• GST on development charges

We bought Villa on 2-october-2015 and paid 12.2 lakh within next 5 months. 
As no development from builder later on October 2017 land got registered for 7.5 lakh,with home loan Total villa cost is 61 lakh and divided as follows 
Land cost 11 lakh 
Land development 18 lakh 
construction cost 32 lakh 
Please let me know what all components will contribute to consider gst?
 Before gst date , do the person has to pay service charge for 12.2 lakh now? 
brief on difference between land development charges and infrastructure development charges which is 3 lakh extra(IDC)
land owners are Sham and Ram
Builder is Raj developers where again Ram and sham are partners 

land owners (ram & Sham ) are into unregistered Joint land development with Raj developers.

Please say what is correct for gst ?

11+18+32=61*12%
or
11+32=43*12%
or
32*18%=
or
32+18=50*12%

Thanks
Asked 4 years ago in Property Law
Religion: Hindu

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6 Answers

where the payments were made prior to the GST coming into force, the builder would have already recovered the service tax and VAT, applicable on such payments made if not then he had to suffer same from his pocket on any service tax notice if he has not submitted with he department.

The rate of GST on an under-construction property is 18 per cent. However, one-thirds of the value of the consideration is presumed to be the value toward cost of the land, in cases where the interest in the land is also supposed to be transferred. So, effectively, the GST rate, in such cases, is 12 per cent, on the entire agreement value.

So you have to pay gst of 12 percent on complete amount of 61-12 that is 49 lakh. Since it is the joint developer agreement under which you are buying the villa not independent land and then taking construction services.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

Hello,

Since you are making the payment to the builder therefore GST will be applicable on any payment made by you to the builder after the implementation of the GST i.e., after July 1, 2017.

regards

Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0

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.

T Kalaiselvan
Advocate, Vellore
78059 Answers
1543 Consultations

5.0 on 5.0

You have come out with your calculation but do you think that the builder will agree for this?

No doubt the GST is to be paid as applicable but how do you say that you cannot initiate any legal action against the builder for his inordinate delay in starting the construction even though he started taking money for this some two years ago and also for his atrocious and exorbitant demand for money by citing some clauses no and then?

It is not necessary that you may have to agree to all the clauses he may introduce as and when he feels like, and also if the clauses are arbitral you can very well protest, agitate and express unwillingness to pay or pay under objection and give a legal notice demanding justification or to drag him to the consumer court for his unfair trade practice.

T Kalaiselvan
Advocate, Vellore
78059 Answers
1543 Consultations

5.0 on 5.0

To teach builder lesson and recover damages issue him a legal notice for compensation for delay if he refuse than file a complaint in consumer forum to get damages for delay there are number of judgements to effect.

Also in case of housing project no separate calculation for each head of land, development construction can be there in gst it is taxable on agreement value mentioned in above answers

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

If builder has refused to carry on construction for period of 3 years you can cancel your agreement and seek refund of money with interest

2) if builder refuses to do so file complaint before consumer forum and seek refund of money paid with interest

3) also claim litigation costs and compensation for mental torture undergone by you

Ajay Sethi
Advocate, Mumbai
87901 Answers
6207 Consultations

5.0 on 5.0

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