Press Release on Effective GST tax rate on complex, building, flat, etc
The government has issued a press release dt .08th December 2018 to clarify the Effective GST tax rate on complexes, buildings, flats,s, etc.
The government has brought to the notice of buyers of constructed property that there is no GST applicable on the sale of the complex. Also, there is no GST on building and ready-to-move-in flats on sales of such property, where such sale takes place after issue of completion certificate by the competent authority.
Further, it says GST is applicable on sale of under construction property or ready to move-in flats where completion certificate has not been issued at the time of sale.
The Effective GST rate of tax and credit available to the builders for payment of tax are summarized in the below table for pre-GST and existing regime.
pre-GST and Existing Rates
| Period | Output Tax Rate | Input Tax Credit details | Effective Rate of Tax | |
| In Pre-GST regime | Service 4.5% VAT: 1% to 5% (composition scheme) | Central Excise on most of the construction Materials was: 12.5% VAT: 12.5 to 14.5% Entry Tax: Yes | No input tax credit (ITC) of VAT and Central Excise duty paid on inputs was available to the builder for payment of output tax, hence it got embedded in the value of properties. Considering that goods constitute approximately 45% of the value, embedded ITC was approximately 10- 12%. | Effective pre-GST tax Incidence was: 15- 18% |
| In Current GST | Affordable housing rate is: 8%, Other segment: 12% after 1/3rd abatement of value of land. | The Major construction materials, capital goods, and input services used for the construction of flats, houses, etc. attract GST of 18% or more. | The ITC available weighted rate is approximately 8 to10% to the builders. | The Effective GST incidence, for affordable sector and for other sector has not increased as compared to pre- GST regime. |
Rates on Housing Projects
The Housing projects at an affordable rate such as Jawaharlal Nehru National Urban Renewal Mission, Rajiv Awas Yojana, Pradhan Mantri Awas Yojana, or any other housing scheme of State Government, etc., attract GST Tax of 8%.
For such projects, after setting off input tax credit, the builder or developer in most cases will not be required to pay GST in cash as the builder will have enough ITC in his books of account to pay the output GST.
For projects other than the affordable sector, it is expected that the cost of the complex/ buildings/ flats is not gone up due to the implementation of GST.
Therefore, Builders are also required to pass on the benefits of the lower tax burden to the buyers of property by way of reduced prices/ installments, where the effective tax rate has come down
Previous Article in this regard
On 14th December 2017, the Central Board of Excise and Customs(CBEC) officially tweeted and clarified, about GST on Under construction and ready to move in property for sale. Let us discuss this in detail:
As per GST law, construction of complex, building, civil structure or a part thereof, including complex or building intended for sale to a buyer, wholly or partly, where required, by the competent authority or after its first occupation, whichever is earlier, is a supply of service and liable to GST.
Therefore:
Sales of the building is an activity or consideration which is neither a supply of goods nor a supply of services (para 5 of schedule III of CGST Act, 2017). It is understood from the above facts that, sale of ready-to-move-in or completed property does not attract GST. GST is payable only on the under-construction property as discussed below.
1) Property for which completion certificate has been issued
Ans: NO GST is applicable on ready to move in or completed property as per para 5(b) of Schedule II of CGST Act. 2017.
2) Entire consideration been paid to the builder before 1st July 2017
Ans: There is no GST payable on such property even if the construction is completed after 1st July 2017. This transaction will attract service Tax at the rate of 4.5% because as for the point of Taxation Rules, 2011 applicable to service Tax, Where the invoice was raised or payment made prior to the appointed date under GST, the point of taxation arose before the appointed day and thus such transaction attracts Service tax and not GST.
3) Part Consideration has been paid to the builder before 1st July 2017.
Ans: 4.5% of Service Tax is applicable on the invoices raised or consideration paid before the 1st July 2017. However, payment, made by the buyer to the builder on or after 1st July 2017 against invoices issued on or after 1st July 2017 shall attract GST @12%.
4) RATE OF GST
Ans: Effective rate of GST payable on the purchase of an under-construction residence or commercial properties from a builder involving the transfer of an interest in land or individual share of land to the buyer, is 12% with full Input TAX credit (ITC). GST payable @18% on 2/3rd of the amount for the property; 1/3rd of the amount having been deemed as value of land or undivided share of land supplied to the buyer. The consideration which does not constitute transfer in land or undivided share of land as part of the consideration, such as construction services provided by a sub-contractor the builder, attracts GST at the standard rate of 18% with full ITC.
About :
This article is meant to understand GST for individual house construction, GST impact on ready-to-move flats, GST on completed flats, etc. This clarifies GST on completed flats 2018, GST on construction contracts, GST on flats under construction, and GST on plot sale.
Also, this includes GST on plotting of land, GST on ready possession flat and property, GST on ready to move flats 2018, GST on sale of factory building, GST on sale of flat, and GST on sale of immovable property.
However, we will update you about GST on the sale of land in India, GST on sale of plots, GST on under-construction flats latest news, and GST on under-construction property 8% or more in nearby future.
You will find here GST rate on completed flats, GST rate on ready-to-move flats, GST rate on the sale of immovable property, GST rate on under-construction property, how to calculate GST on under-construction flat, and how to calculate GST on under-construction property.
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