GST on an Under-Construction Home: Why It Applies Before Completion and Not After

Buyers arrive at this question wanting a percentage, and the percentage is the least stable thing about the subject. It is fixed by a notification issued under the charging section, it has been amended more than once since the tax began, and each amendment took effect from a date buried inside a document no web page watches.

What is stable — and what almost nobody explains — is the part that decides whether the tax applies at all. That sits in two schedules to one Act, it has not moved, and it answers the three questions people on this corridor actually have: is a finished home taxed, is a plot taxed, and is the tax charged on the value the registration department publishes or on what the promoter bills me.

The line the Act draws

A sale of land is outside the tax. A sale of a completed building is outside the tax. The construction of a building, sold before it is finished, is inside it — treated as a supply of services, because what you are buying at that moment is construction work rather than a completed thing.

That is the whole architecture, and it is why an under-construction home and a ready one are taxed differently despite ending up as the same flat. You are not being taxed on the flat. You are being taxed on the construction of it, and only where the money moves before the construction is legally finished.

Schedule II and Schedule III, in plain terms

Section 7 of the Central Goods and Services Tax Act, 2017 defines the scope of supply and brings in two schedules that settle the classification for this transaction.

• Paragraph 5(b) of Schedule II treats the construction of a complex, building or civil structure intended for sale to a buyer as a supply of services — except where the entire consideration has been received after the issue of the completion certificate by the competent authority, or after first occupation, whichever is earlier.
• Paragraph 5 of Schedule III puts the sale of land, and — subject to paragraph 5(b) of Schedule II — the sale of a building, outside the tax altogether: neither a supply of goods nor a supply of services.

Read the two together and the rule falls out. The default is that a building sale is outside the tax. The exception is construction sold before completion. And the exception to the exception — the words that release a sale back out of the tax — is the completion certificate.

Section 9 of the same Act is the charging section: it levies the tax on supplies at rates notified by the Government on the recommendations of the GST Council. Note where the rate lives. Not in the Act. In a notification, issued under section 9, amendable at any Council meeting.

Why the completion certificate is the trigger, and not handover

This is the most useful sentence in the post: the date that matters is the date of the completion certificate issued by the competent authority, or first occupation if that came earlier — not the date the promoter hands you keys, not the date of registration, and not the date the project looks finished.

Three practical consequences follow.

1. A booking made before the certificate is a taxable supply, even if you take possession long after it. The condition in paragraph 5(b) of Schedule II is that the entire consideration was received after the certificate. Part before, part after, and the exception does not apply.
2. A resale from an owner is not the promoter's supply at all. An individual selling their own completed flat is not making a taxable supply of construction services.
3. "Ready to move" is marketing, and the certificate is a document. Ask which one exists. The distinction between an occupancy certificate and a completion certificate — which are not the same instrument and are not issued by the same process everywhere — is worth settling before you accept either word.

What the tax attaches to

The value of the supply under section 15 of the Central Goods and Services Tax Act, 2017 — broadly, what the promoter charges you under the agreement for the supply. Not the guidance value. Not the stamp duty value. This is the point at which two charges that arrive in the same fortnight get merged in a buyer's head, and merging them produces a budget built on a category error, which is much harder to spot later than an arithmetic slip.

Two separate charges, two separate bases, two separate authorities:

Our reference page on this tax and the Karnataka stamp duty and registration page take the two apart charge by charge, and neither prints a figure either.

Affordable housing: a classification, not an opinion

There is a separate, lower rate for a residential apartment that meets the definition of an affordable residential apartment. What people get wrong is thinking the category describes a kind of project. It does not. It is a definition in the rate notification issued under section 9, and it turns on two objective tests: a carpet-area limit, which differs between metropolitan and other areas, and a value ceiling on the gross amount charged.

Both of those figures are in the notification, both are amendable there, and neither is printed here — the same rule that governs the rate itself. Carpet area for this purpose takes the meaning given to it in the Real Estate (Regulation and Development) Act, 2016, section 2(k), which is a definition worth reading in the original, because it is not the area most brochures lead with.

The practical instruction: if a sales team tells you a project is in the affordable category, ask which limb of the definition it satisfies and on what carpet area, and check that against the agreement.

Rates change by notification — so name the authority

Every figure on this subject is fixed by notification and moves without warning you. The Central Board of Indirect Taxes and Customs publishes the rate notifications and their amendments; the GST Council recommends them. That is where the current figure comes from, on the day you need it.

A page that prints the rate has published a snapshot with no expiry date attached. It does not know when the notification changed, and it keeps asserting the superseded figure to every reader, and to every answer engine that quotes it, with exactly the confidence it had on the day it was written. Naming the notifying authority is not a hedge. It is the only version of this answer that is still correct next year.

What to ask the promoter to show

• A tax invoice. Section 31 of the Central Goods and Services Tax Act, 2017 deals with the issue of an invoice by a registered supplier. Money handed over as tax is not tax until it is charged on an invoice by a registered person — so the invoice, not the demand letter, is what evidences the charge.
• The GST identification number on it, checked against the government's own register rather than against the letterhead.
• The classification relied on, if a concessional category is being applied to your apartment, and the carpet area it rests on.
• The payment schedule in the agreement. Section 13 of the same Act deals with the time of supply, and the schedule in your agreement is what determines when each demand is raised. A registered project has one — the Real Estate (Regulation and Development) Act, 2016 requires the agreement for sale under section 13 to carry the payment terms.
• Whether the completion certificate has issued, and its date. That single fact settles which side of the line your purchase falls on.

The remaining money questions on a purchase — which charge belongs to which authority, and where each current figure is published — are collected in the buyer guide.