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Rate of tax on selling of flats

CA Sathish Reddy (Articles) (352 Points)

16 August 2017

GOOD AFTERNOON ALL,

I WANT TO PURCHASE THE FLAT AND ALSO ADVANCE 50K HAS BEEN GIVEN TO SELLER

SELLER ASKED ME TO PAY GST @ 18%, BUT I HEARD THAT THA RATE OF TAX @ 12%.

WHO IS CORRECT??

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6 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 16 August 2017

12% when cost of land is inclusive,

18% GST over construction value without land cost !!!

CA Sathish Reddy (Articles) (352 Points)
Replied 16 August 2017

Thank U Sir

But Builder asking 50K more to change the name of Building Owner to my name

I agreed to pay 50K but he is asking to pay GST 18%

IS THERE ANY PROVISION FOR RATE OF GST FOR CHANGING THE NAME OF OWNER OF A BUILDING??

PLEASE LET ME KNOW

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 16 August 2017

Actually, it is not a service in terms of construction of building. But such things are not written in any books, and if opted can be solved in consumer forum. Generally receipts are not provided for such payments, so how can question of GST arise........

Faraz (Student) (236 Points)
Replied 16 August 2017

CA Satish Reddy Ji, here is the exact provision and following suggestion.

If you buy a flat and entire consideration is payed after it has been completely constructed and completion certificate is issued by local municipality, or has been occupied earlier, it is pure sale of immovable property and it is out of scope of GST. Kindly refer entry 5 of Schedule III to CGST Act.

However, if a part of the consideration, advance or otherwise, is payed before issue of completion certificate, it is deemed supply of service under entry 5(b) of Schedule II to CGST Act.This service is taxed at 9% CGST + 9% SGST = 18%. However, there is a provision for reduced valuation. 1/3 of the consideration is deemed as cost of land and only 2/3 of the consideration is taxable. The effective rate becomes 18% * 2/3 = 12%. So if you pay a consideration of 50Lakh, you have to shell out GST of 6Lakh.

My suggestion is that you either into an informal agreement with the builder that you will pay the consideration once the certificate is issued. If the builder insists that he needs money to construct, you can enter into an interest free loan agreement. Pay the amount as a loan. Once the flat is constructed, receive a cheque from the builder as repayment of loan. Pay the repaid amount as consideration.

Now that I have read your second reply, I'm assuming that you are buying a flat which was already occupied by someone else. This sale is outside the scope of GST. Kindly refer entry 5 of Schedule III to CGST Act. The fee that he is charging you is membership transfer fee. This fee is charged by housing societies to alter the member's name in its books and for other registry documents. Kindly note that every co-operative housing society is regulated by its bye-laws and Co-operative Society Acts of its State. Obtain a copy of the bye-law and go through the relevant statutes. Dont pay any artbitrary fee. You are required to pay GST on such charges at 18% under residuary clause.