Here is how GST is Charged for under Construction Properties
Dec 22, 2017 Home Trading Steps
In a recent development, the Central Board of Excise and Customs (CBEC) have issued a clarification related to the GST charges on under construction and ready to move in property. GST was implemented on July 1, 2017.
Here is how GST is charged on a property depending upon its stage.
GST is applicable on under construction properties. So if you are buying an under construction property then you are liable to pat the supposed GST on the property. As per the law, construction of a building, its complex or any part of it meant for selling to the buyer, attracts GST on the sale price. But the tax is not applicable to the property is being bought after the issue of completion certificate by the authority or after it is being already occupied that is in case of a resale property.
Under GST, 18 percent is levied on an under construction property. However, it is not charged on the entire value of the property rather it is charged on the two- third value of the property. One- third of the property value is considered to be the cost of the land. The effective GST rate on the under construction residential or even commercial properties from the builder involving the transfer of interest to the buyer comes out to be 12 percent with the entire input tax credit (ITC).
In case you have bought an under construction property that has been in the same situation since 2015 and about to get completed in 2018, then the amount paid prior to July 1, 2017, should have attracted 4.5 percent service tax rate. But the payments made after July 1, 2017, for purchasing a property will attract 12 percent of GST rate. Real estate services that do not include the transfer of land rights attract GST on the entire amount.
As per CBEC, “consideration which doesn’t constitute the transfer in land or undivided share of land as part of the consideration, such as construction services provided by a sub-contractor to the builder, attract GST at the standard rate of 18 percent with full ITC.”
Builders are expected to pass on the advantage of ITC to the home buyers as it will bring down the effect of tax on the property value But there is no GST on the completed or ready to move in projects. Often it has been seen that the developer try to lure buyers saying that there is no GST levied on certain properties. But the buyers should not fall into the trap as in any which way ready to move in projects do not attract any GST. The transfer of a completed property does not include as rendering services and thus does not come under GST.
Also as stated in media according to the CBEC's recent clarification, “Sale of a 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).” Hence this means that if you purchase a ready to move in property, then it will help you in saving money from tax.
Here is how GST is charged on a property depending upon its stage.
GST is applicable on under construction properties. So if you are buying an under construction property then you are liable to pat the supposed GST on the property. As per the law, construction of a building, its complex or any part of it meant for selling to the buyer, attracts GST on the sale price. But the tax is not applicable to the property is being bought after the issue of completion certificate by the authority or after it is being already occupied that is in case of a resale property.
Under GST, 18 percent is levied on an under construction property. However, it is not charged on the entire value of the property rather it is charged on the two- third value of the property. One- third of the property value is considered to be the cost of the land. The effective GST rate on the under construction residential or even commercial properties from the builder involving the transfer of interest to the buyer comes out to be 12 percent with the entire input tax credit (ITC).
In case you have bought an under construction property that has been in the same situation since 2015 and about to get completed in 2018, then the amount paid prior to July 1, 2017, should have attracted 4.5 percent service tax rate. But the payments made after July 1, 2017, for purchasing a property will attract 12 percent of GST rate. Real estate services that do not include the transfer of land rights attract GST on the entire amount.
As per CBEC, “consideration which doesn’t constitute the transfer in land or undivided share of land as part of the consideration, such as construction services provided by a sub-contractor to the builder, attract GST at the standard rate of 18 percent with full ITC.”
Builders are expected to pass on the advantage of ITC to the home buyers as it will bring down the effect of tax on the property value But there is no GST on the completed or ready to move in projects. Often it has been seen that the developer try to lure buyers saying that there is no GST levied on certain properties. But the buyers should not fall into the trap as in any which way ready to move in projects do not attract any GST. The transfer of a completed property does not include as rendering services and thus does not come under GST.
Also as stated in media according to the CBEC's recent clarification, “Sale of a 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).” Hence this means that if you purchase a ready to move in property, then it will help you in saving money from tax.
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