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.
There is also no clarity with regard to the treatment of joint development projects.
As per a law firm, in Delhi. “ GST is not applicable on sale of a plot of land or an apartment, so, 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.
GST rate on under construction property will be classified as below:
If the builder got the completion certificate before you purchase it, then it is considered as ready-to-move-in property. Hence, in such cases, there is neither supply of goods nor service. Therefore, no GST on such properties.
If you paid the full sale consideration amount before the applicability of GST (i.e 1st July 2017), then GST will not be applicable in such situation.
However, as the transaction was done before the implementation of GST, service tax @ 4.5% has to be payable by the buyer in this regard.
If you paid the part of sale amount to the builder before 1st July 2017, then GST will not be applicable to such part payment.
Because as the transaction was done before the implementation of GST, service tax @ 4.5% has to be payable by the buyer in this regard on such part payment.
If you paid the sale amount to the builder after 1st July 2017
As the transaction happened post-GST implementation date, in such transactions GST will have to be payable by the buyer.
The applicable GST rate for under construction flats, properties or commercial properties in land or undivided share of land is currently at 12% with full Input Tax Credit (ITC).
The actual GST rate for under construction flats, properties or commercial properties is 18%. However, 1/3 of 18% is deemed as the value of land or undivided share of land supplied to the buyer of the property.
GST will not be applicable for ready-to-move-in properties.
Effective from 25th January 2018, if you purchased the property under the Credit-Linked Subsidy Scheme (CLSS), then the applicable GST rate will be 12%. The effective rate of 8% after deducting one-third of the amount charged for the house towards the cost of land.