Booking, cancelling, refunds

A flat purchase moves through two different stages before it is a house, and they are governed by different rules. In the first, you have paid a booking amount, perhaps against an allotment letter, but no agreement for sale exists yet. In the second, that agreement has been signed and registered, and you are paying against its schedule. Cancelling in the first stage and cancelling in the second end in different amounts of money coming back.

This guide works through both: what Karnataka RERA and the state’s model agreement for sale say about who can cancel, what a promoter may keep, and how long a refund can take. It then follows one ₹1 crore flat through three points of cancellation, with the arithmetic shown. Two threads run alongside the price and are easy to miss until it is too late to plan around them: the GST you paid does not automatically come back with it, and stamp duty on a registered agreement almost never does.

What you pay before you sign

Before a registered agreement for sale exists, Karnataka RERA caps what a promoter can collect from you. Section 13 of the Real Estate (Regulation and Development) Act, 2016 says a promoter “shall not accept a sum more than ten per cent. of the cost of the apartment, plot, or building… as an advance payment or an application fee” without first signing and registering an agreement for sale. On a ₹1 crore flat, that ceiling is ₹10 lakh, plus GST on it.

What that money usually buys is an allotment letter: the promoter’s written confirmation that a specific unit is held for you, often with the payment schedule that will later become the agreement’s. It is not the agreement itself, and Karnataka’s model agreement for sale (Annexure-A to the K-RERA Rules) does not govern this stage – its cancellation clauses only start to apply once you have signed. Our guide to documents to check before you buy covers what each of these papers should contain, and checking the project’s own K-RERA filing before you pay anything is worth the ten minutes it takes.

One clause in Annexure-A reaches back into this stage: what happens if you never get to signing and registering at all. Under clause 20, if you do not execute the agreement within 30 days of receiving it, the promoter must give a further 30 days’ notice to cure that; if you still have not signed and registered, “the application of the Allottee shall be treated as cancelled and all sums deposited by the Allottee in connection therewith including the booking amount shall be returned to the Allottee without any interest or compensation whatsoever.” The whole amount comes back – but with nothing for the time it sat with the promoter.

Cancelling under Annexure-A

Once the agreement is signed and registered, its own cancellation clauses take over, and they are not symmetric between the two sides.

If you change your mind

Clause 7.5 lets you cancel or withdraw your allotment at any time. Where the reason is not the promoter’s fault, the clause says the promoter “is entitled to forfeit the booking amount paid for the allotment,” and must return everything else “within 60 days of such cancellation.” The booking amount here means whatever you paid to book the flat, before the agreement existed – not a percentage of everything you have paid since. That distinction does most of the work in the worked example below.

If you stop paying

The agreement also protects the promoter. If you miss an agreed run of consecutive instalments after notice, clause 9.3 lets the promoter cancel your allotment and refund what you paid “by deducting the booking amount and the interest liabilities” on the missed payments, with 30 days’ notice of the cancellation itself. The arithmetic ends up close to clause 7.5’s, plus whatever interest you owe as a late payer under the agreement’s own terms.

When the fault is the promoter’s

Two routes exist when the promoter, not you, is the reason for cancelling, and both are better for you than clause 7.5.

If the promoter is delayed

Section 18 of the RERA Act gives you a choice if the promoter fails to complete the project or hand over possession by the date fixed in the agreement: withdraw and get your money back, or stay and be paid for the delay. Our guide to builder delays covers the complaint itself. If you withdraw, the promoter must “return the amount received by him… with interest at such rate as may be prescribed… including compensation,” and section 19(4) restates the same right from your side. Annexure-A’s clause 9.2 carries the same choice into the agreement itself. Either way the interest runs at the Karnataka RERA Rules’ rate – the State Bank of India’s highest marginal cost of lending rate plus two percentage points, which comes to 10.80% as this is written (SBI’s three-year MCLR, the highest tenor it publishes, has stood at 8.80% since 15 Aug 2026). Nothing is forfeited on this route; every rupee you paid comes back, with interest for however long the promoter held it. If a slipped date is what brought you here, our guide to what a possession date means is worth reading before you decide whether to withdraw or stay.

If you were misled

A narrower but equally strong remedy sits in section 12. If a false statement in the advertisement, prospectus or a model apartment caused you loss and you want to withdraw, you are entitled to “his entire investment along with interest… and the compensation in the manner provided under this Act” – the same rate, the same no-forfeiture outcome, but on the specific ground of misrepresentation rather than delay.

If it becomes impossible to build

Clause 7.1 covers a force majeure the promoter cannot work around – war, flood, drought, fire, cyclone, earthquake or a similar calamity that makes the project impossible to complete. The allotment then “shall stand terminated and the Promoter shall refund… the entire amount received… within 60 days,” with 30 days’ notice first. Nothing is forfeited, but unlike the delay and misrepresentation routes, this clause does not mention interest.

₹1 crore, cancelled three ways

Take a ₹1 crore flat bought under construction, with GST at 5%. At booking, the buyer pays the maximum the law allows before signing – 10%, ₹10 lakh, plus ₹50,000 GST, ₹10.5 lakh in all. Three points of cancellation, three outcomes.

Cancelled before the agreement is signed, clause 20 applies: everything comes back, including the GST, because clause 7.5’s forfeiture right has not started yet – there is no signed agreement for it to attach to. Cancelled after signing, with 20% paid (₹20 lakh plus ₹1 lakh GST, ₹21 lakh in all), clause 7.5 applies: the promoter keeps the ₹10 lakh booking amount and its ₹50,000 GST, and refunds the rest, ₹10.5 lakh. Cancelled at 50% paid (₹50 lakh plus ₹2.5 lakh GST, ₹52.5 lakh in all), the same ₹10 lakh and ₹50,000 GST are kept, and the balance, ₹42 lakh, comes back.

The share that comes back rises with how much you have paid, because clause 7.5’s forfeiture is a fixed ₹10.5 lakh, not a percentage of the price. Nothing back is forfeited at booking; half comes back at 20% paid; four-fifths comes back at 50% paid. Cancel early and you lose a larger share of a smaller sum; cancel later and you lose a smaller share of a larger one – in rupees, the loss is the same ₹10.5 lakh either way. Stamp duty already paid to register the agreement, 0.5% of the price, ₹50,000 on this flat, is not part of either refund; the next section explains why.

GST on a cancelled booking

GST follows the money, not the cancellation. When a supply is cancelled, the promoter can issue you a credit note under section 34 of the CGST Act, 2017 and adjust its own return – but only within a deadline: the credit note has to be declared in a return no later than the 30th of November following the end of the financial year the original invoice fell in, or the date the annual return is filed, whichever comes first. Within that window, cancelling is simple: the promoter refunds you in full, GST included, and claims the tax back through its own filing. These are the same rates our full cost guide works through for a purchase that goes ahead; here, the question is what happens to them when it does not.

Miss the window – easy to do on a multi-year construction schedule, where an early instalment’s deadline can have passed long before you cancel – and the promoter can still refund the price, but not the tax on it: it “may refund the amount to the buyer, after deducting the amount of tax collected by him from the buyer,” in the words of the CBIC’s own circular on the problem. That circular, No. 188/20/2022-GST of 27 December 2022, exists because this exact gap – a construction contract “cancelled subsequently due to non-completion or delay in construction activity in time or any other reasons” – left buyers with tax nobody would give back. It opens a route: you take a temporary GST registration on the common portal using your PAN, complete Aadhaar authentication, and file FORM GST RFD-01 under the category “Refund for Unregistered person,” attaching the promoter’s certificate that the tax was not passed on to anyone else.

Two limits apply to that claim, under section 54 of the CGST Act. You have two years to file, and for a cancelled construction contract the circular fixes the start of that clock as “the date of issuance of letter of cancellation… by the supplier” – not whenever you originally paid. And nothing is paid out if the claim comes to less than ₹1,000. On the worked example above, the GST sitting inside either refund – ₹50,000 at booking, or ₹2 lakh on the 50%-paid refund – comfortably clears that floor.

Stamp duty rarely comes back

An agreement for sale that has been registered carries its own stamp duty, 0.5% of the value – ₹50,000 on a ₹1 crore agreement. Cancelling the agreement does not get this back. The Karnataka Stamp Act’s only mechanism for refunding duty on a stamped document, section 47, is narrow: it covers a stamp spoiled before anything was written on it, an instrument nobody signed, or one later “found to be absolutely void in law from the beginning” – not a validly executed agreement that the parties, or the rules, later allow to be cancelled. An ordinary cancellation under clause 7.5, 9.2 or 9.3 does not fit any of those grounds, and even where a ground does fit, the application has to reach the Deputy Commissioner within six months to a year of the instrument’s date under section 48.

Formalising the cancellation makes this worse before it makes it better. If you and the promoter go on to sign a registered deed of cancellation, that deed is itself a fresh stamped instrument under Article 14 of the Act’s Schedule – carrying the same duty as the original agreement if the cancellation has the effect of reconveying property already conveyed, or duty on the property’s market value at the date of cancellation if the original instrument was a conveyance on sale. Either way, that is a second bill, not a refund of the first. Treat stamp duty as gone once you have registered.

If the bank has paid the builder

Buy under a construction-linked plan with a home loan, and the bank does not hand the money to you; it pays each released instalment straight to the promoter, against your mortgage on the flat. RBI’s rules for banks describe this structure as a “tripartite agreement between the bank, the builder and the buyer of the housing unit,” most visible in 80:20 or 75:25-type schemes, and require an ordinary loan’s disbursal to stay “closely linked to the stages of construction” rather than paid upfront – precisely because of what a buyer is exposed to if something later goes wrong. Our home-loan guide covers how these disbursals work stage by stage.

Cancelling the flat does not cancel the loan. What the bank has already disbursed is still a debt you owe it, now secured on a flat you no longer intend to buy, so under the tripartite paperwork a refund from the promoter is applied to that lender first – closing out or reducing what was disbursed and releasing the bank’s charge on the flat. Only what is left, if anything, reaches you. If a construction-linked loan is part-disbursed and you are weighing a cancellation, ask your lender in writing what it has released to date and how the promoter’s refund would be routed, before you serve a cancellation notice, not after.

Before you sign a cancellation

• Work out which stage you are in: no agreement yet, or a signed and registered one. What is forfeited, if anything, depends on it.
• Read clauses 7.1, 7.5, 9.2 and 9.3 of your own agreement, not just Annexure-A’s wording – a promoter fills in details such as the number of consecutive defaults that trigger clause 9.3.
• Get the cancellation and the 60-day refund clock in writing, with the date the notice was served and the date the refund becomes due.
• Check whether the credit-note window is still open for the GST inside your refund; if not, plan for the CBIC circular route and the documents it needs.
• Do not expect stamp duty back, and ask what fresh duty a cancellation deed will carry before you register one.
• Tell your lender before you serve notice, if a loan is part-disbursed, and get its payoff figure in writing.