If you are comparing an under-construction flat with a ready-to-move one in Chennai, the price difference is not just about possession date — it is also about GST. A ready-to-move home with a completion/occupancy certificate attracts no GST at all, while an under-construction flat adds 1% or 5% on top of the price, depending on the type of housing. Getting this wrong by even a few lakh can throw off your budget and your home loan eligibility, so it is worth understanding before you book.
This guide covers the current GST rates on residential property, how affordable housing is defined, a worked calculation example, and how GST is different from (and in addition to) stamp duty and registration charges.
Why does GST apply to under-construction property at all?
Under GST law, buying a flat that is still being built is treated as a "works contract" / supply of construction service by the builder — you are paying for a service that is still in progress, not for a completed, immovable asset. Once the project gets a Completion Certificate (CC) or Occupancy Certificate (OC) from the local authority (in Chennai, typically CMDA or the Greater Chennai Corporation depending on the project), the sale becomes a transfer of immovable property, which falls outside GST's scope entirely.
That single distinction — CC/OC issued or not — is what decides whether you pay GST on a flat, regardless of how "finished" the building looks from the outside.
Current GST rates on residential property (2026)
| Property type | GST rate | Input Tax Credit (ITC) |
|---|---|---|
| Affordable housing (under construction) | 1% | Not available |
| Other residential (under construction) | 5% | Not available |
| Commercial property (under construction) | 12% | Available |
| Ready-to-move / resale with CC or OC | 0% (no GST) | — |
| Plain land / plot (no construction) | 0% (no GST) | — |
These rates have applied since the GST Council's April 2019 restructuring, and multiple sources confirm they were carried forward unchanged when GST rates were restructured again in September 2025 ("GST 2.0") [VERIFY: confirm the exact CBIC notification number for the record before publishing — every source checked agrees the rate itself didn't change, but none cited the specific notification]. Both rates apply without Input Tax Credit — the builder cannot offset GST paid on cement, steel and other inputs against your 1%/5%, which is why builders price inputs into the base cost instead of passing ITC savings to buyers.
Land is never taxed under GST — only the construction/service component is. For an apartment, the builder's price already bundles in an implicit undivided share of land, but the entire listed price is still treated as "construction service" for GST purposes for a standard under-construction flat sale, not split into a separately-taxed building portion and an untaxed land portion.
What counts as "affordable housing"?
The 1% rate is not about the builder's marketing label — it applies only when a specific flat meets all of these conditions at the time of booking:
- Carpet area up to 60 sq metres (≈ 646 sq ft) in a metro city, or up to 90 sq metres (≈ 968 sq ft) in a non-metro city
- Total value of the unit up to ₹45 lakh
Chennai is one of the GST Council's designated metropolitan cities for this scheme — the official list is Bengaluru, Chennai, Delhi-NCR (Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon and Faridabad), Hyderabad, Kolkata and Mumbai (including the Mumbai Metropolitan Region). Pune is not on this list, despite sometimes being grouped with it in casual comparisons. So a Chennai flat has to clear the tighter 60 sq m carpet-area limit, not the looser 90 sq m non-metro limit, to qualify for 1%.
A flat priced at ₹46 lakh, or with a carpet area of 65 sq m even if priced under ₹45 lakh, falls into the 5% bracket instead — there is no partial or pro-rated rate. When you are comparing new launch apartments in Chennai, check the builder's quoted carpet area (not super built-up area) against this 60 sq m line before assuming a flat qualifies as "affordable."
How GST is calculated — a worked example
GST is charged on the total agreement value, not just the base construction cost. Preferential location charges (PLC) and floor-rise charges are explicitly confirmed to carry the same GST rate as the flat itself when billed before the project's completion certificate — the GST Council clarified this at its 54th meeting (9 September 2024), and the government issued a formal clarification on 11 October 2024 stating PLC is part of a single "composite supply" with the construction service, not a separately-taxed 18% charge.
Car parking is the one major exception — it is taxed separately, at a much higher 18%, not at your flat's 1%/5% rate. The Appellate Authority for Advance Rulings has held that the sale or right to use a car parking space is not "naturally bundled" with construction services (a buyer can choose not to take one), so it doesn't qualify as part of the same composite supply the way PLC and floor-rise charges do. Factor this in separately when budgeting — a ₹3 lakh open car-parking charge, for instance, adds ₹54,000 in GST at 18%, not ₹15,000–₹30,000 at your flat's own rate.
Example — non-affordable flat:
- Agreement value: ₹80,00,000
- GST at 5%: ₹80,00,000 × 5% = ₹4,00,000
- Total payable to the builder: ₹84,00,000
Example — affordable housing flat:
- Agreement value: ₹44,00,000 (carpet area 55 sq m, within the Chennai metro limit)
- GST at 1%: ₹44,00,000 × 1% = ₹44,000
- Total payable to the builder: ₹44,44,000
GST is usually collected by the builder in instalments, matching each construction-linked payment, not as one lump sum at booking — so your demand letters will show GST added to each milestone payment, not just the first one.
GST is separate from stamp duty and registration
This is the most common point of confusion: GST and stamp duty are two different levies, charged by two different governments, and you pay both.
| Levied by | Central Government | Tamil Nadu state government |
|---|---|---|
| Applies to | Under-construction property only | Every sale (under-construction or ready) |
| Charged on | Agreement/builder value | Higher of guideline value or sale value |
| Rate (Chennai, 2026) | 1% or 5% | 7% stamp duty + 4% registration fee = ~11% total for a general/male buyer (women buyers get a reduced stamp duty rate) |
So an under-construction flat in Chennai can carry both GST (1–5%) and stamp duty/registration (around 11% combined) on top of the base price — budget for both, not one or the other. See our guide to the Chennai guideline value for how the stamp-duty side is calculated.
Does this mean ready-to-move is always cheaper?
Not necessarily — it means the headline comparison has to account for GST, not that ready homes always win. A ready-to-move flat has no GST, but it is often priced higher per sq ft to begin with because the builder has already absorbed the construction-period cost of capital and the flat carries zero completion risk for the buyer. An under-construction flat adds GST but is typically priced lower at the base, and some buyers specifically want a say in fittings or a longer payment runway tied to construction milestones.
Our guide on under-construction vs ready-to-move: which is smarter in 2026 walks through the full set of trade-offs — GST is one input into that decision, not the only one.
Checklist before you book an under-construction flat
- Ask the builder for the carpet area (not super built-up) and the all-inclusive agreement value, so you can confirm whether 1% or 5% applies.
- Get the GST rate and amount in writing in the builder-buyer agreement, not just a verbal assurance.
- Confirm whether the quoted price is GST-inclusive or GST-exclusive before signing — this single clarification avoids the most common last-minute budget surprise.
- Separately budget for stamp duty and registration charges, which apply regardless of GST.
- If the project already has its Completion/Occupancy Certificate, confirm that directly with the builder or on the local authority's portal — a project can be fully built and still awaiting CC/OC, in which case GST can still apply even though no construction work is visibly pending.
- Check the project's RERA registration alongside its GST status — both are things to confirm before signing, not after.
Browse new launch apartments in Chennai and ready-to-move flats side by side to compare GST-inclusive budgets across both.
Sources: https://razorpay.com/learn/gst-on-construction/ · https://razorpay.com/learn/gst-on-flat-purchase/ · https://homefirstindia.com/blog/article/gst-on-under-construction-property-rates-calculation/ · https://www.piramalrealty.com/blogs/how-gst-applies-when-you-buy-an-under-construction-flat · https://busy.in/gst-rates/under-construction-property.md · https://busy.in/gst-rates/builders/ · https://constructionestimatorindia.com/?p=15420 · https://disytax.com/?p=24156 · https://ujjivansfb.bank.in/banking-blogs/personal-finance/property-registration-chennai-stamp-duty-fees-guide · https://www.squareyards.com/blog/stamp-duty-and-registration-charges-in-chennai · https://taxguru.in/goods-and-service-tax/gst-preferential-location-charges.html · https://taxo.online/latest-news/preferential-location-charges-plc-is-taxable-at-the-same-gst-rate-applicable-to-construction-services-and-cannot-be-treated-as-an-independent-supply-punjab-and-haryana-high-court/ · https://housing.com/news/open-car-parks-sale-to-attract-18-gst-for-flat-buyers/ · https://taxo.online/latest-news/20-05-2023-flat-buyers-will-face-18-gst-on-open-car-parks-sale/
[VERIFY: one item remains unresolved — the exact CBIC notification number confirming residential GST rates were unchanged in the September 2025 "GST 2.0" restructuring. Every source checked agrees on the substance (no rate change), but none cited the specific notification number, which should be pinned down before publishing for a fully citable source.]
