Is GST on an Under-Construction Flat 1% or 5%? Depends on Price and Size
GSTZone Desk · Updated 2026
Short answer
1% GST (without ITC) applies specifically to ‘affordable housing’ — defined by BOTH a value cap of ₹45 lakh AND a carpet area cap (60 sqm in metro cities, 90 sqm elsewhere). Any residential under-construction property that doesn’t meet BOTH conditions falls into the standard 5% (without ITC) bracket instead.
In detail
This is genuinely a dual test, not a simple price-only or size-only rule — and missing that ‘both conditions’ requirement is where a lot of confusion comes from. A flat priced under ₹45 lakh but exceeding the area cap for its city category doesn’t qualify for 1%, and neither does a flat within the area cap but priced above ₹45 lakh.
Both rates — 1% and 5% — apply WITHOUT input tax credit for the developer, a deliberate design choice made when this structure was introduced in April 2019, moving away from an earlier system that did allow ITC but at higher headline rates (8% and 12%).
This whole framework applies specifically to residential property still UNDER CONSTRUCTION — as covered elsewhere in this series, a completed property (post completion certificate, with full payment received after that point) is treated completely differently, falling entirely outside GST.
GSTZone tip
Before assuming your flat purchase qualifies for the lower 1% rate, check the actual carpet area against your specific city’s metro/non-metro classification — the area cap catches a lot of buyers who focus only on the ₹45 lakh price test and assume that’s the whole story.
Related questions
Does this 1%/5% structure apply to commercial property too?+
No — commercial (non-residential) under-construction property generally follows a different, standard rate structure with ITC available, distinct from the residential affordable/standard split.
Which cities count as ‘metro’ for the 60 sqm area cap?+
The metro classification for this specific purpose is a defined, notified list of cities — worth confirming your specific city’s classification directly, since it isn’t simply every large city.
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