Why GST applies at all
GST is a tax on the supply of goods and services. The sale of land and of completed buildings is outside its scope, because that is a transfer of immovable property rather than a supply.
An under construction flat sits on the other side of that line. When you book before completion you are, in tax terms, buying a construction service that the developer performs for you. That is a supply, so it is taxed.
Once the building is complete and certified, there is no longer a service being supplied to you. There is a finished thing being transferred. The tax drops away, not as a concession but because the transaction changed category.
The moment it stops applying
The flip happens on the issue of the occupancy certificate or completion certificate. Before it, a sale is a supply of construction service. After it, a sale is a transfer of immovable property.
That certificate is issued by the local authority, not by the developer, which is what makes it a reliable dividing line. It is the same document that makes occupation lawful and that anchors the final tranche in a 50:50 payment plan.
One document therefore does three jobs in your purchase: it permits occupation, it can trigger your final payment, and it ends the GST exposure on a sale. Worth knowing where it sits in your timeline.
What it is charged on
- The consideration for the under construction property, charged alongside your payment tranches rather than as a single bill.
- On top of the quoted base price in almost all cases. The asterisk on a price sheet saying prices exclude GST means exactly that.
- Not on the portion attributable to land, in the sense that the scheme for residential construction has historically accounted for land value in how the charge is computed. The mechanics of this have changed over time, which is why the next callout exists.
GST rates for residential construction, the treatment of affordable housing, and the availability of input tax credit have all been revised since GST was introduced. This article deliberately describes the structure rather than quoting a rate, because a rate printed here could be wrong by the time you read it.
Ask the developer for the GST amount in rupees for your specific unit, and confirm it with your chartered accountant.
What GST is not
Three things routinely confused with it:
| Levy | Charged by | Applies to |
|---|---|---|
| GST | Central and state, as a supply tax | Under construction sales only |
| Stamp duty | State | Registration of the document, regardless of stage |
| Registration charge | State | Registration of the document, regardless of stage |
| Tax deducted at source | Income tax, withheld by the buyer | Payment to the seller, subject to thresholds |
You can therefore be outside GST and still face a substantial statutory bill. Stamp duty and registration in Karnataka covers that side.
Want the GST position for a specific unit?
The project team can give the GST amount in rupees alongside the base price, floor rise and the other charges on one sheet.
Resale and ready properties
Two common situations, both outside GST:
- Buying a completed flat from the developer after the occupancy certificate. A transfer of immovable property.
- Buying a resale flat from an individual owner. Also a transfer of immovable property.
In both, stamp duty and registration still apply, and in both the seller may have capital gains consequences. The absence of GST is a real difference in total cost, and it is part of why a ready property's higher headline price is not the whole comparison. The full stage by stage comparison sets out the rest.
What to ask
- What is the GST amount in rupees for this specific unit?
- Is GST charged with each payment tranche, and on what basis?
- Has the occupancy certificate been issued for this tower? If so, is GST applicable at all?
- Which charges on the cost sheet attract GST and which do not?
- Is the quoted base price inclusive or exclusive of GST? Get it in writing.
- What will stamp duty and registration be, separately, in rupees?
Question three is worth asking even when you assume the answer. In a phased project a partial occupancy certificate may already cover some towers and not others.
This explains how the mechanism works. It is not financial, tax or legal advice, rates and rules change, and your position depends on your own circumstances. Confirm the figures with your chartered accountant and have a property lawyer read your agreement.
Is GST applicable on an under construction flat?
Yes. The sale of a property before completion is treated as a supply of construction service rather than a transfer of immovable property, so GST applies. It is normally charged alongside your payment tranches rather than as a single lump sum.
Is GST applicable after the occupancy certificate is issued?
No. Once the occupancy certificate or completion certificate has been issued, the sale is treated as a transfer of immovable property, which is outside the scope of GST. This is one of the differences in total cost between an under construction and a ready to move purchase.
Is GST charged on stamp duty and registration?
No. Stamp duty and registration charges are state levies on the registration of the document, and are separate from GST. You pay both, but one is not charged on the other. They are different lines on the same bill.
Is GST payable on a resale flat?
A resale of a completed property between individuals is a transfer of immovable property and does not attract GST. What does apply is stamp duty and registration on the transfer, plus any capital gains tax consequences for the seller.
Is GST included in the quoted price?
Usually not. Price sheets commonly quote a base price excluding GST, registration and other charges. Ask for the GST amount in rupees for your specific unit so you can compare projects on a complete figure rather than on base prices.
Does GST apply to a villa plot purchase?
The sale of land is outside the scope of GST. Where a transaction involves construction services alongside land, the treatment depends on the structure of what is being sold. If you are buying a plot and separately engaging a contractor to build, the construction service is its own supply. Confirm the treatment for your specific arrangement with your chartered accountant.