• GST on property booked before 1/7/2017

I booked a flat in 2014 with 50-50% payment plan. 50% payment was made at the time of booking 50% were to be made at the time of final demand near possession of flat. Final demand for balance 50% amount and other charges was raised by builder on 22/03/2017. In final demand builder charged extra 5% Service tax on 50% balance amount and 15% service tax on other charges like EDC, FFC etc.
I could not make payment in time due to some reasons. Now builder has revised demand as on 16.10.2017 for balance payment but with 12% GST on 50% balance amount and 18% GST on other charges and 18% GST extra on accrued interest on account of delayed payment.

Is demand of 12% GST on 50% balance amount and 18% GST on other charges and 18% GST on accrued interest on account of delayed payment is right while at present 5% GST is applicable on new booking.

Please advise how to tackle this case with builder. Provide new notification no, if any, stating 5% GST on real estate property.
Asked 6 years ago in Taxation

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6 Answers

1.GST is applicable on our remainign amount.

2.however no penalty or additional charge would be imposed unless there is any penal clause in the sale agreement.

3. Ask for consolidated GST on the remaining amount.Breakup of GST is applicable only if the totalcosndoeration money gives and includes various break up costs of other services.

4. So send a legal notice to him and if no relief is granted then you may consider filing a case beofre the consumer forum.

Devajyoti Barman
Advocate, Kolkata
22947 Answers
498 Consultations

5.0 on 5.0


1) The demand of your builder ( 12% GST on 50% balance amount and 18% GST on other charges and 18% GST on accrued interest on account of delayed payment) is totally illegal and that the builder will be charged for Anti-Profiteering u/s171 of GST Act.

2) Also since the final demand is made by the builder on 22/03/2017,it is presumed that the construction was completed prior to 22/03/2017.

3)If at all the builder has to demand money, he has to demand money from you as per old rate(50% balance amount+Service tax) given that GST is not applicable on flats in which construction was completed prior to 01-July-2017. Also in all likelihood if completion certificate has been issued prior to 01-july-2017, and hence GST per se is not applicable at all in your case.

4) If at the builder is to recover the money, he can only claim GST on interest payable on account of delayed payment and nothing else.

5) Please refer to https://cbec-gst.gov.in/pdf/press-release/reduced-tax-liability-gstregime2.pdf dated [deleted].

6) It is amply clear from the guideline (section 6 and 7) the demand of your builder is illegal and void and that your builder is liable for punishment u/s 171 of GST Law.

Section 6 : The builders are expected to pass on the benefits of lower tax burden under the GST regime to the buyers of property by way of reduced prices/ installments. It is, therefore, advised to all builders / construction companies that in the flats under construction, they should not ask customers to pay higher tax rate on instalments to be received after imposition of GST.

Section 7: Despite this clarity on law position, if any builder resorts to such practice, the same can be deemed to be profiteering under section 171 of GST law.

Hope this information is useful.

Rajgopalan Sripathi
Advocate, Hyderabad
2173 Answers
394 Consultations

5.0 on 5.0

Builder is justified in demanding 12 per cent GST on balance payment payable by you

2) further on delayed payment on accrued interest 18 per cent GST would be payable

Ajay Sethi
Advocate, Mumbai
95373 Answers
7641 Consultations

5.0 on 5.0

GST is applicable on the balance amount that is to be paid by you, however 18% GST on accrued interest on account of delayed payment is wrong and he can be charged for Anti-Profiteering u/s171 of GST Act.

Therefore the demand raised by the builder happens to be partly wrong.


Anilesh Tewari
Advocate, New Delhi
18079 Answers
377 Consultations

5.0 on 5.0

The finance ministry, by its June 28 notification, allowed one-third of an apartment cost to be deducted towards the transfer of land or the undivided share of land and pay GST at the rate of 18% on the balance amount. The effective GST rate, thus, becomes 12%, says the government

When a buyer pays the developer, he makes a lump sum payment, which includes the cost of both construction and land. Barring exceptional cases, the price does not provide a break-up of land cost and construction cost.

a flat under construction is neither a plot of land or a building, and hence, an effective 12% GST may not pose such a problem, when a developer collects a price, it includes the cost of land, as well.

The CBEC (Central Board of Excise and Customs) and states have received many complaints that in view of the works contract service tax rate under GST at 12 per cent in respect of under construction flats, complex etc, the people who have booked flats and made part payment before 1 July, 2017, are being asked to bear higher tax incidence for payments made after 1 July, 2017," the government informed the public through multiple forums. This is against the GST law, the government said, explaining the revised tax rules under GST, which came into effect from July 1.

The situation has changed under GST. Under GST, full input credit is available for offsetting the headline rate of 12 per cent. As a result, the input taxes embedded in the flat will not (and should not) form a part of the cost of the flat. The input credits should take care of the headline rate of 12 per cent and it is for this reason that refund of overflow of input tax credits to the builder has been disallowed.

T Kalaiselvan
Advocate, Vellore
85572 Answers
2253 Consultations

5.0 on 5.0


The GST on Real estate is not at all 5% but yes since the demand was raised on 22/03/2017, he cannot increase the demand suddenly as per norms. GST is applicable for services/ goods provided after 01st July 2017.

In your case the demand was raised well before July and hence Service Tax is applicable by you. The builder cannot change the demand letter as his own whims and fancies.

Keerthiga Sharma
Advocate, Greater Mumbai
44 Answers
2 Consultations

5.0 on 5.0

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