credit on inputs paid like building materials, which affects the overall cost of the unit.
Timing of payment and GST liability
GST is only paid on payments made prior to a completion certificate being issued for the project. You do not pay GST if you pay for a house after occupation of the project is complete and ready. The timing of payment is thus of the highest significance. Payment timelines of builders are usually instalments based on stages of construction, and GST is to be paid on every instalment received prior to possession.
If the customer wants to cancel the booking before possession and get a refund, the builder can claim set off GST paid to the government. Buyers, hence, need to read refund terms carefully before the payment.
Impact on pricing and transparency
The elimination of ITC has caused most developers to hike base prices to pass on the tax. Although this makes taxation easier for customers, it can decrease transparency of purchases. Developers need to provide a valid tax invoice and clear GST separately in the breakup of the cost. Customers must be sure that the final cost sheet is accurate for purchases, otherwise, disputes or secret charges may arise later.
FAQs
Q1: Is GST payable on resale of under-construction property?
GST is not levied on resale by an individual if the seller is not a registered dealer. GST is levied on buying directly from the builder prior to completion.
Q2: Is GST paid on home purchase allowed to be claimed while filing taxes?
No, homebuyer of a residential property cannot claim ITC on GST on a residential property under current rules.
Q3: Is GST levied on home loan EMIs or registration charges?
No, GST is not levied on EMIs or stamp duty and registration fees. These fall under other tax and legal guidelines.
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