AuthorAbhijeet Kaur
Prior to implementation of GST regime, three types of indirect taxes were involved i.e Central
Excise duty , VAT, Service tax for the construction of complex, flats and buildings. The Central
Excise and the VAT charged was ultimately borne by the consumers which ultimately resulted in
the increase in the price of the real estate project. and the taxes had to be paid on the sale of
the Under Construction Properties. After the GST regime has come into force , the indirect tax
has to be studied under three heads namely:
a. Completed Projects
b. Projects under Construction
c. Future projects i.e projects to be launched post GST
Completed Projects
For the projects that are completed and had obtained the completion certificate , no GST is to
be levied. It is because sale of building is treated as an activity or transaction which shall be
treated neither as a supply of good nor a supply of service as per Schedule III of CGST Act,
2017.
Projects under construction
The projects booked for GST implementation i.e the under construction properties, 12% GST is
levied. But for homes purchased under Credit Linked Subsidy Scheme under this category, the
GST is 8% (after cutting 1/3rd amount towards cost of land). Prior to GST, the indirect tax used
to be about 5.5% for the promoters that included 4.5% Service tax and 1% VAT. Now since the
GST is 12%, it had led to the increase in the cost of the property.
Other important issues are :
1. Construction of flats, complex, buildings have a lower incidence of GST as compared to a
plethora of central and state indirect taxes .
2. GST removed the cascading of input taxes on constructed flats, complex etc. which was
initially paid @12.5% on construction material as Central Exice duty along with VAT @ 12.5% to
14.5% across different states. Construction materials also suffered Entry tax levied by the
States.
3. Prior to GST, the taxes such as Central Excise , VAT, Entry tax was borne by the builders
which they passed on to the customers as a part of price . Since it formed a part of the cost of
the construction of houses, flats etc., it was not visible to the customer.
4. 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.
GST Rates for some goods relating to construction:
Sand 5%
Sand and Fly ash bricks 12%
Steel 18%
Paints 18%
Marble and granite 28%
Cement 18%
Future Projects
For the projects that launched after the implementation of GST, the rate will be 12% with full
benefits of input tax credit availment in the hands of the developers. Rate of tax on input
materials such as steel , cement shall be same as mentioned above and whereas output tax
liability shall be 12% only. Additionally stamp duty liability has not been subsumed in the GST
and it shall be parallel to GST being levied. It will continue to be applicable on both completed
properties and under construction properties as was the case with pre-GST regime.
GST with respect to various Real transactions :
a. On resale of the properties : N/A
b. On land purchase and sale : N/A because sale of land is neither sale of goods nor services
as per the Schedule III of CGST Act, 2017.
c. Works Contract : 18%
d. Composite supply of works contract : 18%
e. Composite supply of works contract to Government Authorities : 12%
f. Composite supply of works contract - for use by general public : 12%
g. Composite supply of works contract - Affordable housing : 12%
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