Buying an apartment before its required completion certificate or first occupation can bring the sale within GST as a construction service. Under Schedule II, paragraph 5(b) of the Central Goods and Services Tax Act, 2017, construction intended for sale is treated as a supply of services unless the entire consideration is received after the earlier of those two events.
The tax rate cannot be identified from the words “under construction” alone. CBIC’s current rate table displays total rates of 1.5% for specified affordable residential apartments and 7.5% for other specified residential apartments, while CBIC and GST Council materials from 2019 describe effective rates of 1% and 5%. Because the official material is not reconciled, verify the operative notification, project classification, payment dates and promoter’s invoice with a qualified Indian GST professional.
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What the GST law treats as an under-construction sale
Schedule II, paragraph 5(b) of the CGST Act classifies construction of a complex, building or civil structure intended for sale to a buyer, wholly or partly, as a supply of services. The statutory exception is based on when the promoter receives consideration. The relevant sentence is:
“construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.”
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In practical terms, identify two dates: the date the required completion certificate is issued and the date of first occupation. The earlier date is the cutoff. If the entire consideration is received only after that cutoff, the construction-service exception can apply. If any consideration was received before it, the buyer must examine the agreement, invoices and payment chronology rather than assuming the completed-property treatment.
The Act’s explanation also covers additions, alterations, replacements and remodelling of an existing civil structure. Where local law does not require a completion certificate, the Act identifies a registered architect, chartered engineer or licensed surveyor as a possible certifier. The certificate and occupation rules therefore depend partly on the law governing the project’s location.
When timing changes the analysis
Payment before the cutoff
A booking amount, instalment or other part-payment made before the earlier of completion certification and first occupation means the entire-consideration exception does not describe the whole transaction. That does not, by itself, establish the exact rate or tax amount; the project’s classification and the operative rate entry still have to be checked.
All consideration after the cutoff
For a completed unit, obtain the actual completion certificate or evidence of first occupation and compare those dates with every payment date. If the whole consideration was received after the earlier event, the construction-service exception is the relevant statutory starting point. Keep in mind that this conclusion concerns GST on the construction supply; stamp duty, registration fees and other state or local charges are separate issues.
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Why “ready to move” is not a sufficient label
Marketing language such as “ready to move,” “possession offered” or “near completion” does not establish the statutory date. Ask which authority issued the required certificate, whether anyone occupied the unit first, and when each instalment was actually received. A possession letter alone may not answer those questions.
Rates: the official material currently conflicts
As of the CBIC GST Goods and Services Rates page reviewed on 13 October 2026, the relevant construction-services entries display these totals for specified residential apartments:
| Apartment category in the CBIC rate table | CGST component | SGST/UTGST component | Total displayed | Older official material |
|---|---|---|---|---|
| Affordable residential apartment | 0.75% | 0.75% | 1.5% | 1% effective rate in CBIC’s 1 April 2019 concept document and GST Council historical material |
| Other residential apartment | 3.75% | 3.75% | 7.5% | 5% effective rate in CBIC’s 1 April 2019 concept document and GST Council historical material |
The older 1% and 5% figures are not a typo in this article: they appear in official 2019 explanatory and meeting documents. A GST Council-published ruling in M/s Castle Realtors also refers to 1.5% and 7.5% rates for the applicant’s specified real-estate-project entries. That supports the presence of the higher figures in at least one project context, but it does not settle every project category or transaction date.
Do not treat either pair as a universal answer. The official sources reviewed do not provide a single reconciliation covering every residential project, project-start date, ongoing-project election and payment chronology. Before accepting an invoice, request the exact notification and rate-table entry the promoter is applying, including the effective date and conditions.
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Classification matters more than the phrase “under construction”
Residential versus commercial use
CBIC’s rate table separates residential apartments from commercial apartments and contains different entries for real-estate-project categories. A shop, office, serviced unit or mixed-use allocation cannot automatically use a residential-apartment rate. Confirm how the agreement and approved project documents classify the specific unit.
REP and RREP treatment
The rate table distinguishes a real estate project (REP) from a residential real estate project (RREP), and it contains separate treatment for qualifying ongoing projects. The promoter’s classification can therefore affect the entry used on the invoice. Ask for the project’s classification rather than inferring it from the brochure.
Affordable housing is a defined category
“Affordable” is not simply a promotional description. CBIC’s 1 April 2019 explanation described an affordable residential house or flat as meeting both a value ceiling and a carpet-area ceiling:
| Location category in the 2019 explanation | Maximum carpet area | Maximum value |
|---|---|---|
| Non-metropolitan city or town | 90 square metres | ₹45 lakh |
| Metropolitan city | 60 square metres | ₹45 lakh |
For that explanation, the metropolitan list included Bengaluru, Chennai, Delhi NCR in specified localities, Hyderabad, Kolkata and the whole Mumbai Metropolitan Region. Definitions can be amended, so compare the unit’s carpet area, value and location with the operative notification for the relevant supply date. A developer’s use of the word “affordable” in advertising is not conclusive.
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Ongoing-project treatment
CBIC’s rate table separates qualifying ongoing projects and records a one-time promoter option that was due by 20 May 2019, with deemed treatment if the option was not exercised. A buyer in 2026 should not assume that the promoter can make that election anew. Ask what treatment applied to the project at the relevant transition date and request supporting documentation.
Promoter conditions: input tax credit and procurement
The reduced-rate framework described by CBIC in 2019 came with promoter-side conditions. It stated that input tax credit was unavailable under the new reduced-rate arrangement and described an 80% procurement threshold for specified inputs and input services. Listed exclusions included capital goods, development rights or joint-development agreements, floor-space index and long-term lease premiums.
Where the specified procurement threshold is not met, the 2019 material describes reverse-charge treatment on the shortfall. It also describes separate treatment for cement bought from an unregistered supplier and for capital goods. The exact operation depends on the applicable rate entry and notification. These are compliance obligations of the promoter; the buyer does not claim the builder’s construction input credits on a personal GST return.
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How to audit a promoter’s GST invoice
- Record the chronology. List the booking date, every instalment date, the date consideration was received, the completion-certificate date and the first-occupation date. Mark whichever of the last two occurred first.
- Obtain the project documents. Request the required completion certificate or other legally recognised certification, evidence of first occupation where relevant, the registered agreement and the unit’s approved carpet area.
- Confirm the unit category. Check residential or commercial use, affordable or other residential status, REP or RREP classification, and whether the project was treated as ongoing under a transitional entry.
- Ask for the operative rate authority. Have the promoter identify the notification, rate-table heading and effective date used. Because official CBIC materials display both 1.5%/7.5% and older 1%/5% figures, do not accept an unexplained percentage.
- Recalculate the split. For an intra-state supply, check that CGST and SGST components add to the stated total. For an inter-state supply, verify the IGST treatment shown on the invoice. The invoice should identify the taxable value, rate, tax amount and description of supply.
- Check the consideration basis. Compare the taxable value with the agreement’s construction, land or other components. Do not assume that every amount labelled “maintenance,” “club,” “parking” or “infrastructure” has the same GST treatment; obtain a project-specific tax explanation.
- Escalate discrepancies in writing. Ask the promoter to correct an arithmetic or classification error through a revised invoice or credit/debit document. For a disputed legal classification, obtain independent advice from a qualified Indian GST or real-estate tax professional before withholding contractual payments.
Under-construction versus completed property
| Question to compare | Under-construction purchase | Completed-property purchase |
|---|---|---|
| Relevant event | Whether consideration was received before the earlier completion-certificate or first-occupation date | Whether the entire consideration was received after that earlier date |
| Documents to inspect | Agreement, payment ledger, project classification and expected or actual certificate details | Issued completion certificate, first-occupation evidence and complete payment chronology |
| Rate analysis | Residential/commercial status, affordable criteria, REP/RREP status and any ongoing-project treatment | The same classification checks, plus confirmation that the statutory exception applies to the full consideration |
| Invoice check | Taxable value, rate authority, CGST/SGST or IGST split and payment-linked invoices | Whether GST is being charged despite the full-consideration exception, and the legal basis given for doing so |
| Other charges | Stamp duty, registration and local charges require separate state-specific analysis | Stamp duty, registration and local charges require separate state-specific analysis |
Illustrative timelines
Installments precede certification
A buyer pays a booking amount and three instalments while construction is underway. The competent authority later issues the completion certificate, and first occupation occurs afterward. Because consideration was received before the earlier certificate date, the buyer should have the promoter map the supply and rate to the applicable construction-service entry. The buyer should not rely on the label “possession ready” to erase the earlier payment dates.
All payment follows first occupation
A unit is first occupied before the buyer pays the entire agreed consideration. If no consideration was received earlier, the first-occupation date becomes the relevant cutoff under the “whichever is earlier” wording. The buyer should retain evidence of both the occupation date and the payment record when asking whether the statutory exception applies.
Small unit marketed as affordable
A 55-square-metre apartment is advertised as affordable, but its value exceeds ₹45 lakh. The 2019 CBIC criteria require both the area and value limits, so the marketing label alone cannot establish affordable status. The buyer must check the operative definition and valuation rules for the supply date.
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Common mistakes and how to avoid them
- Quoting one rate without a date. The 1.5%/7.5% display and 1%/5% older official explanation must be presented with their source and date context.
- Assuming every apartment purchase attracts GST. The statutory wording concerns construction intended for sale and contains a full-consideration exception tied to completion or first occupation.
- Using carpet area as the only affordable test. The 2019 explanation also used a ₹45 lakh value ceiling and location-based area limits.
- Confusing possession with first occupation. Establish the legally relevant event and retain documentary evidence.
- Applying the promoter’s ITC conditions to the buyer. Procurement thresholds, reverse charge and credit restrictions are promoter compliance matters, although they can explain the rate entry appearing on an invoice.
- Ignoring non-GST costs. Stamp duty and registration charges are outside the CGST rate analysis and vary by state and transaction.
When professional review is justified
Obtain case-specific advice when the project is mixed-use, the promoter relies on a transitional ongoing-project treatment, payments cross a certificate or occupation date, the unit’s affordable status is disputed, or the invoice uses a rate that cannot be tied to an operative notification. Give the adviser the agreement, payment ledger, certificates, occupation evidence, invoice and project classification documents. Those records allow the adviser to test the statutory timing rule and the rate conditions together rather than reviewing a percentage in isolation.
The legal trigger comes from the CGST Act, while the rate figures and conditions come from CBIC’s rate table, CBIC’s 1 April 2019 GST: Concept and Status, GST Council meeting material and the Council-published M/s Castle Realtors ruling. The conflicting official rate displays make project- and date-specific verification essential.
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