Tax Query: Is GST Applicable on Residential Apartment Under Construction?
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1. I have purchased a residential apartment, currently under construction by the builder. Is GST applicable on this residential property and at what rate?

Ans: If a residential property has been purchased while under construction, GST will be applicable on the same. The rates with effect from 1st April 2019, on new residential projects and ongoing residential projects which have opted for the revised rates, are:

Rate Projects it applies to w.e.f. 1st April 2019
1% – New affordable housing projects*

– Ongoing affordable housing projects opting for the revised rates#

5% – New housing projects other than affordable housing projects

– Ongoing projects other than affordable housing projects opting for the revised rates#

– Projects with commercial space <15% of total carpet area

*Affordable housing projects are housing projects with carpet areas of up to 60 sq. m and 90 sq, m. in metropolitan and non-metropolitan areas respectively, with the gross amount charged by the builder not exceeding Rs.45 lakh in either case.

#Previously, the rate was 8% on affordable housing projects and 12% on other than affordable housing projects, with input tax credit available.

There are certain conditions to be followed for builders to charge GST on the revised rates:

  1. ITC cannot be claimed
  2. A minimum of 80% of the total value of inputs and input services should be purchased from registered suppliers. However, the following services used while constructing residential properties will be excluded for this calculation:
    • The grant of developmental rights
    • Long term lease of land
    • Floor space index
    • The value of electricity
    • The value of high-speed diesel
    • Motor spirit and natural gas

The builder will need to pay GST at the rate of 18% on a reverse-charge basis on all inward supplies, to the extent it falls short of 80% of purchases made from registered suppliers. GST on cement will need to be paid at a rate of 28% (if purchased from unregistered persons).

It is important to note that GST will not be applicable on ready-to-move (RTM) properties, for which the completion certificate has been issued. This is because the sale of a property is neither treated as a supply of goods or supply of services under Schedule III of the CGST Act, 2017.

Also Read: Tax Query: Can I claim deduction for expenses from commission income?

2. If I have paid stamp duty on my residential property, will GST still be applicable?

Ans: Stamp duty is a duty levied by the State Governments on property transactions and legal documents. GST is an indirect tax levied by the Central Government, applicable on almost all goods and services in India. Both are governed under different laws. 

Stamp duty will be applicable on both completed properties and under-construction properties, as was the case in the pre-GST regime. Paying stamp duty does not exempt the buyer from paying GST.

For any clarifications/feedback on the topic, please contact the writer at athena.rebello@cleartax.in 

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