GST on Property Purchase in Bangalore: Rates & Rules

GST on Property Purchase in India: What You Pay, When You Pay and What Is Exempt | Legal Brigade

Meta description: Complete guide to GST on property purchases in India. Under-construction vs ready property, affordable housing rates, and why resale flats have no GST. By Legal Brigade, Bangalore.

Canonical: /gst-property-purchase-india/

Author byline: By Legal Brigade, Property Law Specialist, Legal Brigade | Bar Council of Karnataka

Quick Answer: GST applies to under-construction property in India at 1% for affordable housing and 5% for regular residential projects (without ITC). Ready-to-move and resale properties are entirely exempt from GST.

When Does GST Apply to a Property Purchase in India?

GST applies to under-construction property where the buyer enters into an agreement with the builder before the building receives its Completion Certificate (CC) or Occupancy Certificate (OC). Once a building has its OC or CC, it is considered a completed property and the sale is a transfer of immovable property, not a service — GST does not apply to such sales. This means resale flats (which were already completed and registered earlier) and ready-to-move flats with OC are both outside the GST net entirely.

The distinction is critical for buyers in Bangalore’s property market. Many buyers are unsure whether GST is payable on a ready-to-move apartment they are purchasing from the first owner. The answer is no: if the building has its OC, the transaction is a transfer of immovable property and GST does not apply. Only stamp duty and registration charges are payable on such transactions. This is one of the key reasons why resale and ready-to-move properties are often more financially attractive than under-construction units, despite the higher per-square-foot price that ready properties sometimes command.

GST on Under-Construction Property: Current Rate Framework

The current GST framework for real estate was restructured in April 2019 and remains the operative structure as of 2026. Under this framework, builders cannot claim Input Tax Credit on construction inputs for residential projects, and the lower rates (1% and 5%) are offered without ITC. Buyers should note that these rates are subject to revision by the GST Council and must be confirmed with a Chartered Accountant before finalising any transaction.

What Is Affordable Housing for GST Purposes?

The GST Council defined affordable housing based on carpet area and price thresholds that may differ for metro and non-metro cities. Bangalore, as a metropolitan city, falls into the metro threshold category. Confirm the current applicable thresholds with a CA before relying on the lower affordable housing GST rate, as definitions and thresholds are subject to revision by the GST Council. A property that does not meet the prescribed criteria is taxed at the standard residential rate.

As of 2026, the affordable housing criteria continue to be governed by the GST Council’s notifications. Buyers should not assume that a property marketed as “affordable” automatically qualifies for the 1% GST rate. The carpet area and price thresholds must be verified against the current notification, and the builder’s agreement should explicitly state the applicable GST rate. Legal Brigade recommends that buyers obtain a written confirmation from the builder or their CA before signing the agreement for sale.

Is GST Applicable on Resale Flats in Bangalore?

No — GST is not applicable on the purchase of a resale flat in Bangalore or anywhere else in India. A resale flat is a completed, previously registered property. The transfer of immovable property by way of a registered sale deed between private parties is not subject to GST. Only stamp duty and registration charges apply on resale. This is one of the key financial advantages of buying resale over under-construction in terms of total transaction cost.

Buyers who are comparing the total cost of an under-construction flat versus a resale flat should factor in the GST component carefully. On a property priced at Rs. 1 crore, a 5% GST rate adds Rs. 5 lakh to the transaction cost (subject to the land value deduction). A resale flat of the same price avoids this entirely. Additionally, under-construction buyers may face GST on interior work, parking charges and other amenities if these are billed separately by the builder. Resale buyers pay only stamp duty and registration, making the total transaction cost significantly lower in most cases.

Is GST Applicable on Plots and Land in India?

The sale of land (as a standalone transaction) is not subject to GST in India, since land is immovable property and not a service. However, if a developer sells a plot as part of a plotted development project where the developer is also providing development services (roads, infrastructure, amenities), the GST treatment depends on how the transaction is structured. Confirm the position for any specific plotted development with a CA, as the characterisation of the transaction matters.

In Bangalore, many plotted developments in areas like Sarjapur Road, Devanahalli and Whitefield offer plots with infrastructure development. The agreement for such plots must be examined carefully to determine whether the transaction is characterised as a sale of land (no GST) or a composite supply of land plus construction/development services (GST applicable on the construction portion). The builder’s payment schedule and the description of services in the agreement are the key documents that determine the GST treatment. Legal Brigade reviews these agreements to ensure the GST clause is correctly drafted and does not expose the buyer to unexpected tax liability.

What Is the GST Base for an Under-Construction Apartment?

GST is charged on the agreement value or the actual consideration for the under-construction property. However, since land itself is not subject to GST, a standard deduction of one-third of the total consideration is notionally allocated to the land component, and GST is applied to the remaining two-thirds (the construction portion). Builders typically show this in the payment schedule and the agreement for sale.

For example, if the total agreement value is Rs. 90 lakh, the land component is notionally taken as Rs. 30 lakh and GST at 5% is applied to the remaining Rs. 60 lakh (construction portion), resulting in a GST liability of Rs. 3 lakh. Buyers should verify that the builder’s payment schedule correctly applies this one-third deduction and does not charge GST on the full consideration. Any discrepancy in the GST calculation should be raised before signing the agreement, as rectifying it later requires a supplementary deed or amendment to the agreement.

Was Input Tax Credit (ITC) Available for Builders Before April 2019?

Before April 2019 the GST rate for under-construction property was higher (12% for regular residential and 8% for affordable housing) but builders could claim Input Tax Credit on their construction inputs. After April 2019 the rates were reduced to 5% and 1% respectively but the ITC benefit was withdrawn from builders for residential projects. The practical effect for buyers: builders cannot pass on construction input credits, so the benefit of lower rates is partly offset by the builder’s higher effective cost base.

Some buyers who booked properties before April 2019 and are still paying instalments may encounter confusion about whether the old or new rate applies. The applicable rate is determined by the date of the agreement and the payment schedule. If the agreement was entered into before April 2019 and the builder was charging 12% GST with ITC, the transition to the new rate structure may require an amendment to the agreement. Buyers in this position should consult a CA to determine the correct rate applicable to their specific transaction and whether any adjustment is required.

How GST Affects the Total Cost of Buying Under-Construction Property in Bangalore

This comparison illustrates why many Bangalore buyers in 2026 are gravitating toward resale and ready-to-move properties despite the higher capital cost. The absence of GST, combined with the ability to verify the property’s physical condition and legal status before purchase, makes resale a lower-risk option for many buyers. However, under-construction properties in RERA-registered projects with construction-linked payment plans still offer advantages for buyers who want to customise their unit or who are investing for long-term appreciation.

What Happens If You Book Under-Construction and the OC Is Issued Before Registration?

If a buyer enters into an agreement for an under-construction flat, pays instalments (and GST) during construction, and the builder then obtains the OC before the buyer registers the flat, the GST position can be complex. Generally, GST liability arises at the time of payment for under-construction supply. Once the OC is issued, the property transitions to a completed state and subsequent payments may not attract GST. Confirm the specific position on any instalment payment made after OC issuance with a CA.

In practice, builders often continue to charge GST on all instalments until possession, even if the OC was issued earlier. Buyers should request a copy of the OC and verify its date. If the OC was issued before a particular instalment was due, that instalment should not attract GST. The buyer is entitled to question the builder’s GST charge and, if necessary, seek a refund or adjustment. Legal Brigade assists buyers in reviewing their payment schedules and GST calculations to ensure compliance with the applicable law.

How Legal Brigade Advises Buyers on the GST and Legal Aspects of Property Purchase

Legal Brigade handles the legal verification, agreement review and registration aspects of under-construction purchases. The GST computation and compliance sit with the buyer’s CA or the builder’s tax team. When reviewing builder agreements, Legal Brigade checks that the GST clause correctly reflects the applicable rate, distinguishes land and construction consideration, and does not impose an open-ended GST revision clause that could expose the buyer to future additional charges.

A common issue Legal Brigade encounters in builder agreements is a clause stating that “GST is payable at the applicable rate as notified by the government from time to time.” While this is technically accurate, it should be accompanied by a specific rate for the current transaction and a clear mechanism for adjustment if the rate changes. An open-ended clause that allows the builder to pass on any future GST increase without limit is not in the buyer’s interest. Legal Brigade flags such clauses and recommends amendments before the buyer signs.

Frequently Asked Questions

Is GST applicable on property purchase in India?

GST is applicable on under-construction property purchases in India where the building does not yet have its Completion Certificate or Occupancy Certificate. It does not apply to ready-to-move properties with OC, resale flats, or standalone land sales. The applicable rate for regular residential under-construction property is 5% (without ITC), and 1% for affordable housing (without ITC). Confirm current rates with a CA as they are subject to GST Council revision.

What is the GST rate on under-construction flats in Bangalore?

As of 2026, the GST rate on under-construction flats in Bangalore is 5% for regular residential projects and 1% for affordable housing projects, both without Input Tax Credit. These rates apply to the construction portion of the consideration after deducting the notional land value (one-third of total consideration). Ready-to-move flats with OC are exempt from GST.

Is GST applicable on resale flats in Bangalore?

No, GST is not applicable on resale flats in Bangalore or anywhere in India. A resale flat is a completed property that was previously registered. The transfer of immovable property by registered sale deed between private parties is outside the scope of GST. Only stamp duty and registration charges apply.

Is GST applicable on the purchase of a plot of land in India?

No, the standalone sale of land is not subject to GST in India as land is immovable property, not a service. However, if the plot is sold as part of a development project where the developer provides infrastructure and amenities, the GST treatment depends on how the transaction is structured. Confirm with a CA for plotted developments.

What is affordable housing for GST purposes in India?

Affordable housing for GST purposes is defined by the GST Council based on carpet area and price thresholds that differ for metro and non-metro cities. Bangalore falls under the metro threshold. Properties meeting these criteria qualify for the 1% GST rate. Definitions are subject to revision, so confirm current thresholds with a CA before relying on the lower rate.

Why did GST rates for residential property change in April 2019?

In April 2019, the GST Council restructured real estate GST rates to reduce the burden on homebuyers. The rates were lowered from 12% (regular) and 8% (affordable) to 5% and 1% respectively, but Input Tax Credit for builders was withdrawn. This simplified the structure but meant builders could no longer offset their construction input taxes.

Can builders pass on Input Tax Credit to buyers after April 2019?

No, builders cannot pass on Input Tax Credit to buyers for residential projects after April 2019. The ITC benefit was withdrawn when the rates were reduced to 5% and 1%. Builders must absorb their input tax costs, which is why the lower rates were introduced without ITC. Buyers should verify that the builder is not illegally claiming ITC on their invoices.

How is the GST base calculated for an under-construction apartment?

GST is calculated on the construction portion of the total consideration after deducting a notional one-third for the land component. For example, on a Rs. 90 lakh agreement value, GST at 5% applies to Rs. 60 lakh (the construction portion), resulting in Rs. 3 lakh GST. The builder’s payment schedule should reflect this calculation.

What happens to GST if I pay instalments after the OC is issued?

Once the Occupancy Certificate is issued, the property is considered completed and subsequent payments should not attract GST. However, builders sometimes continue charging GST on all instalments. Buyers should verify the OC date and question any GST charged on payments due after OC issuance. Consult a CA for the specific position on your transaction.

Do I need to pay GST and stamp duty both on an under-construction flat?

Yes, on an under-construction flat, both GST and stamp duty are payable. GST applies to the construction services component, while stamp duty and registration charges apply to the transfer of immovable property. These are separate taxes with different bases. On a resale flat, only stamp duty and registration apply — GST is not payable.

Buying an under-construction flat in Bangalore and want the agreement reviewed? Legal Brigade checks the GST clause alongside all legal terms before you sign.

WhatsApp → wa.me/916360266840

Frequently Asked Questions