We Indians are going to witness the biggest tax revolution ever in independent India. The long awaited GST will be rolling out on 1 July 2017. Though everything is set for GST there are certain issues that require attention. One of such is GST on immovable property.
In this article I will take you to certain provisions of the act which will help us understand the tax ability of sale of immovable property in GST.
First of all let us see what se movable and what is immovable. Both the definition has not been defined in the act. So we have to take reference of various case laws that we have in excise regime that have defined movable. Like Supreme Court in case of Municipal Corporation of greater Mumbai held “if article can be moved to another place as such without any dismantling then it is movable”. In Sirpur Paper Mills Ltd. [1998 (97) ELT 3 (S.C.)] apex court held that “if a machine is embedded to the earth only to ensure wobble-free functioning, that would not be considered as immovable”. And we know everything which is not movable is immovable.
Definition of goods as per GST act says that “goods mean every movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply”, so it is clear that goods does not include immovable property.
But definition of service in the same act says “Service means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged”
Looking to both the definition one can conclude that definition of service include Immovable property. But will tax be levied on sale of immovable property? Is our question. Now let’s see scope of supply as GST is levied of supply of goods or service or both.
Sec 7 of the GST act says supply include all form of supply of goods or service or both such as sale, barter, exchange lease, renting etc. and also include activities specified as supply of goods or supply of service as per schedule II GST act. But sec 7 does not treat activities listed in schedule III of the GST act, as supply of goods or service or both.
As per paragraph 5 of schedule III activities or transaction relation to sale of land and subject to clause b of paragraph 5 of schedule II, sale of building shall not be treated as supply.
Clause b of paragraph 5 of schedule II reads as “construction of a 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”.
Now it is quite clear that sale of land will not attract GST and sale of building after obtaining completion certificate or after its first occupation will not attract GST. Sale of building before its first occupation or before issuance of completion certificate will be taxed under GST, and shall be treated as supply of service. But what is the meaning of Building? What will happen on supply of other immovable property which is not covered under the definition of building?
Building is nowhere defined in the act. As per oxford definition of building is “A structure with roof and walls” This definition has very limited scope and will raise various litigation, like, is mobile tower a building? It doesn’t have roof and walls. If it is not a building then it will be taxed in case of sale and will be considered as supply of service. Same is the case of sale of big plant and machinery, which have to be dismantled for moving.
Next issue is if this supply is supply of service then under which code we should classify them? Current service account code and proposed codes for classification of service don’t have any code to consider such type of supply. So can we argue that this supply is not taxable? But rate schedule for services issued by council contain a residuary entry which says “All other service not specified elsewhere”.
As of now supply of any immovable property which is not a building will taxed under GST and will be treated as supply of services.
Disclaimer:
These are the view of the author himself. In no case this should be treated as consultancy. Readers are advised to get professional advised before acting.
Author Bio
We are an irrigation infrastructure Company wholly owned by a State government.We build and operate irrigation structures like barrages which comprises of a Civil Structure, Gates made of steel, and gate hoisting machinery.
The government has ordered transfer of this barrage to another government Irrigation infrastructure company with in the state for consideration at book value.
Does the above transaction attract GST, if so what is the rate and under which classification and Code.
Hi Sir. I have purchased house in the year of 2016 and builder had done the sale deed (document) of the land on 30th June, 2017. Now, builder asking me to pay the GST for house whereas the document has been done of land, so as per GST clause land will not attract any GST. Please provide me your valuable guidance on the same.
I booked a flat, signed and registered agreement in Thane in December 2010, for total value of Consideration ( Property Value ) of Rs. 6677500/= Till 15/06/2017 I paid Rs.3739428/= to Builder in installments as Property Value and he collected Rs.110102/= as Service Tax dues.
Now on 11/06/2018, the Builder has raised a demand for Rs.267770/= as an installment towards Property Value and Rs.32052/= as a GST payable as per Installment due. ( Details of the Payment of Tax is shown as GST due = 142154=00. GST received till date + 110102=00 and GST payable as installment due = 32052=00 ).
GST was introduced by GOVT. in July 2017.But I do not know when it was made applicable and what is the rate applicable on Sale of Immovable Property. What is the basis applied for charging me Rs.32052=00 GST for an installment of Rs. 267770=00.
Would you please help me knowing the whole gamut.
With Regards,
Arvind.
Hi,
I’ve purchased a flat which is under construction.
I’ve paid 70% of the amount. Now the builder is asking me to pay 1% TDS which would be later adjusted while paying remaining amount.
My doubt is let say I’ve paid 60 lakhs till now which includes 12% GST too.
Should the 1% TDS be calculate on the amount including GST (eg:60 lakhs here) or should I deduct the GST amount and pay 1% TDS on the remaining amount.
Priyesh ji,
I booked a flat in 2012. UDS registration and construction agreement are done before July 1, 2017.
Flat is not yet handed over.
when I am paying my milestone payment now, builder is asking for 12% GST.
Is it against section 171 of the GST law?
What are the options in front of me.
Please advise.
Builder is asking to start registration process after completion, as under construction flat attract more GST than ready possession. Is the GST for ready possession and under construction flat is different? Can you Please explain this scenario? and what would you suggest when it is beneficial for me to purchase the flat.
Can you please explain what happens when there is a PLC (preferential location charge) on a land that I am buying? Am I supposed to pay GST on PLC on land? I thought PLC on land is also (in effect) price of land and should not have GST on it. The seller(developer) is asking me to pay (a) 18% tax on the PLC part of the land cost, (b) 18% on the club-house cost and (c) 18% on MPEB charges (electicity i.e.). I am from Indore,M.P., where the land is also located.
Can you please explain what happens when there is a PLC (preferential location charge) on a land. Am I supposed to pay GST on PLC on land? I thought PLC on land is also in effect price of land and should not have GST on it.
Priyesh ji pl see your last comment in the article. Some mistake make your conclusion in the article ambiguous. Will you please correct and state again your conclusion.
Sir, If a builder mentions cost of flat, cost of car parking, Club Membership, Deposits to Electricity & WaterBoard, Documentation Charges seperately in the Sale Agreement whether GST is applicable on all components excluding land cost
Dear Experts,
GST applicability on land developers. Person, who purchases land and he develops the land with an infrastructure such as Building, Warehouse, drainage system, roads and plantation of plants as per the instructions given. After this development of the land, He sales developed land. What is the provisions/rules under GST applicable to this kind of business ?
if manufacturer give fabrication contract to contract, payment will be only on job work charges which manufacturers and contract both are different states. Which tax is applicable IGST or CGST/SGST
i have a question in my mind if a person is engaged in real estate business and he is buying the land and sold them and pay commission to the agent. Tho kya wo GST payb karega Commission pe. or kya usse client se jo usse land purchase karega use GST Charge karega or Is case mai input tax credit milega
Dear, Sir i am planning to sell my land(2017) the sale Value Rs 40,00,000, but i have bought land Rs 15,00,000 in Year of 2004, in this case how much i have pay Capital Gain Tax please for selling of my land.
SIR
I WANT TO KNOW THAT IF I HAVE ALREADY TAKE COMPLETION CETIFICATE BEFORE APPLICATION OF GST AND NOW I WANT TO SALE FLAT IS GST IS APPLICABLE OR NOT
Dear Sir,
I have a company (xxxx pvt. ltd.) and the said company has real estate buisness. In this case 50% of total amount had received before applicable of gst. against flat (In Complete Condition). and rest of amount will receive at the time of registry or after applicable of gst. So please guide us if gst will applicable on said firm or whatever will applicable?
Kindly Explain on urgent basis.
If buying a property on resale but it’s still under construction … Existing want to transfer the property what will be the tax implications … wither the buyer has to pay gst again and previous buyer has pais taxes … Need I fo
Dear Sir, it seems that there is bit of contradiction in the article regarding sale of land. You explained that land is not subject to GST, why conclusion includes ‘all immovable property’? please clear this off…
What will be GST rate for contractor who sale resident tenament block of rs.26 lac ?
sale of immobileproperty rate of tax in gst
I have booked a house from a builder in Apr-15 and paid 25% of total consideration as advance and entered into an agreement. Remaining 75% of total consideration will be paid at the time of possession of completed house with all fittings and fixtures. Possession of the completed house is likely to be given within 2-3 months.
You are requested please clarify that GST will be applicable on me at the time of taking possession after implementation of GST? Service tax is not applicable on me if I will take possession before 30/06/17.
Kindly advise.
Can u explain that condition in which advance is received on 10th July 2017 , and buiding completion certificate is received on 20 th july and registry is execute during August 2017 with balance considertaion is received on the date of registry , so whether amt received on date of registry attracts GST ? and second situation in which completion certificate is not received in that condition amt received on the date of registry attracts GST ? As in previous Act STAX is applicable only on the advance received
Sir, whether exemption wide notification dated 13/6/2017 applicable to fy 16-17
as per honourable finance minister builder give benefit to purchaser on cost on I T C basis in G S T please clarify how builder property /flat sale less price of guideline rates as per INCOME TAX ACT?
Very well written and explained in context to definitions of other acts not referred in GST. Good article. Request others to read it.
Sir,
Thanks for giving clear understanding on subject.
Having few doubts :
1. Usually builder prepares two contract one is for Land & another is construction agreement. Do we need to pay GST on Construction Agreement only Before getting completion certificate?
2. Is same mechanism replicated ?what is being following up for charging Service tax i.e Service tax is being charged on abated value. Said abatement is towards value of Land….Is same principal would be followed in GST?
3. If any amount paid after getting completion certificate..than will it be taxed under GST?
Can you please advise provision in GST for any tax on sale of agricultural land in rural area
Building – Wikipedia
en.wikipedia.org/wiki/Building
A building or edifice is a structure with a roof and walls standing more or less permanently in one place, such as a house or factory.
Hence , sale of flat shall be treated neither as a supply of goods nor a supply of services.