RCM on Construction of Apartment - Real estate

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Nagaraj (Querist)
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04 February 2025 Hi,

As per the the JDA, the builder has given payment of rs. 10 laksh to landlord as non refundable security deposit and in his books as payment to landlord under profit and loss account.

Whether this amount is included or excluded for calculating 80% : 20% rule for RCM payment ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 February 2025 This payment is excluded in 80% payment calculation as it's paid towards land.

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Nagaraj

Nagaraj (Querist)
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07 February 2025 Thank you Sir,
In case if we dont meet 80% of the limit then we need to pay 18% or applaicable gst rate on RCM basis, whether RCM ITC can we utilise against future sale of flats gst liability?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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12 August 2025 Here’s the clarification on your query about RCM and the 80% rule in real estate JDA:

1. Non-refundable security deposit of Rs. 10 lakh to landlord:
Excluded from the 80% payment calculation for RCM.

Because it is considered a payment towards land (an immovable property), not construction services.

2. If the builder does not meet the 80% payment threshold to registered persons (contractors/suppliers), then:
Builder must pay GST under Reverse Charge Mechanism (RCM) on the amount paid to unregistered persons at the applicable GST rate (usually 18% for construction services).

The GST on RCM can be claimed as Input Tax Credit (ITC) by the builder.

This ITC can be utilised against future GST liability on the sale of flats or other taxable supplies.

Summary:
Security deposit to landlord = excluded from 80% calculation.

Failure to meet 80% threshold = pay GST under RCM on remaining amount.

RCM paid GST credit = allowed and can be adjusted against output GST.

Nagaraj

Nagaraj (Querist)
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21 August 2025 ITC is not eligible to claim on construction of residential flats, non affordable flats gst at 5%, when itc itself not eligible to claim how RCM input is elgible to claim becuase RCM input i pay tax under reverse charge not as forward charge both will be input for me. what is the logic behind this RCM ITC eligible but forward charge ITC not eligible

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