GST on Real Estate Developer | Construction Contract, Sale of Units and ITC

We seek expert advice on the GST implications for LLP (Owner/Developer of a shopping mall project) in the following scenario:

Construction Contract: Party 1 awards the construction contract to a main contractor (Party 2). What is the GST liability on such works contract services received by the developer? Can ITC be availed on this?
Sale of Mall Units Before/ During Construction: What is the applicable GST rate and liability on sale of commercial units before issuance of the completion certificate or during construction?
Sale of Mall Units After Completion: Is the sale of units after completion certificate / occupation certificate outside the ambit of GST (treated as immovable property)?
Input Tax Credit (ITC): To what extent can Party 1 (developer) claim ITC on GST paid to the contractor and subcontractors, and how will it impact the effective tax cost?
Alternative Structuring: Would alternative models such as Joint Development Agreement, Works Contract Model, or SPV route provide any GST optimization or compliance benefits for the developer?

The GST liability on works contract services received by the developed (LLP) is determined based on the type of service and the applicable GST rate. As of the current GST framework, the GST rate on construction services is typically 18% (CGST 9% + SGST 9 % or IGST 18% for inter-state transactions.)

The main contractor (Party 2) is responsible for charging GST on the construction services provided to the devleoper.

Yes, the developer (LLP) can avail input Tax Credit (ITC) on the GST paid to the contractor, provided the following conditions are met:

The developer is registered under GST.

The contractor has issued a tax invoice for the services rendered

The developer has received the goods or services.

The developer has paid the GST to the contractor .

The developer has filed the GST return (GSTR-3B) and claimed ITC in GSTR-3B.

The sale of commercial units before the issuance of the completion certificate or during construction is subject to GST.

The applicable GST rate is typically 18% (CGST 9% + GST 9% or IGST 18% for inter -state transactions) on the sale value of the units..

Yes, the sale of units after the completion certificate or occupation certificate is generally considered outside the ambit of GST, as it is treated as the sale of immovable property. GST is not applicable on the sale of completed immovable property (other than under construction or partially constructed).

The developer can claim ITC on GST paid to the contractor and subcontractors to the extent that the inputs, input services, and capital goods are used for business purposes and are not blocked under Section 17(5) of the CGST Act, 2017.

ITC can be claimed on construction services, materials, and other inputs used in the construction of the mall, subject to the conditions mentioned earlier.

Impact on Effective Tax Cost: The availability of ITC reduces the effective tax cost for the developer, as it allows the developer to claim credit for the GST paid on inpts and input services.

The effective tax cost is reduced by the amount of ITC claimed, thereby lowering the overall GST burden on the developer.