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