By TIOL News Service

NEW DELHI, DEC 14, 2017: The CBEC today clarified the applicable rate of GST on under-construction as well as ready-to-move-in property. What will attract GST is the construction of a complex, building, civil structure or part thereof, intended for sale to a buyer, either wholly or in part, except where the entire consideration was received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever was earlier.

The CBEC clarification states that the sale of ready-to-move-in or completed property would not attract levy of GST. Hence, GST will be levied only on under-construction property.

Firstly, w.r.t. property on which completion certificate had been issued, the clarification states that no GST would be levied on ready-to-move-in or completed property, as per the Paragraph 5(b) of the Third Schedule to the CGST Act, 2017. Secondly, w.r.t. under-construction property, the clarification envisages two circumstances -

i) where the entire amount of consideration for the property was paid to the builder of such property before July 01, 2017, no GST would be leviable. This would be even though the construction was completed after July 01, 2017. However, such transaction would attract Service Tax @ 4.5%, considering that as per the Service Tax (Point of Taxation Rules), 2011 where the invoice was raised or payment was made prior to the appointed date under GST, the point of taxation would arise before the appointed day. Thus, such transaction would attract levy of service tax and not GST;

ii) where part amount of the consideration for the property was paid to the builder of such property, before July 01, 2017, Service Tax @ 4.5% would be leviable on the invoices raised or on consideration paid before July 01, 2017. However, any payment made by the property buyer to the builder on or after July 01, 2017 against invoices issued on or after July 01, 2017 would attract GST @ 12%.

Lastly, the clarification also makes it clear that in case of purchase of under-construction residential or commercial property, from a builder, involving transfer of interest in land or individual share of land to the buyer, the effective rate of GST for such purchase would be 12%, with full Input Tax Credit. It is also clarified that GST would be levied @18% on 2/3rd of the amount of the property, whereas 1/3rd of the amount was deemed to be value of land or undivided share of land supplied to the buyer. It is further clarified that consideration amount which did not constitute transfer in land or undivided share of land as part of the consideration, for instance, construction services provided by a sub-contractor to a builder, would attract levy of GST @ 18%, with full Input Tax Credit.