When you budget for a first flat, GST often appears as a surprise line on the cost sheet. Most buyers ask for the percentage. The rate is actually the part that changes most. What stays fixed is the rule for whether GST applies at all, and once you understand that, the rest makes sense.
The simple version
- Selling land: no GST.
- Selling a completed building: no GST.
- Selling a flat while it is still being built: GST applies.
Why? Because when you buy before completion, the law treats what you are paying for as construction work, a service, rather than a finished building. You end up with the same flat either way. What differs is what you were buying at the time you paid.
Where this comes from
Section 7 of the Central Goods and Services Tax Act, 2017 (CGST Act) defines what a "supply" is, and two schedules settle how a flat sale is treated:
- Paragraph 5(b) of Schedule II treats building a complex or building meant for sale to a buyer as a supply of services. The exception: where the entire amount is received after the completion certificate is issued by the competent authority, or after first occupation, whichever is earlier.
- Paragraph 5 of Schedule III puts the sale of land, and (subject to the above) the sale of a building, outside GST altogether.
So the default is "no GST on a building sale". The exception is "construction sold before completion". The completion certificate is what moves a sale back outside the tax.
Section 9 is the charging section. It levies GST at rates notified by the government on the GST Council's advice. The rate lives in a notification, not in the Act, which is why it can change at any Council meeting.
The completion certificate, not the keys
The date that matters is the date of the completion certificate, or first occupation if that came earlier. It is not the day you get the keys, register the deed, or the day the building looks finished. Three things follow:
- If you paid anything before the certificate, GST applies, even if you move in much later.
- A resale from an owner is not the builder's supply, so this GST does not arise.
- "Ready to move" is a sales phrase. The certificate is a document. Ask to see it, and note its date.
GST vs stamp duty: two different bills
These two arrive close together, and it is easy to mix them up.
| GST on an under-construction flat | Stamp duty on the sale deed | |
|---|---|---|
| Law | CGST Act, 2017 (section 9) and the State GST Act | Karnataka Stamp Act, 1957 (section 3) |
| Charged on | Value of the supply under section 15, broadly what the builder charges | The property's value, checked against the government guidance value |
| Rate set by | Notification on GST Council advice | The State law's schedule |
| Paid to | The builder, who passes it to the government | The stamps and registration department |
A budgeting tip for first-time buyers
Build your budget in separate lines: the base price, GST (if buying before completion), stamp duty and registration, and other charges. Then ask the builder for the current GST rate on your cost sheet and check it against the latest notification. If you are comparing an under-construction flat with a completed one in the same ₹60–90 lakh range, remember GST may apply to the first and not the second. Our EMI calculator can help you see how the total affects your monthly payment.
A worked example: the "one per cent rule" (illustrative)
You do not need the rate to see how much GST moves your budget. Work in steps of one per cent.
- Say the value charged for your flat is ₹80 lakh.
- Every 1% of GST on that is ₹80,00,000 × 1 ÷ 100 = ₹80,000.
- So whatever the notified rate is, multiply ₹80,000 by it. A rate of "x per cent" means x × ₹80,000.
This also shows why the timing rule matters. If a completed flat in the same budget is sold after the completion certificate, with the entire amount received after it, that ₹80,000-per-point line does not appear at all. The figures are made up to show the sum. Use the rate in the current notification for your own numbers.
GST is also split between the Centre and the State. Under the CGST Act and the State GST Act, an intra-state supply carries central tax (CGST) and state tax (SGST) in equal halves. Your invoice should show both lines.
Step by step: building your GST line
- Get the itemised cost sheet. Ask which items GST is charged on, and which it is not.
- Ask for the rate and the notification. Note the notification number the builder relies on.
- Check the category. Is the flat treated as an affordable residential apartment or not? On what carpet area?
- Do the one per cent sum. Multiply the value by the rate. Check it against the cost sheet.
- Match the schedule. GST is charged with each instalment, so spread the GST line across your payment plan.
- Collect invoices. One per payment, each with the CGST and SGST split.
Common mistakes first-time buyers make
- Taking "ready to move" to mean "no GST". Only the completion certificate, with the full amount received after it, does that.
- Adding GST on stamp duty. Stamp duty and registration fees are paid to the State under a different law. They are separate lines.
- Using an old rate from a friend's purchase. Rates have changed by notification before.
- Not asking for invoices. A demand letter is not a tax invoice.
- Forgetting GST in the loan plan. Banks usually lend against the property value. Check with your lender what part of the GST line your loan covers and what you pay yourself.
The affordable housing category
There is a lower rate for flats that meet the notification's definition of an affordable residential apartment. It is not a label a project gives itself. It depends on two tests in the notification: a carpet-area limit (different for metro and non-metro areas) and a price ceiling. Carpet area here takes the RERA meaning in section 2(k) of the Real Estate (Regulation and Development) Act, 2016. If a sales team says a flat qualifies, ask which test it meets and on what carpet area.
What to ask the builder for
- A tax invoice for each payment. Section 31 of the CGST Act governs invoices; the invoice, not a demand letter, shows the tax was charged.
- The builder's GSTIN on that invoice, checked on the government portal.
- The category used, if a lower rate is applied.
- The payment schedule in your agreement. Section 13 of the CGST Act deals with the time of supply, and your schedule decides when each demand is raised.
- Whether the completion certificate has been issued, and its date.
If you cancel your booking
If a booking is cancelled, ask the builder in writing how the GST already paid will be dealt with, and get it reflected in a document. The answer depends on the facts and the timing, so take advice from a chartered accountant.
Your GST checklist
- Completion certificate status and date known
- Current rate and notification number noted
- Category (affordable or not) confirmed, with carpet area
- One per cent sum done on your own figures
- Builder's GSTIN checked on the GST portal
- A tax invoice for every payment, with CGST and SGST shown
Get these clear before you sign and GST stops being a surprise.