GST (goods and Service Tax) was introduced as an indirect tax chargeable on all supply of goods and services. In addition to this, GST is also made applicable to the supply of service in relation to the construction of buildings. However, the applicability of GST is not on completed constructions. In this article, we discuss the applicability of GST on completed flats in detail.

Applicability of GST

As per the current GST law, construction of a civil structure, complex, building intended for sale is considered a taxable service and liable for GST. However, GST is only applicable to the construction service if any part of the consideration is received before issuance of completion certificate. This simply means, GST is not applicable if the entire consideration is paid after the issue of the certificate of completion by a competent authority or after its first occupancy, whichever is earlier.

Hence, if you purchase a property directly from a builder and you pay any part of the consideration to the builder prior to the occupation, GST would be payable on the amount paid. On the contrary, if a property is purchased from the owner in a secondary transaction, then there would be no application of GST as the payment is being made after issuance of completion certificate or first occupancy.

GST on Completed Flats

Cases, where completed flats are purchased in a secondary transaction, Goods and Service Tax, would not be applicable to such sale transaction. Therefore, it is important to note that GST is applicable only on payments made to a builder for supplying the construction services. Hence, where completed flats (ready to move) or used flats are purchased, the question of supplying construction service does not arise. Thus, GST would not be applicable on purchase of completed flats.

The applicability of GST on the immovable property depends upon the issuance of a certificate of completion by the competent authority. If the certificate of completion for a particular property is obtained before making any payment to the seller, the same would be considered as a sale of ready-to-move-in property and not a supply of goods or services. Hence, no GST would be applicable to the sale of completed flats.

GST on flats or apartments purchased Under CLSS

The  (CLSS) (Credit-Linked Subsidy Scheme) is introduced to provide affordable houses to the weaker and the lower sections of the society. In order to be eligible for the scheme, the maximum annual income of beneficiaries is up to Rs 18 lakh. The rate of GST on houses under the scheme will be 8% and not 12%.

Credit-Linked Subsidy Scheme (CLSS)

The property could be purchased under CLSS at the rate of 8% of GST as follows:-

  •    Lower Income Group (LIG)
  •    Economically Weaker Sections (EWS)
  •    Middle Income Group 1 or Middle Income Group 2  under the Housing for All  Mission
  •    Pradhan Mantri Awas Yojana (PMAY Urban)

Anti-Profiteering

As per the section 171 of the CGST Act, if there is a reduction in GST rate on the supply of goods or services then the benefit of input tax credit should be passed on to the buyer by the corresponding reduction in prices. However, if the seller fails to reduce the prices after reduction of GST rates, the matter will be referred to the Anti-Profiteering Authorities.

More Under Goods and Services Tax

10 Comments

  1. siraj says:

    Please advise me, if we purchase Bank auctioned Flats, still we have to pay GST and how it will treat first or second owner.
    please share your valuable feedback.

  2. Mukesh says:

    1)Who issued completion certificate in cities?
    2)Is architectures complition certificate valid?
    3) if I booked property after submission of proposal for complition certificate and before issuanc of certificate then gst attracts?

  3. deepak says:

    sir ,i purchased a flat on nov 2018 .but builder demand GST 12% .BUT COMLETION CERTIFICATE on oct 2018.how much gst paid to builder plesae informe

  4. Vinod says:

    How Govt recover gst on unsold flats as buyer don’t have to pay gst on completed project?
    Do builder have to pay gst on unsold inventory before getting completion certificate?

  5. RAMA KRISHNA says:

    Namaste,
    I have purchased an under constuction flat for 24 lakhs (2L self+ 22L loan) which is registered on 25th January, 2018. The building didnt get occupancy certificate till this day. Builder has taken advance of Rs.2 lakhs towards payment of GST. For 24 Lakhs he calculated Rs.2,88,000/- @12% and asking for remaining balance. As I came to know that GST rate has been reduced as per 34th GST Council. How much GST rate is applicable for me? How much I need to pay. If i must pay 12%, how can I get any benefit after paying. Can I get some thing return as per the law? Please suggest me. Im not in position to more money as my financial back ground very weak.
    Thank you all.
    Regards
    RAMA KRISHNA

  6. PROF SURYAWANSHI SHIVAJI says:

    Sir,
    I have made agreement to sale with the builder in month of April 2018 and now that site of construction is been completed and corporation has issued Completion certificate in last month.Builder is asking to do the (registry) sale deed and also asking to give GST @ 12%. whether this type of GST is applicable after Completion.
    Please guide me. I will be very thankful to you for guiding me in matter.

  7. vivek says:

    Hi,
    case 1:
    I booked flat on 1st Jan 19 and paid 20% amount
    I entered into agreement on 15 Jan
    completion received on 1st feb
    Should i pay GST on 80% amount
    How can i avoid GST in such case. please support with section and rule

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