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Guide · GST Rates

GST on Construction & Real Estate —
5%, 1% or Exempt?

The correct GST rate for under-construction flats, affordable housing, ready-to-move property, commercial units and works contracts — with ITC rules updated for GST 2.0.

TaxClue Editorial Desk Updated 18 August 2026 5 min read 15 FAQs answered
Updated for FY 2026-27 GST Expert Reviewed Builders, Buyers & Contractors
Quick Answer

A flat bought while under construction attracts 5% GST without ITC (1% for affordable housing). A ready-to-move flat where the builder has the Occupancy/Completion Certificate before sale is exempt (Nil) — it is a sale of immovable property, outside GST. Works contracts (labour + material) are now taxed at a uniform 18% after GST 2.0 removed the 12% slab.

Under-construction flat 5%
Affordable housing 1%
Ready-to-move (OC/CC) Nil
Works contract 18%
At a glance

GST on Construction & Real Estate — Decision Table

The GST rate for every common property and construction scenario, with ITC eligibility. Residential rates were retained under GST 2.0; the 12% works-contract slab was removed and merged into 18%.

Property / TransactionGST RateITCNotes
Affordable residential — under construction1%NoEffective rate; carpet & ≤₹45L limits apply
Other residential flat — under construction5%NoOn value net of 1/3 land deduction
Ready-to-move flat — OC/CC obtainedNil—Sale of immovable property — outside GST
Commercial unit — under construction12%*YesShops/offices; confirm current rate on portal
Commercial — OC/CC obtainedNil—Same as residential — outside GST
Works contract — residential18%YesWas 12% pre-22 Sep 2025
Works contract — commercial / industrial18%YesOffices, factories, warehouses
Works contract — government / infra18%Yes12% concession removed under GST 2.0
JDA — developer's flat share5% / 1%NoOn proportionate value of flats

Rates reflect the GST 2.0 two-slab structure effective 22 September 2025. *Commercial under-construction is widely cited at 12%; a portion of the market treats it as 18% post-reform — verify on the official GST portal before invoicing.

Lower rate

What Counts as "Affordable Housing"?

Affordable housing attracts the lower 1% effective GST. The GST definition is specific and differs from other government schemes — a unit qualifies only if both the value cap and the carpet-area limit are met.

CriteriaMetro CitiesNon-Metro Cities
Carpet area≤ 60 sqm≤ 90 sqm
Value cap≤ ₹45 lakh≤ ₹45 lakh

Metros: Mumbai (MMR), Delhi NCR, Bengaluru, Chennai, Hyderabad, Kolkata. Miss either condition and the flat falls to the 5% rate.

1%

Affordable housing — no ITC

  • Carpet area within the metro/non-metro limit
  • Total value ≤ ₹45 lakh
  • Under-construction stage only
  • Effective rate after 1/3 land deduction
  • No input tax credit to the developer
vs
5%

Other residential — no ITC

  • Flats above the affordable-housing caps
  • Villas, premium & larger apartments
  • Under-construction stage only
  • Effective rate after 1/3 land deduction
  • No input tax credit to the developer

Not sure if your flat qualifies as affordable housing?

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Buyer side

GST on an Under-Construction Flat — Key Rules

GST applies only while construction is in progress at the time of sale. Once the builder holds the Occupancy or Completion Certificate, the sale is of immovable property and carries no GST.

Book flatUnder construction — GST applies
→
Pay in stages5% / 1% on each instalment
→
OC / CC issuedLater payments turn GST-free
→
Ready-to-moveResale is fully exempt
  • GST is charged on the total consideration net of a 1/3 deduction for land value per Notification 11/2017-CT(R).
  • Under the 5%/1% scheme the developer cannot claim ITC on cement, steel, tiles, labour or other inputs.
  • PLC, floor-rise, car-parking and club charges form part of taxable value and carry the same rate as the flat.
  • Society/RWA maintenance is a separate supply — 18% GST only if monthly charges exceed ₹7,500 per member.
Worked example

How GST Adds Up — ₹60 Lakh Flat

5% Regular under-construction flat

Agreement value₹60,00,000
GST @ 5%₹3,00,000
Buyer pays₹63,00,000

1% Affordable housing (≤₹45L)

Agreement value₹45,00,000
GST @ 1%₹45,000
Buyer pays₹45,45,000
Important: 5%/1% means no ITC

Under the current scheme the builder cannot claim Input Tax Credit — GST on cement (now 18% after GST 2.0), steel, tiles and labour becomes an embedded cost built into the price. Only the old 12%-with-ITC scheme (closed to new projects) allowed credit.

Buying an under-construction flat? Get your GST, stage-payments and price checked.

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Contractors

GST on Works Contracts in Construction

A works contract is a composite supply of goods + services (material + labour for construction, repair or renovation). Under GST 2.0 (effective 22 September 2025) the 12% slab was removed, so works contracts now attract a uniform 18% with ITC.

Works Contract TypeGST RateWas (pre-22 Sep 2025)Example
Residential construction18%12%Contractor building flats / villas
Commercial / industrial construction18%18%Offices, factories, warehouses
Government / infra (roads, bridges, dams)18%12%Concessional 12% slab withdrawn
Repair / renovation18%18%Home or office renovation

Contractors can claim ITC on inputs and input services used for the contract. Confirm the exact rate for your SAC on the official portal.

TaxClue Insight

The scheme you buy under matters more than the headline number. A flat at 5% without ITC can cost more than it looks because the builder's blocked input GST is priced in; a works contract at 18% lets a registered business recover ITC. Match the transaction type to your credit position before signing.

Contractor or developer working out your GST rate and ITC?

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Stay compliant

Builder & Contractor GST Compliance

Registration is mandatory once aggregate turnover crosses ₹20 lakh (₹10 lakh in special-category states); most builders and contractors exceed it. Here is the compliance picture:

  • GST registration (GSTIN)
  • Correct rate: 5% / 1% / 18%
  • Tax invoice with 1/3 land deduction
  • 80% inputs from registered suppliers
  • RCM on shortfall / cement
  • ITC eligibility check (works contract)
  • GSTR-1 (outward supplies)
  • GSTR-3B (monthly/quarterly)
  • JDA & TDR/FSI tax position
  • E-invoicing applicability
  • GSTR-9 annual return
  • Books & project-wise records

You likely charge GST if

  • You sell flats before OC/CC is issued
  • You provide a construction works contract
  • Your turnover crosses ₹20 lakh
  • You collect PLC, parking or club charges

No GST applies if

  • You sell only after OC/CC is obtained
  • It is a pure resale of a completed flat
  • Only the land is being transferred
  • Turnover stays below the threshold
Government sourcesRates & notifications: gst.gov.in · CBIC rate finder: cbic-gst.gov.in · Real-estate 5%/1% scheme: Notification 03/2019-CT(R) (eff. 1 Apr 2019) · Land deduction (1/3): Notification 11/2017-CT(R) · GST 2.0 rate rationalisation: 56th GST Council, eff. 22 September 2025
People also ask

Frequently Asked Questions

Rates & Slabs
What is the GST rate on an under-construction flat in India?
Under-construction residential flats attract 5% GST without Input Tax Credit, and affordable housing attracts 1% (effective rate, no ITC). These rates apply on the value net of a one-third deduction for land and have been in force since 1 April 2019. The GST 2.0 reform effective 22 September 2025 did not change these residential real-estate rates.
Is there any GST on a ready-to-move flat?
No. If the builder has obtained the Completion Certificate (CC) or Occupancy Certificate (OC) before the date of sale, the transaction is a sale of immovable property and is exempt from GST. GST applies only when construction is still in progress at the time of sale.
What is the GST rate on affordable housing?
Affordable housing under construction is taxed at a 1% effective GST rate without ITC. A unit qualifies only if it meets both a carpet-area limit (60 sqm in metros, 90 sqm in non-metros) and a value cap of ₹45 lakh. If either condition is not met, the flat falls to the 5% rate.
Did GST 2.0 change the GST rate on flats?
No. The GST 2.0 rationalisation effective 22 September 2025 restructured most goods and services into a two-slab system but left residential real-estate rates unchanged — under-construction flats stay at 5%, affordable housing at 1%, and ready-to-move flats remain exempt. GST 2.0 did, however, cut cement from 28% to 18%, lowering builder input costs.
Works Contract
What is the GST rate on a construction works contract in 2025-26?
Works contracts now attract a uniform 18% GST with ITC. Under GST 2.0 (effective 22 September 2025) the earlier 12% slab was removed, so residential and government/infrastructure works contracts that were taxed at 12% have moved to 18%. Commercial and renovation works contracts were already at 18%.
Has the GST rate on government works contracts increased?
Yes. The concessional 12% rate that applied to government works contracts (roads, bridges, dams, canals, railways and similar notified works) was withdrawn under GST 2.0. From 22 September 2025 these government works contracts are taxed at the uniform 18% rate like other works contracts.
Can a contractor claim ITC on a works contract?
Yes. A contractor providing a works contract service can claim Input Tax Credit on inputs and input services used to provide that contract. This differs from a builder selling flats under the 5%/1% scheme, who cannot claim ITC. Note that ITC on works-contract services received for constructing your own immovable property is generally blocked under Section 17(5).
ITC & Builder Rules
Can a builder claim ITC on construction materials?
No. Builders who sell under the 5%/1% scheme (all new projects since 1 April 2019) cannot claim ITC on cement, steel, tiles, paint, labour or other inputs. ITC was available only under the old 12%-with-ITC scheme, which is closed to new projects. The blocked input GST becomes an embedded cost in the flat price.
How is GST calculated on an under-construction property?
GST is charged on the agreement value after a one-third deduction for the land component, per Notification 11/2017-CT(R). For example, on a ₹60 lakh regular flat, GST at 5% works out to ₹3 lakh, so the buyer pays ₹63 lakh. On a ₹45 lakh affordable-housing flat, GST at 1% is ₹45,000. GST is payable on each stage payment made before the completion certificate is issued.
Is GST charged on car parking, PLC and club charges?
Yes. Preferential location charges (PLC), floor-rise charges, car-parking charges and club-membership charges collected by the builder form part of the taxable value of the flat and attract the same GST rate as the flat (5% or 1%). They are treated as part of the composite construction supply.
Commercial & Special Cases
What is the GST rate on commercial property under construction?
The sale of an under-construction commercial unit (shop or office) is widely cited at 12% GST with ITC available to a registered business buyer using it for taxable supplies. Some of the market treats commercial under-construction at 18% after GST 2.0, so confirm the current rate on the GST portal before invoicing. A completed commercial unit sold after OC/CC is exempt from GST.
Is GST applicable on a Joint Development Agreement (JDA)?
Yes. Under a JDA the developer's share of flats is taxed at 5% (or 1% for affordable housing) on the proportionate value of those units, without ITC. The transfer of development rights (TDR/FSI) by the landowner and the developer's construction service to the landowner also have specific GST treatment, so a JDA should be structured with professional advice.
Is GST applicable on society or RWA maintenance charges?
GST at 18% applies on monthly maintenance charges collected by a housing society or RWA only if the charge exceeds ₹7,500 per member per month, and only when the society's aggregate turnover crosses the registration threshold. If either condition is not met, the maintenance is exempt. This is separate from the GST on the flat purchase itself.
When must a builder or contractor register for GST?
Registration is mandatory once aggregate turnover crosses ₹20 lakh in a financial year (₹10 lakh in special-category states). Most builders and works-contractors exceed this and must register, charge the correct rate, issue tax invoices and file GSTR-1 and GSTR-3B. Inter-state supply of services can trigger mandatory registration regardless of turnover.
Is there GST on the resale of a flat?
No. The resale of a ready, completed flat (one that already has its OC/CC) is a sale of immovable property and is outside the scope of GST. GST applies only on the first sale of a flat that is still under construction. Stamp duty and registration charges, which are state levies, still apply to a resale.
If you would rather not do it yourself

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