GST on Under-Construction vs Ready-to-Move Property

Imagine two buyers purchasing what is essentially the identical apartment, in the same building, at the same price, except one buys it while it's still under construction and the other waits until after the building receives its Occupancy Certificate, covered elsewhere on this site, before purchasing. The under-construction buyer owes GST on the purchase, the ready-to-move buyer, buying after the OC is issued, generally doesn't, a genuinely significant tax difference driven entirely by construction timing.

The current structure applies 5% GST on under-construction residential property purchases outside the affordable housing category, with no input tax credit available to offset it, and a reduced 1% GST specifically for properties qualifying under the affordable housing definition, generally units below a defined price and size threshold, while property sold only after receiving its Occupancy Certificate is treated as a completed asset sale, outside GST's scope entirely.

This tax gap creates a genuine, direct financial incentive shaping buyer behaviour, some buyers deliberately wait for a project to reach completion specifically to avoid the GST liability, even if it means paying a premium the developer may charge for a fully finished, ready-to-move unit, a real tradeoff between paying GST now on an under-construction purchase versus paying a completion premium later with no GST.

This structure also connects to the affordable housing push covered under PMAY elsewhere on this site, the reduced 1% GST rate specifically for affordable housing exists as a deliberate policy lever making that segment more price-competitive, layering a tax incentive on top of the direct subsidy and financing support schemes already targeting the same affordable housing goal from multiple directions simultaneously.