GST on under-construction flats in Bangalore

3.5.1 What is the GST rate on an under-construction flat in Bangalore?

GST on an under-construction flat in Bangalore is 5 percent of the total amount for most flats. An affordable flat pays 1 percent. The GST Council and Ministry of Finance FAQ on real estate, dated 7 May 2019, gives these effective rates from 1 April 2019. Both rates are “without ITC”, which means the builder does not use input tax credit to reduce the tax. They apply to flats in projects that started on or after 1 April 2019. They also apply to older ongoing projects, unless the builder chose the old rates. The legal source is Notification No. 11/2017-Central Tax (Rate), as amended by Notification No. 3/2019. It sets central tax at 0.75 percent for an affordable flat and 3.75 percent for other flats. Paragraph 2 of the notification then deducts one third of the total amount as the value of land. The FAQ’s combined rates of 1 and 5 percent include the matching state tax.

Flat type	Central tax rate in Notification 11/2017	Effective GST on the total amount (FAQ)	Input tax credit for the builder
Affordable residential apartment	0.75%	1%	Not allowed
Other residential apartment	3.75%	5%	Not allowed
Ongoing project where the builder opted for the old rates by 10 May 2019	Not checked	8% affordable, 12% other	Allowed

Source: GST FAQ on real estate, 7 May 2019, questions 1 and 4; Notification 11/2017-Central Tax (Rate), serial 3, items (i), (ia), (ic) and (id). Checked 10 October 2026.

Items (i) and (ia) cover a Residential Real Estate Project, where commercial carpet area is 15 percent or less of the total (clause (xix)). Items (ic) and (id) cover other real estate projects. They set the same central tax rates of 0.75 and 3.75 percent.

The old 8 and 12 percent rates matter only for an “ongoing project”. Clause (xx) of the notification defines it, and all its conditions must hold. Where a commencement certificate is required, it was issued on or before 31 March 2019. A registered architect, chartered engineer or licensed surveyor certified that construction started on or before that date. “Started” means earthwork for site preparation was complete and excavation for the foundation had started. Some flats were booked on or before 31 March 2019. There was no completion certificate or first occupation by that date. For such a project, the FAQ says the builder is “expected to pass the benefit of the credit” to buyers.

The FAQ says its answers “do not have force of law”, and the gazetted notification wins in a conflict. The 56th GST Council meeting changed service rates from 22 September 2025. Its press release lists three changes under heading 9954 (construction services): two works contracts for the Government and one offshore oil and gas contract. It lists no change for residential flats. Unverified: Sachi could not load the text of Notification No. 15/2025-Central Tax (Rate), which carries out those changes. Confirm the rate on your builder’s invoice.

3.5.2 Is GST charged on a ready-to-move flat?

No GST applies to a ready-to-move flat if you pay the entire price after the completion certificate or first occupation, whichever is earlier. Schedule II, paragraph 5(b) of the CGST Act, 2017 treats the construction of a building for sale to a buyer as a supply of services. The same clause excludes the case “where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier”. Schedule III, paragraph 5 then says the sale of a building, subject to that clause, is neither a supply of goods nor a supply of services. The test is about when you pay, not about the label in the brochure. If you paid a booking amount before the completion certificate, GST can apply to that payment. So check the date on the completion certificate, and compare it with the date of every payment you make.

Your situation	GST on the flat	Legal basis
Entire price paid after the completion certificate or first occupation	No GST	CGST Act, Schedule II 5(b) and Schedule III 5
Any payment made before the completion certificate and first occupation	GST at 1% or 5% on the construction supply	CGST Act, Schedule II 5(b); Notification 11/2017
Builder says “ready to move” but has no completion certificate yet	Treat it as under construction until the certificate date	CGST Act, Schedule II 5(b)

Source: CGST Act, 2017, Schedules II and III, checked 10 October 2026.

“Competent authority” means the authority that issues the completion certificate under the law. Where no such certificate is required, the Explanation to Schedule II, paragraph 5(b) accepts a registered architect, a chartered engineer or a licensed surveyor. FAQ question 29 says “first occupation” means first occupation of the project under the laws and rules of the government or other authority.

3.5.3 When does a Bangalore flat count as affordable for the 1 percent rate?

A Bangalore flat counts as affordable when its carpet area is up to 60 square metres and its gross amount is up to ₹45 lakh. Both limits must hold. Clause (xvi) of paragraph 4 of Notification 11/2017 sets this test for flats in projects that started on or after 1 April 2019. The 60 square metre limit applies in metropolitan cities, and the notification lists Bengaluru as one. Other cities and towns have a 90 square metre limit. “Carpet area” has the meaning in section 2(k) of the RERA Act, 2016. The gross amount is wider than the base price. It adds the charge for construction, the charge for land or the undivided share of land, and “any other amount charged by the promoter”. The notification names preferential location charges, development charges, parking charges and common facility charges. So a flat with a ₹44 lakh base price and ₹2 lakh of parking fails the ₹45 lakh limit.

Test	Limit in Bengaluru	What to check
Carpet area	Up to 60 square metres (about 645.8 square feet)	RERA carpet area in the agreement for sale, not super built-up area
Gross amount	Up to ₹45 lakh	Base price plus land, preferential location, development, parking and common facility charges
Project start	On or after 1 April 2019, or an ongoing project at the new rates	Builder’s statement of the rate it pays

Source: Notification 11/2017-Central Tax (Rate), paragraph 4, clause (xvi); GST FAQ question 2. Checked 10 October 2026.

The notification says the metropolitan cities have “their respective geographical limits prescribed by an order issued by the Central or State Government”. Unverified: Sachi did not find that order for Bengaluru. If the project is near the city edge, ask the builder in writing which limit it applies.

3.5.4 How is GST calculated on the price of a flat?

GST on a flat is calculated on two thirds of the total amount, because the law deems one third to be the value of land. Paragraph 2 of Notification 11/2017 sets the taxable value. It is the total amount charged, less the value of the land or undivided share of land. It then says that land value “shall be deemed to be one third of the total amount charged”. The total amount is the charge for construction plus the charge for land or the undivided share of land. FAQ question 36 says a builder cannot deduct the actual land value instead. The central tax rate of 3.75 percent on two thirds of the price works out to 2.5 percent of the total amount. With the matching state tax, the FAQ gives 5 percent of the total amount. For an affordable flat, 0.75 percent on two thirds is 0.5 percent, or 1 percent in total. The table shows the arithmetic for two example flats.

Step	Other flat, ₹90 lakh	Affordable flat, 55 sq m carpet, ₹40 lakh
Total amount	₹90,00,000	₹40,00,000
Less one third deemed land value	₹30,00,000	₹13,33,333
Taxable value	₹60,00,000	₹26,66,667
Central tax (3.75% or 0.75% of taxable value)	₹2,25,000	₹20,000
GST at the FAQ effective rate (5% or 1% of total)	₹4,50,000	₹40,000

Source: Notification 11/2017-Central Tax (Rate), paragraph 2; GST FAQ questions 1 and 36. Arithmetic by Sachi, checked 10 October 2026.

Unverified: Sachi did not find a primary source on how GST applies to each separate cost sheet line. Examples are car parking, club membership, maintenance deposits and utility connection charges. Ask the builder to show, line by line, which charges carry GST, at what rate and on what legal basis.

3.5.5 When do you pay GST on instalments during construction?

You pay GST with each instalment, because the tax arises when the builder raises an invoice or receives your payment, whichever is earlier. Section 13(2) of the CGST Act sets the time of supply of services as the earliest of these dates. Its Explanation says the supply is “deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment”. So a booking amount carries GST on that amount. Section 31(5)(c) applies to a “continuous supply of services”. Section 2(33) defines this as a contract for more than three months with periodic payment obligations. Sachi’s reading is that a construction-linked plan fits this. Then, where “the payment is linked to the completion of an event”, the invoice is due on or before that date. Plan your own funds for the GST part, and ask your lender whether the loan covers it.

1. Ask for the payment schedule from the agreement for sale.
2. Check that each demand shows the stage, the amount and the GST on it.
3. Pay only against a demand that matches the schedule.
4. Collect a tax invoice for each payment.

If the taxable value or tax on an invoice is found to be too high, section 34 of the CGST Act lets the builder issue a credit note. FAQ question 22 covers only a narrow case: a flat booked before 1 April 2019 and cancelled after that date. There, the builder must refund the excess to the buyer before September after the end of the financial year. For a booking made today, read the cancellation clause in your agreement for sale for the refund timeline.

3.5.6 Can a homebuyer claim input tax credit on GST paid for a flat?

A homebuyer who buys a flat to live in cannot claim input tax credit on the GST paid. Section 16(1) of the CGST Act gives credit only to a “registered person”. It applies to goods or services “used or intended to be used in the course or furtherance of his business”. An individual buying a home is usually not registered and not in business. Section 17(5) also blocks credit in two cases. Clause (c) covers works contract services for construction of an immovable property. Clause (d) covers goods or services received for construction of an immovable property on the taxable person’s own account. The words “without ITC” in the 1 and 5 percent rates refer to the builder, not to you. They mean the builder cannot set off the tax it paid on cement, steel and contractor services. So the GST on your invoice is a final cost for you. Add it to your budget along with stamp duty and registration.

If a company or a registered business buys a flat, the credit question is different. Sachi did not check rulings on this point. A business buyer must take advice from a chartered accountant before claiming any credit.

3.5.7 What should the builder’s GST invoice show?

The builder’s GST invoice must show its GSTIN, the description of the service, the taxable value, the rate and the tax amount. Section 31(2) of the CGST Act says a registered person supplying taxable services must issue a tax invoice. It must show “the description, value, tax charged thereon and such other particulars as may be prescribed”. Rule 46 of the CGST Rules, 2017 lists those particulars. They include the supplier’s name, address and GSTIN, a serial number, the date, and the recipient’s name and address. For an unregistered recipient, the invoice also shows the delivery address and State when the taxable value is ₹50,000 or more. Rule 46 also requires the taxable value “taking into account discount or abatement”. For a flat, that is the value after the one-third land deduction. Check that the GSTIN on the invoice belongs to the same company named in your agreement for sale.

Field required by Rule 46	What to check on your invoice
Supplier name, address and GSTIN	Same legal entity as the promoter in the agreement for sale
Serial number and date	One invoice for each demand you pay
Recipient name and address	Your name and the flat address, as in the agreement
Description of service and code	Construction of a residential apartment
Total value and taxable value after abatement	Taxable value is two thirds of the amount for the flat
Rate and amount of central and state tax	Central tax at 0.75% (affordable) or 3.75% (other) of the taxable value, with state tax shown separately
Signature or digital signature	Present, or an electronic invoice

Source: CGST Act, section 31(2); CGST Rules, Rule 46; Notification 11/2017, paragraph 2. Checked 10 October 2026.

Unverified: Sachi did not check Karnataka’s state tax rate notification. Sachi’s reading of the FAQ’s combined rates is that state tax equals central tax. If an invoice shows a different rate, ask the builder for the notification it relies on. To check your builder’s GST lines against these rules, Ask Sachi.