WHAT IS GST TAX RATE ON CONSTRUCTION AGREEMENT

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YELLANKI RATHNAGIRI (Querist)
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22 December 2020 Dear all

Mr. X is a builder
Flat value 50lakh
Semi finished flat was sold for 35 Lakh
for remaining work 15 Lakh he entered in to construction agreement with buyer on same day

Doubts
Now builder has to pay GST 5% on 35 Lakh and 18% on 15 Lakh
Or
5% on 50 Lakhs

please clarify me

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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27 December 2020 GST Will only be applicable on 35 Lacs which is the sales value.

YELLANKI RATHNAGIRI

YELLANKI RATHNAGIRI (Querist)
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27 December 2020 Thank U

Sir
What about 15 Lakh (Remaining Works)

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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11 July 2024 In the scenario described, Mr. X is a builder who sold a semi-finished flat for Rs. 35 lakh and entered into a construction agreement for the remaining work of Rs. 15 lakh on the same day. Here’s how GST (Goods and Services Tax) would apply:

1. **Sale of Semi-Finished Flat (Rs. 35 Lakh):**
- The sale of a semi-finished flat is considered a supply of goods under GST.
- GST rate on the sale of under-construction flats (including semi-finished flats) is 5% without input tax credit (ITC).
- Therefore, GST applicable on Rs. 35 lakh would be 5%.
- GST Amount = 5% of Rs. 35,00,000 = Rs. 1,75,000

2. **Construction Agreement for Remaining Work (Rs. 15 Lakh):**
- The construction agreement involves supplying construction services, which attract GST at the rate of 18%.
- Therefore, GST applicable on Rs. 15 lakh would be 18%.
- GST Amount = 18% of Rs. 15,00,000 = Rs. 2,70,000

### Total GST Calculation:

- **GST on Sale of Semi-Finished Flat (Rs. 35 Lakh):** Rs. 1,75,000
- **GST on Construction Agreement (Rs. 15 Lakh):** Rs. 2,70,000

**Total GST Payable = Rs. 1,75,000 + Rs. 2,70,000 = Rs. 4,45,000**

### Clarification:

- The GST is not calculated on the entire value of the flat (Rs. 50 lakh) because:
- The sale of the semi-finished flat is treated as a supply of goods, attracting GST at 5%.
- The construction agreement for the remaining work is treated as a supply of services, attracting GST at 18%.

- Therefore, Mr. X would need to pay:
- 5% GST on the value of Rs. 35 lakh for the sale of the semi-finished flat.
- 18% GST on the value of Rs. 15 lakh for the construction services provided under the agreement.

This approach ensures that GST is applied correctly based on the nature of each supply (goods or services) as per the GST rates applicable under the law.

YELLANKI RATHNAGIRI

YELLANKI RATHNAGIRI (Querist)
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11 July 2024 Thank You Sir
Thank You Verymuch

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