WB AAR has ruled that 1.5% GST must be charged from flat buyers except in one condition

West Bengal’s Authority of Advance Ruling (AAR) has issued a new ruling on charging the GST rates in the construction sector. As per the ruling, a builder can charge GST at 1.5% to its flat buyers, except if the entire consideration is received after issuing the completion certificate. 

The advance ruling applicant, in this case, is M/s Kayal Infra, who was constructing property at the Ghosh Hat, Madhaitala, P.S. & P.O. Katwa under Katwa Municipality, located at the PurbaBardhaman district of West Bengal.

The applicant wanted to know whether the property presently under construction classifies as a Residential Real Estate Project (RREP). The term is defined under the Central Tax (Rate) Notification No. 11/2017 on 28th June 2017 and was amended vide Central Tax (Rate) Notification No. 03/2019 on 29th March 2019. 

It also wished to know if, otherwise, the said the under-construction property could be referred to as an affordable residential apartment as per the same notification. The applicant also wanted to know the GST rate to charge for the sale of flats in this project. It put forth two options- 

• Option 1: 1.5% (i.e., 0.75% each of CGST and SGST), minus 1/3 rd towards the land value
• Option 2: 7.5% (3.75% each of CGST and SGST), minus 1/3 rd towards the land value

The quorum of Brajesh Kumar Singh and Jyoti Banik ruled that the project is a Residential Real Estate Project (RREP). Further, these apartments in this project qualify as affordable residential apartments as defined under the notification given above.

The builder must charge and collect GST at 1.5% from customers for flats sold in the said project unless they collect the complete consideration earlier from the competent authority issuing the completion certificate or upon its first occupation.

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