GST on Under Construction and Ready-To-Move-In Property – [Clarification] – Simplified
There was an ongoing debate whether GST should be charged on Sale of Building or on those property which are ready to move in or we can say it as Completed property & what shall be the tax implication on those under constructed property in which consideration has been paid or party paid before 1st July. These question was raised time to time and Now the GST department came with an Clarification.
Now let’s take a look what GST says-
As per GST Law-
Construction of –
- Complex,
- Building,
- Civil structure or a part thereof
including a complex or building intended for sale to a buyer, wholly or partly, is a supply of service and liable to GST.
Exception– where the entire consideration has been received after issuance of completion certificate.
Clarification
- Sale of building is an activity or consideration which is neither a supply of goods nor a supply of services (Para 5 of schedule III of the CGST Act, 2017).
- It flows from the above facts that, Sale of ready-to-move-in or completed property does not attract GST. GST is payable only on under construction property as discussed below-
| Property for which completion certificate has been issued |
Under Construction Property |
|
|
Entire consideration has been paid to the builder before 1st July, 2017 |
Part consideration has been paid to the builder before 1st July, 2017 |
|
| No GST is applicable on ready-to-move-in or completed property as per para 5(b) of Schedule II of CGST Act, 2017 | There is no GST payable on such property even if the construction is completed after 1st July, 2017. This attraction will attract Service Tax at the rate of 4.5% because as for the Point of Taxation Rules, 2011 applicable to Service Tax, where the invoice was raised or payment made prior to the appointed date under GST, the point of taxation arose before the appointed day and thus such transaction attracts Service Tax and not GST | 4.5% of Service Tax is applicable on the paid before the 1st July, 2017. However, payment, made by the buyer to the builder on or after 1st July, 2017 against invoices issued on or after 1st July, 2017 shall attract GST @ 12% |
RATE OF GST on purchase of under construction property
GST Rate – 18%
For Property Involving transfer of interest in land or individual share of land to the buyer –12%
Effective rate of GST payable on purchase of under construction residence or commercial properties from a builder involving transfer of interest in land or individual share of land to the buyer, is 12% with full Input Tax Credit (ITC).
[Decoding– GST payable @ 18% – 2/3rd of the amount for the property;1/3rd of the amount having been deemed as value of land or undivided share of land supplied to the buyer]
For Property that doesn’t constitute transfer in land or undivided share of land as part of consideration – 18%
Consideration which doesn’t constitute transfer in land or undivided share of land as part of consideration, such as construction services provided by a sub- contractor to the builder, attracts GST at the standard rate of 18% with full ITC
