When purchasing a new home in Mohali, Zirakpur, or Panchkula, tax calculations can dramatically shift your overall acquisition budget. One of the most critical levies to budget for is GST on under-construction property. Unlike secondary market transactions or completed projects with an official handover certificate, under-construction apartments, independent floors, and commercial spaces attract Goods and Services Tax that developers pass on to the buyer. Navigating these tax rules ensures you never overpay when booking your home in 2026.

Current Rates of GST on Under-Construction Property

The GST framework classifies residential real estate into two clear tax slabs, both operating without the benefit of Input Tax Credit (ITC) for the developer:

  • Affordable Residential Housing (1% GST): Properties qualify under this concessional 1% rate if the total consideration does not exceed Rs 45 lakh, and the carpet area is up to 60 square metres in metropolitan cities or up to 90 square metres in non-metropolitan urban areas like the Chandigarh Tricity.
  • Non-Affordable Residential Housing (5% GST): Most modern 3BHK and 4BHK apartments in regions like Aerocity Mohali, PR7 Airport Road, and New Chandigarh exceed the Rs 45 lakh threshold. These properties attract an effective GST rate of 5% on the overall property value.
  • Commercial Property (12% GST): Under-construction commercial spaces, such as retail shops and SCOs in IT City or Zirakpur, attract an effective GST rate of 12% with Input Tax Credit available to eligible business buyers.

The effective rates of 1% and 5% are calculated after factoring in a statutory one-third deduction for the value of undivided land share, meaning you do not pay tax on the land component of your housing unit.

When Is a Property Completely Exempt from GST?

Homebuyers can legally avoid paying GST entirely depending on the construction status and title nature of the property at the time of purchase:

  • Ready-to-Move Units with Occupancy Certificate (OC): If the developer has obtained a valid Completion Certificate (CC) or Occupancy Certificate from local planning authorities—such as GMADA in Mohali or HUDA in Panchkula—the transaction is treated as a sale of immovable property rather than a service. No GST is applicable.
  • Secondary Market Resale: Buying a ready apartment or built-up house directly from an individual owner incurs stamp duty and registration fees, but zero GST.
  • Residential and Commercial Plots: The sale of vacant land or plotted developments is strictly outside the scope of GST under Schedule III of the CGST Act, provided the developer is not selling an integrated construction service contract.

How Developers Calculate GST on Demand Notes

In under-construction purchases, payments are typically spread across milestone-based Construction Linked Plans (CLP). GST is applied proportionally to each installment invoice as construction progresses, rather than collected as a single lump sum upfront.

However, buyers must inspect their payment breakdown carefully. While the core apartment value attracts the 5% residential slab, ancillary charges may carry different tax rates:

  1. Preferential Location Charges (PLC): Taxed under the same composite supply rate (5%) as the apartment when bundled into the original builder-buyer agreement.
  2. Electrification and Power Backup Infrastructure: Generally billed alongside construction stages at the 5% residential rate.
  3. Maintenance and Club Memberships: Standalone advance club charges or ongoing common area maintenance services provided after handover often attract an 18% GST rate if billed separately from the core housing unit.

Expert Tip: Always ask your builder for an updated RERA registration certificate and verification of the Occupancy Certificate status. If you pay the final installment after the competent authority issues the OC, that specific final milestone cannot be billed for GST.

Factoring the effective 5% tax into your down payment calculations prevents unexpected cash shortfalls during early construction milestones. By verifying project stage approvals and demanding transparent, itemized demand notes, you protect your legal rights and optimize the true purchase cost of your new home.

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