GST on Residential Property: Rules for Residential Apartments in Bangalore

GST comes into play when you buy an under-construction or pre-possession apartment rather than a completed unit. As per current regulations, if a builder sells a unit in a project still under construction, GST is charged on the construction portion.

On the other hand, once the unit is ready for occupancy and the builder has issued the required completion certificate. In this case, the transaction is treated as an immovable property sale, and so GST on the sale of property does not apply.

For new units in Bangalore that are under construction, the applicable GST slabs are:

• A rate of 1% (without Input Tax Credit) applies if the project falls under the affordable housing criteria (for example, up to a specified carpet area and value).
• A standard rate of 5% (without ITC) applies to all other under-construction residential apartments.
• The taxable value usually excludes the land component (approximately one-third of the total cost), since land is GST-exempt.

It is important to note that GST on the sale of residential property only applies when the home is under construction and possession has not been granted.

From a homebuyer’s perspective, especially for residential apartments in Bangalore, these are the practical implications:

1. Budgeting

When you evaluate the cost of a flat, if it’s under construction, you must add the GST liability (1% or 5%) to your purchase cost.

2. Project Stage Matters

A ready-to-move property has the benefit of no GST (on the flat itself), which makes it more cost-efficient from a tax standpoint.

3. Affordable vs Regular

If the project qualifies as affordable housing (check criteria: price cap, carpet area, etc.), the 1% GST may apply, reducing your tax cost.

4. Value Split

Since land is GST-exempt, the effective taxable value for GST becomes the construction portion (approx. two-thirds of the total value).

5. Builder’s Compliance

Ensure the builder correctly applies GST, issues a tax-compliant invoice, and that you receive clear terms in the agreement.

One common question: Is GST applicable on a resale flat? When you purchase a resale unit, a completed residential apartment in Bangalore from a previous owner, the rules differ:

• Generally, GST is not applicable to resale flats because the transaction is treated as a transfer of completed immovable property, not a supply of construction service.
• If you are buying land (vacant plot) or a purely completed building with an occupancy certificate, these are typically exempt from GST under Real Estate laws.
• The key is the stage of property and whether the service/works contract element remains; if yes, GST may apply; if not (i.e., ready property), it likely doesn’t.

Hence, when you evaluate GST on the sale of property (or GST on the sale of residential property) in Bangalore, resale scenarios will generally not carry GST.

Considering the Bangalore market and your interest in smart investment and home-ownership of residential apartments in Bangalore, here are some extra points:

1. Confirm the project status. Check if the flat has a valid Occupancy Certificate (OC) or Completion Certificate (CC). If yes, GST likely won’t apply.
2. Clarify in your agreement whether the quoted price includes GST or expects you to pay it separately.
3. From a green/homebuyers and investment perspective, if you purchase early in construction, you accept GST risk and tax cost. If you go for ready-to-move or near-ready units, you essentially avoid that GST cost.
4. While GST may not apply on resale flats, remember to factor in stamp duty and registration charges in Karnataka. For example, for properties valued above ₹45 lakh, stamp duty is 5% and registration is 1%.

For apartments in Bangalore undergoing monthly maintenance above a threshold (e.g., maintenance charges > ₹7,500 per month), the society may be liable to collect GST @ 18% on those maintenance charges.

Having a clear understanding of GST on the sale of residential property and GST on the sale of property enables you to make smarter decisions. With that knowledge, you can book a home with confidence and evaluate your cost structure more accurately.

If you would like help analysing a specific project agreement for GST implications, our experts at Casagrand are happy to assist. We can also help you compare under-construction vs ready-to-move flats in Bangalore with a full tax cost breakdown. Let’s review the numbers together and ensure you proceed with clarity.

Disclaimer: GST rates and regulations are subject to change based on Government tax updates.