Real estate / land development / construction of residential

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 September 2017 My Cilent is having NA Land on his personal name, now he has created partnership firm with friends to develop the same for bungalows scheme. Now at the time of sale of bungalows if they enter into two separate agreement with buyer one for land and and another for construction of building.Now in this case GST on land agreement is not applicable, but in agreement of building what will be the GST rate 12 or 18 ?

Is there any other way for Tax Planning in such situation to minimize GST tax rate ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
Follow

28 September 2017 18% GST applicable on agreement for building.

Querist : Anonymous

Querist : Anonymous (Querist)

28 September 2017 Sir,
What about the rate if they plan to build a flat scheme ? And in agreement for land nothing is mentioned.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
Follow

20 July 2025 Got it! Your client has NA (Non-Agricultural) land in personal name and formed a partnership to develop bungalows. Now they want to sell via two separate agreements: one for land and one for construction. You're asking about applicable GST rates and tax planning to minimize GST.

GST on Sale of Land & Construction: Key Points
1. GST on Land Sale

Sale of land (NA land) is outside GST.
No GST is applicable on the agreement for sale of land alone.
2. GST on Construction (Building)

The construction service falls under supply of construction services.
GST rates depend on the type of construction and scheme:
Your Case: Bungalow Scheme Construction
Since your client is developing bungalows under a residential scheme, GST rate applicable on construction contract will generally be 5% without ITC, provided it meets these conditions:
Carpet area ≤ 60 sq.m for affordable housing (or as per govt notifications).
No Input Tax Credit is claimed.
Builder/developer issues proper tax invoice under GST rules.
If these conditions are not met, GST can be charged at 12% with ITC or 18%, depending on exact nature.
On Agreement Splitting: Land + Construction
This approach is legitimate — land portion has no GST, construction portion attracts GST.
Ensure separate invoicing and documentation to avoid disputes.
Tax Planning Tips to Minimize GST
Structure as Residential Affordable Housing
Qualify for 5% GST slab without ITC by limiting carpet area and project type.
Separate Agreements
Continue separate agreements for land and construction to segregate tax.
Proper Documentation
Maintain clear distinction in contracts and invoices to claim correct GST.
Explore Composition Scheme
If eligible, consider GST composition scheme to reduce compliance and tax rates.
Consult GST Expert
Tax planning depends on exact project details, partnership deed, and local regulations.
For Flat Scheme Construction
GST is generally 5% without ITC for affordable housing projects.
For normal housing or commercial, GST rate could be 12% with ITC or 18%.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now