GST on Under-Construction Property in Bangalore: What ₹10 Crore Actually Costs

Quick Answer

GST on an under-construction residential property in Bangalore is 5 percent of the full agreement value, charged without input tax credit. On a ₹10 crore apartment that is ₹50,00,000. A property that has already received its occupancy certificate carries no GST at all. The September 2025 GST reform reduced the tax on cement and construction inputs but left the rate you pay on the flat completely unchanged. Add Karnataka stamp duty, cess, surcharge, registration fee at 2 percent and TDS under Section 194-IA, and the statutory cost on a ₹10 crore under-construction purchase comes to approximately ₹1.26 crore, or 12.6 percent above the price.

TL;DR

• Residential under-construction property attracts 5 percent GST without input tax credit. Affordable housing attracts 1 percent. Both rates come from the scheme notified in 2019 and were left untouched by the 56th GST Council (PIB, September 2025).

• Cement moved from 28 percent to 18 percent on 22 September 2025. Marble and granite blocks moved from 12 percent to 5 percent. Steel, tiles, sanitaryware, paints and professional fees stayed at 18 percent (PIB).

• Because the developer sits on a no-credit scheme, that input saving is cash in his margin, not a credit that flows to you.

• Anti-profiteering closed to new complaints on 1 April 2025. You have no statutory route left to demand the cement saving be passed on (Business Standard).

• Karnataka statutory registration cost above ₹45 lakh is approximately 7.6 percent, following the registration fee revision from 1 percent to 2 percent effective 31 August 2025.

• Section 194-IA TDS is 1 percent, computed since 1 October 2024 on the higher of agreement value or stamp duty value, and excluding separately shown GST.

• A completed property with an occupancy certificate is outside GST entirely. That is the ₹50 lakh decision at the centre of this article.

What Is the GST Rate on Under-Construction Property in Bangalore in 2026

The rate depends on one question only: has the building received its completion certificate or been first occupied?

If it has not, the sale is a supply of construction service and GST applies. Residential apartments outside the affordable bracket attract 5 percent, charged on the entire consideration including the undivided share of land, with no input tax credit available to the developer. Affordable housing attracts 1 percent on the same no-credit basis. Commercial units sold inside a residential real estate project, where commercial carpet area is 15 percent or less of total carpet area, attract 5 percent without credit. Standalone commercial property outside such a project attracts 12 percent with credit.

The affordable bracket is defined by two conditions that must both be met: carpet area up to 60 square metres in a metropolitan city, and a price up to ₹45 lakh. Bangalore is a metropolitan city for this purpose. No ₹10 crore home qualifies. If you are reading this because of a search for how to avoid GST on a flat purchase, the affordable route is closed to you and the only genuine answer is the completion certificate, discussed below.

Karnataka applies no state-level variation. The rate on a Vittal Mallya Road apartment is the same rate as on a Whitefield apartment. Where the address changes your outcome is what ₹10 crore secures in the first place, not the rate applied to it.

Ready-to-Move Property Carries Zero GST, and That Is a ₹50 Lakh Decision

Once a building has received its completion certificate, or has been first occupied, whichever is earlier, a sale of the completed unit falls under Schedule III of the CGST Act. It is neither a supply of goods nor a supply of services. No GST arises.

On a ₹10 crore purchase this is not a technicality. It is ₹50,00,000.

Under-construction inventory in Bangalore typically prices below comparable completed stock, and construction-linked payment plans defer a large share of your outflow. Those are real advantages, and I have set out how the financing structures actually differ elsewhere. But when a buyer tells me the under-construction unit is 8 percent cheaper than the ready one, my first response is that 5 percent of the discount is GST going straight to the exchequer. The comparison has to be run after tax, not before it. That is the same arithmetic that sits underneath the broader resale versus new launch question.

This is also why the occupancy certificate deserves close scrutiny. The certificate is not just the document that makes lawful occupation possible. It is the document that ends the GST liability on the asset.

What GST 2.0 Changed on 22 September 2025, and What It Did Not

The 56th GST Council meeting collapsed the rate structure into two principal slabs of 5 percent and 18 percent, with a 40 percent slab reserved for luxury and sin goods. Cement fell from 28 percent to 18 percent. Marble and granite blocks fell from 12 percent to 5 percent.

Search behaviour tells the story of what buyers concluded. Queries for "gst on flat purchase" ran at 2,900 per month in August 2025, spiked to 5,400 in September 2025, and have since settled at 1,600. A very large number of people went looking for a rate cut on their flat. There was none.

Nothing in the September 2025 decisions touched the sale-side rate on residential property. The 2019 scheme of 1 percent and 5 percent without credit continues exactly as before, and so do the conditions attached to it, including the requirement that promoters procure at least 80 percent of inputs from registered suppliers, with reverse charge payable on any shortfall.

The realistic effect on construction cost is in the range of 2 to 3 percent. On total project cost, where land is the dominant input in a Bangalore luxury development, it is smaller than that.

Why You Can No Longer Force a Builder to Pass On the Cement Cut

Here is the part that matters more than the rate table, and that you will not find on a developer's sales collateral.

Section 171 of the CGST Act required that any reduction in tax rate or benefit of input credit be passed to the buyer as a commensurate reduction in price. That was the mechanism a buyer used to challenge a developer who pocketed a rate cut.

The government notified 1 April 2025 as the sunset date for that provision. From that date no new anti-profiteering application can be received. Jurisdiction over complaints filed before it moved from the Competition Commission of India to the Principal Bench of the GST Appellate Tribunal on 1 October 2024, and those pending matters continue to be heard, but the door to new ones is shut (Business Today; The Tribune).

Read the two facts together. The cement rate fell in September 2025. The right to demand the benefit ended in April 2025, five months earlier. That sequencing is not something a buyer can appeal against. It is simply the position.

What this means in practice is that the entire cement saving on a project under construction today is a negotiating item, not an entitlement. On a ₹10 crore unit, an input saving of 2 to 3 percent of construction cost is a meaningful sum sitting on the developer's side of the table. You will get some of it only if you raise it before you sign the allotment letter, and only in a market where the developer needs the sale. After signing, there is no forum.

The One-Third Land Deduction Costs Luxury Buyers More Than Mid-Market Buyers

The 5 percent headline is not a rate applied to construction value. It is 7.5 percent applied after deeming exactly one-third of the total consideration to be the value of land, which is outside GST. The arithmetic produces 5 percent of the gross price.

That deemed fraction is fixed regardless of where the property is.

On a ₹1 crore apartment on the eastern corridor, one-third for land is roughly defensible. On a ₹10 crore apartment in the central business district, where an outsized share of the price is the address rather than the concrete, the actual land component is materially higher than one-third. The buyer is therefore paying GST on construction value that does not exist. The fixed abatement is regressive against price, and the more expensive the address, the worse it gets. It is a hidden reason why the price gap between a CBD apartment and a North Bangalore villa widens further once tax is included.

This has been litigated. In Munjaal Manishbhai Bhatt v. Union of India, decided by the Gujarat High Court on 6 May 2022, the mandatory one-third deduction in paragraph 2 of Notification 11/2017-Central Tax (Rate) was held ultra vires the CGST Act and violative of Article 14, and read down to be available at the option of the taxpayer where the actual value of land is ascertainable (Khaitan & Co; AMLEGALS).

I am deliberately careful here. That judgment concerned the valuation mechanism under the pre-2019 framework, and its application to the composite 5 percent scheme is not settled. I am not aware of a Karnataka ruling extending it, and I am not going to tell you it does.

What it does change is structuring. Where a transaction is genuinely two things, the sale of a plot or an undivided share at an identified price and a separate construction contract at an identified price, the case for taxing only the construction leg is stronger than where a single composite price is quoted. Bangalore villa and plot-plus-construction structures are frequently documented that way already. Whether yours is drafted to preserve that position is a question for your counsel and your chartered accountant, and it needs to be asked before the agreement is executed, not after.

What ₹10 Crore Costs After GST, Stamp Duty, Registration and TDS

Assume an under-construction apartment inside BBMP limits at an agreement value of ₹10,00,00,000, non-affordable, bought by a resident individual.

Stamp duty, cess, surcharge and registration together come to ₹76,00,000, which is the 7.6 percent figure Karnataka buyers should be working from (Homesok; HomeFirst). Adding GST at ₹50,00,000 gives ₹1,26,00,000, which is 12.6 percent of the agreement value. That sits inside the wider sequence of costs set out in our complete process from shortlist to registration.

The TDS is not an extra cost. It is withheld from what you pay the developer and credited to him. It is included above because buyers routinely forget to deduct it and then discover the liability sits with them, not with the developer or the sub-registrar.

Two details on the TDS catch ₹10 crore buyers. Since 1 October 2024 the 1 percent is computed on the higher of the agreement value or the stamp duty value, following the Finance (No. 2) Act 2024, which makes the guidance value floor directly relevant to your withholding obligation. And the consideration for Section 194-IA expressly includes club membership fees, car parking charges, electricity and water facility charges, maintenance fees and advance fees, so the base is the all-in figure, not the base price (ClearTax; TaxGuru). GST shown separately on the invoice is excluded from the TDS base.

The equivalent completed property at the same ₹10 crore price carries ₹76,00,000 of statutory cost instead of ₹1,26,00,000.

The Charges Builders Bill at 18 Percent Instead of 5 Percent

Preferential location charges, floor rise and car parking are ordinarily treated as part of the composite supply of the apartment and taxed at the same 5 percent.

Corpus fund contributions, advance maintenance collected for a period after handover, and club membership charges are where practice diverges. Some developers bill these inside the composite supply at 5 percent. Others invoice them as a separate service at 18 percent. On a ₹10 crore unit the difference between the two treatments on ₹40 lakh of such charges is ₹520,000.

I am not going to tell you which treatment is correct, because I have not found a CBIC circular that settles it cleanly and I am not your chartered accountant. What I will tell you is that the line item is negotiable, the rate applied to it should be questioned in writing before you sign, and the answer should come from the developer's tax team on letterhead rather than from a sales executive. It is the single most common place I see a ₹10 crore buyer accept a number without asking why. It also has a long tail, because these are the same charges that shape what ownership costs after handover.

When GST Stops Being Payable

GST liability on the sale of the unit ends at the earlier of two events: issue of the completion certificate by the competent authority, or first occupation of the building.

If you book a unit before that date and continue paying instalments after it, the instalments still relate to a supply made under a construction agreement, and the developer will continue to charge GST on them. The exemption applies to a sale of a completed unit, not to the tail of an existing construction contract. Buyers regularly assume the opposite and budget wrongly.

If you buy from an existing allottee before completion, the assignment of the booking is a separate question again and should be run past a chartered accountant before the agreement is signed.

Under-Construction vs Ready-to-Move: The Full Comparison

The honest conclusion is that the under-construction discount has to exceed 5 percent before it is a discount at all, and it has to exceed 5 percent by enough to compensate for possession risk and for interest paid on a home you cannot yet occupy. In the ₹10 crore Bangalore market, where completed central business district inventory is genuinely scarce, that calculation goes both ways depending on the specific asset. It does not go one way just because the launch price looks lower.

Before You Sign the Allotment Letter

The GST rate is fixed. What is not fixed is the price you sign at, the rate applied to corpus and club charges, how your agreement values land against construction, and whether the input saving from the September 2025 reform ends up in your price or the developer's margin. Every one of those is decided before signature and cannot be reopened after it.

Sadhwani Real Estate Holdings has been advising buyers on Bangalore's ultra-luxury market since 1991, from the Lavelle Road office. If you are evaluating a ₹5 crore or ₹10 crore under-construction purchase and want the cost run properly against the completed alternative before you commit, send us the details through the enquiry form on our contact page and we will come back within 24 hours.

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