GST on Purchase of Flat: Complete Guide for Homebuyers (2025)

Buying a flat is a major financial decision, and understanding the GST implications can help you avoid surprises. In this guide, we simplify the GST rules on residential property purchases and clarify when GST is applicable, how much you’ll pay, and what exemptions apply.

1. When is GST Applicable on Flat Purchase?

GST is applicable only if the flat is under construction or sold before the completion certificate (CC) is issued by the authority.

GST applies – if you buy a flat before receiving the CC.

No GST – if you buy a ready-to-move-in flat (post-CC).

2. Why This Distinction? Logic Behind Before vs After Completion Certificate

The GST law makes a clear distinction between under-construction flats and completed flats based on the Completion Certificate (CC). Here’s why:

What is a Completion Certificate?

It is a legal document issued by the municipal or local authority certifying that:

The construction is complete,
The building complies with approved plans,
The flat is fit for occupancy.

Why GST Applies Before Completion Certificate

If you buy a flat before the builder receives the CC, you are effectively paying for a work-in-progress. This is treated as a “works contract”, where:

The builder is supplying a construction service to you.
Your payments fund ongoing construction.

Since GST applies to the supply of services, this type of transaction attracts GST.

Why GST Does Not Apply After Completion Certificate

After the CC is issued, the flat becomes an immovable property — similar to land or a resale flat. The sale of immovable property is outside the scope of GST.

You’re no longer receiving a service, but simply buying a completed asset, which is taxed under stamp duty and registration, not GST.

In short:
Before CC = Service = GST applicable
After CC = Immovable Property = GST not applicable

3. GST Rates on Residential Flats

From April 1, 2019, GST rates on residential property were reduced:

Type of Property	GST Rate (w.e.f. Apr 2019)	Input Tax Credit (ITC)
Affordable Housing	1%	Not allowed
Non-Affordable Housing	5%	Not allowed
Commercial Apartments	12%	Allowed

4. GST on Affordable vs Non-Affordable Housing

Affordable Housing is defined as:

In metro cities: Carpet area ≤ 60 sq. m. & value ≤ ₹45 lakh
In non-metro cities: Carpet area ≤ 90 sq. m. & value ≤ ₹45 lakh

If both conditions are satisfied, the 1% GST rate applies.

Example: A 58 sq. m. flat in Bengaluru worth ₹42 lakh qualifies as affordable housing → GST @ 1%

5. What if You Buy a Ready-to-Move Flat?

There is no GST on ready-to-move flats. However, stamp duty and registration charges still apply (typically 5–7%).

Tip: Ensure the completion certificate (CC) is issued before the sale agreement to claim this benefit.

6. GST on Under-Construction Property

If you’re buying a flat in a project that is still under construction:

GST applies at 5% (or 1% for affordable housing)
Builder cannot claim ITC, hence may pass on the tax burden to buyer

Example: You book a ₹60 lakh flat in a non-metro city (under-construction), you pay ₹3 lakh as GST.

7. GST Input Tax Credit for Builders

Under the new scheme (post-April 2019):

Builders cannot claim ITC on materials/services used
This was done to simplify compliance and curb tax evasion

However, for projects opting for the old scheme (before 2019), ITC was allowed and had to be passed proportionately to homebuyers.

8. Case Law: Larsen & Toubro Ltd vs State of Karnataka

Key takeaway: The Supreme Court held that sale of flat before completion certificate amounts to “works contract”, and is taxable under GST.

This judgment forms the basis for GST being levied on under-construction flats, not ready-to-move flats.

9. GST Implications on EMI or Loan Repayment

There is no GST on:

EMI repayments
Interest on housing loan

However, GST is charged on loan processing fees and other bank charges (typically @18%).

10. Why Doesn’t Everyone Wait Till After Completion? Impact on Buyers & Builders

On paper, yes — buying after CC looks more affordable, because you avoid the 5% (or 1%) GST.

But in reality, there are several practical and financial reasons why people still buy under-construction flats:

1. Price Appreciation During Construction

Under-construction flats are usually priced lower.
Flats appreciate by 20–30% by possession.
Paying GST may still be cheaper than buying at a higher post-CC price.

2. Flexible Payment Plans

You pay in stages (construction-linked plan).
Reduces upfront financial burden.
Post-CC, builders demand lump-sum payments.

3. Wider Choice of Units

Early buyers get first pick: better floors, views, or locations.
Post-CC, limited unsold stock available.

4. Investor Opportunity

Investors book under-construction flats to flip or rent later.
Post-CC, profit margins are thinner.

5. Low Supply of Ready-to-Move Flats

Builders rarely complete entire projects without selling units.
Ready-to-move stock is limited.

Impact on Builders

Cash Flow Dependency

Builders need money during construction to fund work.
Pre-sales (under-construction sales) are essential.

Marketing Tactics

Builders absorb GST partially or offer freebies to offset GST burden.

Timely Completion Pressure

To cater to GST-aware buyers, builders push for faster CC issuance.
Improves delivery timelines and trust.

11. Key FAQs on GST on Flat Purchase

Q1. Is GST applicable on resale flats?

No. Resale flats are considered ready property. No GST is applicable.

Q2. Do I need to pay GST separately to the builder?

Yes, the builder will raise a tax invoice with GST. It’s usually embedded in the payment schedule.

Q3. Can I claim GST credit if I’m a business buyer?

If the flat is for residential use, Input Tax Credit (ITC) is not allowed, even if the buyer is a business.

Q4. What if the builder delays giving possession after collecting GST?

The tax is still payable on invoice/schedule. Buyer can claim refund only if the project is cancelled or reversed.

Q5. Does GST apply to land value?

No. GST applies only to the construction portion. Builders often bifurcate land and construction values.

Q6. Can I negotiate GST with the builder?

While GST is fixed by law, some builders offer to absorb part of the GST as a promotional offer.

Q7. Is GST applicable on parking, club membership or amenities?

Yes. Charges for parking, clubhouse, maintenance deposit, etc., are treated as bundled services and attract 18% GST.

Q8. Can I avoid GST by registering the agreement after CC?

Only if the builder has actually obtained the CC. Registration date alone is not enough; CC date is crucial.

Q9. Is GST applicable on partial payments made before CC?

Yes. Any amount paid before issuance of CC will attract GST, even if balance is paid after CC.

Q10. Do government housing schemes also attract GST?

Yes, but they may qualify under affordable housing. GST is charged at 1% without ITC.

Conclusion

Understanding the GST treatment on flats can help you save lakhs or at least plan your cash flows better. Always verify:

Whether completion certificate has been issued
If your flat qualifies as affordable housing
The GST clause in your agreement

When in doubt, consult a tax expert or CA to verify the taxability before making big payments.