Gst on sale of under construction residential property by Pvt Ltd company

• Is GST Applicable? Yes, because the property is sold in the under-construction stage, making it a taxable supply of service rather than a sale of an immovable property.

• Applicable Rate: The resale or assignment of rights by a trading company attracts 18% GST (as it does not qualify for the developer’s concessional 5% rate without ITC).

• If Shown as Stock-in-Trade: The company is eligible to claim Input Tax Credit (ITC) on the GST paid to the builder because the property is not held "on its own account." This ITC can be used to offset the outward 18% GST liability.

• If Shown as an Investment: The company's ITC is strictly blocked under Section 17(5)(d) because it is treated as a capital asset held on its own account. The company will have to pay the outward GST without getting any credit for the inward GST paid to the builder.

The GST treatment cannot be decided merely by whether the under-construction residential unit is shown as stock-in-trade or investment. Accounting classification is only supporting evidence. The decisive factors are the stage of construction, the nature of the rights transferred, the role of the seller, and the wording of the agreement.

If the unit is transferred after the completion certificate or the first occupation, it is generally a sale of completed immovable property and falls outside GST under Schedule III.

If the unit/rights are transferred before the completion certificate or first occupation, GST exposure arises. The transaction is generally not a pure sale of immovable property; it may be treated as a supply of service, especially where what is transferred is booking rights, allotment rights, agreement rights, or beneficial interest in an under-construction unit.

If the company is a trader and the unit is held as stock-in-trade, outward GST is likely payable on the transfer before completion. ITC can be argued if the inward supply is used for making a taxable outward supply, and the Section 16 conditions are met. However, ITC should not be treated as automatic because Section 17(5)(d) may be examined by the department. The taxpayer must demonstrate that the unit/rights were acquired for onward taxable supply and not for the construction of immovable property on its own account.

If the unit is shown as an investment/capital asset, outward GST may still apply if transferred before completion; however, ITC becomes weak and is likely to be blocked under Section 17(5)(d), as the property may be regarded as held on one's own account.

The rate, 18%, should not be stated mechanically. The 1% / 5% residential real-estate rates generally apply to promoter/developer construction supplies, subject to conditions. A non-promoter company assigning booking/allotment rights may conservatively fall under 18%, but the final rate requires review of the agreement and exact classification of supply.