GST on Real Estate 2026: Rates on Under-Construction Flats & Land

GST on real estate is one of the most searched tax topics for homebuyers, developers, and investors in India. Whether you are buying an under-construction flat, signing a Joint Development Agreement, or trying to understand why your builder cannot pass on ITC benefits, the rules here are specific and non-negotiable.

In my experience working with salaried professionals on tax planning, property purchases consistently generate the most confusion around GST. The key principle is straightforward: GST applies only to under-construction properties. Once a project receives its Completion Certificate or Occupancy Certificate, GST does not apply on any subsequent sale. This one distinction determines whether you pay GST or not.

This guide covers all current GST rates on real estate for 2026, the affordable housing definition, land and completed property exemptions, how TDR and JDA transactions are taxed, and what ITC reversal means for developers.

GST Rate Summary: Real Estate 2026

Under-Construction Flats: How GST Is Calculated

GST at 5% or 1% applies to the construction value of an under-construction flat, not the total sale consideration. Since land itself is exempt from GST, a mandatory one-third deduction is made from the total consideration before GST is applied.

GST is calculated as: GST = Applicable rate x (Total sale consideration minus one-third as land value)

Worked example:

A flat is priced at Rs. 90 lakh (under-construction, non-affordable housing).

For an affordable housing flat priced at Rs. 40 lakh:

GST is charged on each instalment paid during the construction-linked payment plan, not as a lump sum at the end.

What Qualifies as Affordable Housing?

To attract the 1% GST rate, a residential unit must satisfy both conditions simultaneously:

Price condition: The total consideration must not exceed Rs. 45 lakh.

Carpet area condition:

• Metro cities: Carpet area must not exceed 60 sq. metres
• Non-metro cities: Carpet area must not exceed 90 sq. metres

Metro cities for this purpose include Delhi NCR, Mumbai MMR, Bengaluru, Chennai, Hyderabad, and Kolkata.

If either condition is not met, the standard 5% rate applies. A flat priced at Rs. 42 lakh but with a carpet area of 70 sq. metres in Bengaluru does not qualify for affordable housing rate. Both conditions must be satisfied together.

For the complete list of conditions and official clarifications on affordable housing GST rates, refer to the GST Council’s FAQ on real estate.

Completed Flats and Resale: No GST

Once a builder obtains the Completion Certificate (CC) or Occupancy Certificate (OC) from the competent authority, the sale of that flat is no longer treated as a supply of service under GST. It becomes a sale of immovable property and is outside the GST framework entirely.

This means:

• If you buy a ready-to-move flat that already has OC, you pay zero GST
• If you buy a resale flat from another individual, you pay zero GST
• Stamp duty and registration charges apply in both cases, but these are state-level levies outside GST

A practical point for buyers: always ask the developer for the OC status before finalising the purchase. If the OC has been received and GST is still being charged, that is incorrect. If the OC has not been received, GST at the applicable rate is valid.

Land: No GST

The sale of land is not a supply of goods or services under GST. It is specifically excluded under Schedule III of the CGST Act, 2017. This exemption applies to:

• Outright sale of a plot
• Sale of developed plots (with roads, drainage, electricity connections)
• Long-term lease of land for 30 years or more (treated as equivalent to sale under Schedule II)

Note that short-term lease and licensing of land for commercial purposes may attract GST at 18%. The exemption covers sale or long-term transfer of land, not all land-related transactions.

TDR and JDA: How GST Works

Transfer of Development Rights (TDR) and Joint Development Agreements (JDA) are the most complex areas of GST in real estate. Here is how the framework operates.

What Is a JDA?

A Joint Development Agreement is an arrangement where a landowner provides land to a developer, and the developer constructs a project on it. In return, the landowner receives a share of the developed units or revenue, rather than cash. These are extremely common in India, particularly in urban centres like Bengaluru, Hyderabad, and Pune.

Two Separate Taxable Supplies in a JDA

Under GST law, a JDA involves two distinct taxable supplies:

Supply 1: TDR by the landowner to the developer. The landowner transfers development rights over the land to the developer. This is treated as a supply of service (not a sale of land) and is taxable under GST. The developer pays GST on this under the Reverse Charge Mechanism (RCM).

Supply 2: Construction service by the developer to the landowner. The developer provides construction service to the landowner for the units the landowner will receive as their share. GST applies at the applicable project rate (1% or 5% depending on affordable housing classification).

Exemption on TDR: The Pre-OC Rule

GST on TDR supplied by the landowner is exempt to the extent the units are sold before the Occupancy Certificate is issued. The rationale: if units are sold during construction, GST has already been collected from the buyer. Double taxation is avoided.

However, for units that remain unsold as on the date of OC, the developer must pay GST on TDR under RCM at 18%. This liability arises at the time of OC, not when the JDA is executed.

Practical impact: Developers who have a large proportion of unsold inventory at project completion face a significant GST liability on TDR at that point. This makes pre-sales during construction commercially important from a GST perspective as well.

Valuation of TDR

The value of TDR supply is determined based on the value of similar flats sold by the developer to independent buyers nearest to the date of the Completion Certificate, after deducting one-third as land value.

ITC Rules for Developers: What Can and Cannot Be Claimed

Residential Projects: No ITC

From April 1, 2019, developers of residential projects who opt for the concessional rates (1% or 5%) cannot claim Input Tax Credit on any inputs or input services used in construction. This means GST paid on cement, steel, labour contracts, architect fees, and other construction inputs cannot be offset against GST collected from buyers.

The no-ITC condition is mandatory for residential projects under the concessional scheme. Developers cannot selectively claim ITC on some inputs while applying the lower rates to buyers.

Commercial Projects: ITC Available

Developers of commercial under-construction properties (offices, shops, retail units) paying GST at 12% can claim ITC on inputs and input services. This ITC can be used to offset their GST liability on sales.

ITC Reversal on Completion Certificate

For developers who availed ITC during an earlier period (before the April 2019 rule change) or for commercial projects, ITC reversal becomes relevant when the project completes.

When the Completion Certificate is received, any units still unsold become exempt supplies under GST (since sale of completed property is exempt). ITC attributable to these unsold units must be reversed under Rule 42 and Rule 43 of the CGST Rules, 2017.

Key points on ITC reversal:

• Reversal is calculated based on carpet area proportion, not the value of unsold units
• Reversal must be done on the date of receipt of CC or first occupation, whichever is earlier
• Rule 42 covers ITC on inputs and input services; Rule 43 covers ITC on capital goods
• Once reversal is complete, the remaining ITC balance can be used for other projects under the same GSTIN

Example: A developer has total ITC of Rs. 1.5 crore on a project. On the date of CC, 30% of units by carpet area are unsold. The developer must reverse 30% of the eligible ITC, i.e., Rs. 45 lakh, and can retain the balance Rs. 1.05 crore for other eligible use.

GST on Other Real Estate Charges

Maintenance charges: If a housing society’s monthly maintenance contribution per member exceeds Rs. 7,500, GST at 18% applies on the total maintenance amount.

Preferential location charges (PLC): PLC paid to the developer for a better floor, view, or corner unit is part of the construction consideration and attracts GST at the same rate as the flat (1% or 5%).

Car parking: If sold as part of the flat, GST applies at the same rate. If sold separately as a distinct unit, the tax treatment depends on the specific structure of the agreement.

Club membership and amenity charges: If collected as part of the construction agreement, they are included in the taxable value. If collected separately after OC, GST at 18% may apply depending on the nature of service.

For a foundational understanding of how GST return filing and compliance works, my guide on GST basics for Indian businesses covers the complete filing structure. For businesses above Rs. 5 crore, my guide on GST e-invoice rules explains how invoice registration works under the IRP system.

Conclusion

GST on real estate follows a clear framework once you understand the core distinctions. Under-construction residential flats attract 5% (or 1% for affordable housing), both without ITC. Completed flats, resale transactions, and land sale are fully exempt. Commercial under-construction properties attract 12% with ITC available.

For buyers, the practical check is simple: has the builder received the Occupancy Certificate? If yes, no GST should be charged. If no, the applicable rate depends on whether the project qualifies as affordable housing.

For developers, JDA and TDR transactions require careful attention to the pre-OC exemption and the timing of RCM liability. ITC reversal on completion is mandatory and must be computed on carpet area proportion, not value.

If you are a salaried professional with income from house property or planning to report rental income in your ITR, my guide on advance tax payment covers how property income affects your advance tax obligation.

Frequently Asked Questions

I booked a flat when it was under construction. It got its OC before I made the last instalment. Do I pay GST on that final payment?

This is a common situation. GST applies on instalments paid during the construction phase, i.e., before OC. If the OC was issued before your last payment and the builder raises that invoice after OC, strictly speaking GST should not apply on that instalment. However, this depends on the timing and how the builder treats the transaction. Clarify this with the builder before the final payment.

Can I claim the GST I paid on my flat purchase as a tax deduction under income tax?

No. GST paid on property purchase is not eligible as a deduction under income tax for salaried individuals. However, for those with business income, GST paid on commercial property used for business purposes may be treated differently.

My builder is charging 18% GST. Is that correct?

For residential under-construction flats, 18% is not the applicable rate. The rate is 5% for non-affordable housing and 1% for affordable housing, both without ITC. If your builder is charging 18%, ask for a written clarification and the GST invoice with HSN/SAC code details. 18% may apply to specific ancillary services or commercial portions of a mixed-use project.

Does GST apply on a plot purchase in a township project?

A pure plot purchase does not attract GST. However, if the developer is also providing development services along with the plot (water, electricity, roads, drainage), there may be a service component that attracts GST. The nature of the agreement determines the tax treatment.

What is the 80% rule in real estate GST?

Developers must procure at least 80% of their inputs and input services from GST-registered suppliers. If procurement from unregistered suppliers exceeds 20% of the total, the developer must pay GST on the shortfall under Reverse Charge Mechanism at 18%.

Written & Reviewed by

Diksha Chawla

Financial Educator & Content Creator | FinLecture.in

Diksha covers Indian income tax, mutual funds, ITR filing, and personal finance. FinLecture content is cross-checked against official government portals and SEBI/AMFI guidelines.

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