GST on Under-Construction Property 2026 | Complete Guide for Delhi & Gurgaon Buyers

GST on Under-Construction Property 2026 | Complete Guide for Delhi & Gurgaon Buyers

GST on Property — What Every Under-Construction Buyer Pays

Goods and Services Tax (GST) is levied on the purchase of under-construction properties — a significant transaction cost that many first-time buyers underestimate or overlook in their budget planning. Understanding exactly how GST applies, at what rate, and on what base amount is essential for accurate total cost calculation before committing to any under-construction purchase in Delhi or Gurgaon.

Current GST Rates for Residential Property (2025)

Affordable housing: 1% GST on the agreement value (without Input Tax Credit). Non-affordable residential: 5% GST on the agreement value (without Input Tax Credit).

Affordable housing definition for GST purposes: Residential apartments with carpet area up to 60 sqm in metro cities (Delhi, Gurgaon/NCR classified as metro) and priced up to ₹45 lakhs. Most entry-level New Gurgaon and outer Delhi projects qualify under the affordable category.

For most mid-segment and premium Gurgaon purchases (Golf Course Road, Dwarka Expressway, GCER), the 5% rate applies. No GST on ready-to-move (OC-received) properties — a significant cost differential that explains the RTM premium.

How GST Is Calculated — The Land Deduction

GST is levied on construction services only, not on the land component. CBIC (Central Board of Indirect Taxes and Customs) provides a standard land cost deduction of 1/3rd of the total agreement value for purpose of GST calculation.

Effective GST calculation: If the apartment agreement value is ₹1.5 crore, and the standard 1/3rd land deduction is applied, GST is calculated on ₹1 crore (2/3rd construction value). At 5% GST: ₹5 lakhs. At 1% (affordable): ₹1 lakh.

Some developers break down land and construction values contractually — if the explicit construction component is lower than 2/3rd of total, the actual construction value is used for GST calculation.

GST and the Under-Construction vs Ready-to-Move Decision

The GST differential is one of the most significant financial factors in the under-construction vs ready-to-move (RTM) decision:

Under-construction ₹1.5 crore apartment (non-affordable): 5% GST on ₹1 crore construction = ₹5 lakhs GST. RTM ₹1.8 crore apartment (equivalent RTM price, 20% premium): Zero GST.

Net cost comparison: ₹1.5 crore + ₹5 lakh GST = ₹1.55 crore under construction vs ₹1.8 crore RTM. In this example, the under-construction purchase saves ₹25 lakhs despite the GST — which is why buyers accept construction risk.

But if the RTM premium is only 10% (₹1.65 crore): ₹1.55 crore (under-construction with GST) vs ₹1.65 crore (RTM without GST) — a narrower gap where the RTM's risk elimination may be worth the ₹10 lakh premium.

Developer GST Invoicing — What to Check

Always obtain proper GST invoices from your developer for each payment. The invoice should show: GSTIN (GST Identification Number) of the developer, HSN/SAC code for residential construction services, specific GST rate applied, and the exact calculation of the taxable base.

Verify the developer's GSTIN on the GST portal (gst.gov.in). Developers who collect GST but do not deposit it with the government create legal liability risks for buyers — while buyers are not directly liable, it can complicate future sale and title verification.

Conclusion

GST on under-construction property is a significant but manageable transaction cost. Understanding the 1/3rd land deduction, the 1% vs 5% rate differential, and the RTM cost comparison ensures you factor GST correctly into your total acquisition budget. For affordable housing buyers, the 1% GST is minimal; for non-affordable mid and premium segment buyers, the 5% rate adds ₹3–₹8 lakhs to a typical Gurgaon purchase.

Frequently Asked Questions (FAQs)

Q: Do I pay GST on a resale apartment in Gurgaon?

A: No — GST does not apply on resale (secondary market) transactions between individuals. GST is only applicable on first-sale under-construction transactions directly from the developer. Resale transactions only attract stamp duty and registration charges.

Q: Can I claim input tax credit (ITC) on GST paid for my home purchase?

A: No — since the 2019 GST amendment, individual home buyers cannot claim ITC on residential property purchases. Developers also cannot claim ITC on inputs under the current composition scheme, which is why the rates were reduced (5% vs. 12% previously with ITC).

Q: What documents do I need to show GST payment for a home loan?

A: Banks may ask for GST invoices as part of the under-construction disbursement documentation. Keep all GST invoices provided by the developer. These invoices are also important for maintaining clear title documentation for future sale.

Q: If my developer collects GST but doesn't deposit it, am I at risk?

A: As a buyer, you are not directly liable for the developer's GST non-compliance. However, it can create complications in title clearance for future buyers. Verify developer GST compliance through GSTIN lookup on gst.gov.in when making payments.