Under GST law, to levy the GST on any of the activity, the activity should falls under the definition of the ‘supply’ which defined under the Section 7 of the Central Goods and Services Tax Act, 2017 (‘CGST Act, 2017’) which inter-alia includes all the forms of the supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental or lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of the business. The definition of the supply covers all the forms of the supply including the transfer of the land.

GST on Constructed Property

Transfer of Land

It is pertinent to note that CGST Act, 2017 includes the Schedule III which includes some specific transactions or activities which shall not be treated neither a supply of the goods nor a supply of the services.

Para 5/Entry No. 5 of this schedule specifically includes the sale of the land. Therefore, the sale of the land will not subject to GST and there is no question of the ascertainment of the rate of GST on it.

Construction Activity

As per the clause 5(b) of the Schedule II of CGST Act, 2017, construction of a flat / house / complex intended for sale is a supply of service.

Para 5(b) of Schedule-II Supply of services” Construction of complex, building, civil structure or a part thereof , including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.”

Explanation: For the purposes of this clause-

(1) The expression “Competent authority” means the Government or any authority authorised to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely-

(i) An architect registered with the Council of Architecture constituted under the Architects Act, 1972(20 of 1972); or

(ii) A chartered engineer registered with the Institution of Engineers (India); or

(iii) A licensed surveyor of the respective local body of the city or town or village or development or planning authority;

(2) The expression “construction” includes additions, alterations, replacements or remodelling of any existing civil structure.

It is to be noted that if the entire consideration towards the sale of the Flat/House/complex is received after the receipt of completion/occupancy certificate from the competent authority or after its first occupation, whichever is earlier, then such activity is neither a supply goods nor a supply of Service, as provided CGST Act, 2017.

Conclusion:

GST is not applicable to the following construction-related transactions/activities:

  • Sale of ready to move in flats [clause 5(b) of the Schedule II of CGST Act, 2017]
  • Resale of property [clause 5(b) of the Schedule II of CGST Act, 2017]
  • Sale/purchase of land [para 5 of the Schedule III of CGST Act, 2017]

In all the above cases, the sale-purchase activity does not include the supply of goods or services as per the GST Act, hence no GST is applicable to these transactions. 

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Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.

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