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GST on Sale of Land & Building

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As per S. 7 of the CGST Act, 2017, GST is applicable on supply of goods or services. Schedule II of the CGST Act, 2017 provides the activities which are to be treated as supply of goods or services. Schedule III provides activities which are neither supply of goods nor supply of services.

As per Schedule III of the CGST Act, 2017, Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

Para 5(b) of Schedule II of the CGST Act, 2017 provides that 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.

From the above, two conclusions can be chalked out:

• That the construction of a complex, building, civil structure intended for sale to a buyer will be considered as supply of a service if any consideration is received before issuance of completion certificate & accordingly, liable for GST.

• That when the whole of the consideration for a property is paid after issuance of completion certificate or first occupancy, whichever is earlier, No GST is applicable.

Hence, GST is not applicable on ready to move in or completed property. It is applicable on under constructed property.

Rate of tax applicable on the purchase of under construction residence or commercial properties from a builder involving transfer of property in land or undivided share of land to the buyer, is 12% with full ITC. 

For calculating value of supply for under construction properties, 1/3rd of the total amount shall be deemed to be value of land or undivided share of land supplied to buyer. So, GST @ of 18% (Construction services) shall be payable on the 2/3rd of the value of the property.

Now, on 24.02.2019, GST Council proposed to reduce tax rates for under construction flats @ 5% which is currently @ of 12%. For Affordable housing, it is proposed to be @ of 1% without ITC. It is to be made effective from 01.04.2019. Affordable housing A residential house/flat of carpet area of upto 90 sqm in non-metropolitan cities/towns and 60 sqm in metropolitan cities having value upto Rs. 45L.

To conclude, units that have received a completion certificate do not attract any GST. It can be further observed that No GST will apply when rental income is earned by letting out their properties for residential use. However, those who have given their premises on rent to be used for commercial or industrial purposes will have to pay an 18 per cent tax in case they are earning over Rs 20 lakh annually.