If you buy an under-construction home in 2026, GST applies at 5% of the price for a standard residential unit and at a concessional 1% for a qualifying affordable home — both without input tax credit (ITC) for the buyer or builder. If you buy a completed, ready-to-move home that already has its completion or occupancy certificate, no GST applies at all. That single distinction — under-construction versus completed — is the most important thing to understand about GST on housing.

These effective rates have applied since 1 April 2019 under the GST Council's revised scheme for real estate (CBIC notifications), replacing the earlier higher rates that came with ITC. This guide explains exactly when the tax applies, who qualifies for the 1% rate, and how to read the tax correctly against a property's price so you are not surprised at booking.

When GST applies — and when it does not

GST is a tax on the supply of under-construction property. Once a home is legally complete, its sale is treated as a transfer of immovable property, which is outside GST.

  • Under-construction (sold before the completion/occupancy certificate is issued): GST applies (source: Razorpay, BUSY, HomeFirst 2026 guides).
  • Ready-to-move with a completion certificate (CC) or occupancy certificate (OC): no GST (source: same).
  • This is why two identical flats can differ in tax: the one sold before the OC carries GST; the one sold after does not.

The two rates: 5% and 1%

Since the April 2019 scheme, residential under-construction property attracts one of two effective rates, neither of which allows input tax credit.

  • Standard residential (non-affordable): 5% without ITC (source: Razorpay, BUSY, HomeFirst).
  • Affordable housing: 1% without ITC (source: same).
  • Both effective rates already factor in the standard abatement for the land portion of the price, so you apply them to the agreement value as billed by the builder.
  • These rates took effect from 1 April 2019 under the GST Council's revised real-estate scheme (CBIC notifications).

What counts as affordable housing (the 1% rate)

The 1% rate is not a choice — it is defined by carpet area and price, and both conditions must be met. This matters directly to buyers in Bengaluru, Chennai, and Gurgaon.

  • Carpet area: up to 60 sq m (about 646 sq ft) in metropolitan cities, or up to 90 sq m (about 969 sq ft) in non-metro cities (source: BUSY, HomeFirst).
  • Price: the unit value must be up to 45 lakh (source: same).
  • Both the area and the price conditions must be satisfied to qualify for 1%; otherwise the 5% rate applies.
  • Metro definitions cover the major urban agglomerations — confirm your city's classification and your unit's carpet area with the builder's GST working.

Why there is no input tax credit

Under the post-2019 scheme, the lower 5%/1% rates come with a deliberate trade-off: builders cannot claim ITC on their construction inputs, and that cost is built into the price you pay.

  • No ITC for the builder on either the 5% or the 1% rate (source: Razorpay, BUSY, DisyTax).
  • Because the builder cannot offset input GST, that tax effectively sits inside the project cost and the price quoted to you.
  • Practically, you pay the headline 5% or 1% on your agreement value and should not expect any ITC pass-through.

GST is separate from stamp duty

A common confusion: GST and stamp duty are two different charges levied by two different governments, and you may pay both on an under-construction home.

  • GST is a central/state indirect tax on under-construction supply (5% or 1%).
  • Stamp duty and registration are state charges on the transaction document and its recording — payable regardless of GST.
  • On an under-construction purchase you can therefore face GST plus stamp duty plus registration; on a ready home with an OC, only stamp duty and registration.

A worked example

Applying the rules to realistic numbers shows the stakes of the affordable threshold and the under-construction distinction.

  • A 90 lakh under-construction non-affordable flat: GST at 5% is about 4.5 lakh (no ITC).
  • A 42 lakh under-construction flat meeting the carpet-area limit: GST at 1% is about 42,000 — the affordable rate saves roughly 4% of value versus 5%.
  • The same 90 lakh flat bought ready-to-move after the OC: no GST — a direct saving of about 4.5 lakh, though ready homes are often priced higher to reflect this.

The honest takeaway

The GST rule for homebuyers is refreshingly binary: under-construction attracts 5% (or 1% if genuinely affordable), ready-with-OC attracts nothing. Knowing which bucket your purchase falls in, and whether you clear the affordable thresholds, can change your tax by lakhs on a single transaction.

Rates and the affordable thresholds are set by the GST Council and can be revised; the area and price limits in particular can move in a future review. Always confirm your unit's rate and the current affordable definition with the builder's GST working and your chartered accountant before booking.