Is GST applicable in my case , Please guide.

Hi All,

I booked a flat with a builder in the year 2016 by paying considerable advance.

I got into agreement of sale on 27th December, 2017.

The builder has been collecting demands in line with construction progress since then. Builder has neared completion of the project and I release closed to 90 % of the total consideration.

I wanted to get the flat registered to get my interiors done but to my surprise the builder is demanding 12 % GST on the entire sale consideration and its taking a toll of 8 lacs on my pockets which is not anticipated. I have checked the receipts he gave for the payments done earlier and they clearly mentioned (inclusive gst) signed and stamped.

Please clarify if at all I am liable to pay GST on entire sale consideration considering the dates of booking, agreement. If so what is the rate of GST ? Will it be on entire sale consideration or will it be on demands received after GST is implemented.

Regards,
Pradeep

Hi Pradeep,

Your situation involves a property booked before GST implementation, with payments made both before and after GST came into effect. Here’s a detailed explanation based on GST rules related to under-construction properties:

GST Applicability on Under-Construction Flats

GST on Under-Construction Property:
GST is applicable on the sale of under-construction flats (i.e., before completion and registration of the property). The rate for affordable housing or non-affordable housing can vary, but usually, it's around 5% (without ITC) or 12% (with ITC) depending on the category.
Effective Date of GST:
- GST was introduced on 1st July 2017.
- For properties booked before 1st July 2017, but construction and payment continues after that date, GST is applicable only on the payments received after 1st July 2017.
- Payments received before 1st July 2017 are not subject to GST.
Your Case:
- You booked the flat in 2016 and signed the agreement in December 2017.
- Since your agreement was signed after 1st July 2017, GST will apply on payments received after the agreement date.
- If the builder collected advances before GST rollout, GST would not apply on those, but payments demanded after 1st July 2017 are subject to GST.
- The builder cannot charge GST on the entire sale consideration if payments were made before GST came into effect.
- The rate is generally 5% for residential properties without ITC (assuming it is non-affordable housing), or 12% if ITC is claimed by the builder.
Receipts Mentioning “Inclusive GST” Before GST Implementation:
- These might be inaccurate or misunderstandings; GST was not applicable before July 2017.
- It’s possible the builder had included some other tax or charges mistakenly described as GST, or this is a simple receipt format without exact tax applicability.

What You Can Do:

Ask the builder to break down the GST charges only on payments made after 1st July 2017.
Check the exact rate applicable as per the RERA classification of your project (affordable or non-affordable).
Confirm if builder has claimed Input Tax Credit (ITC); this impacts GST rate.
If the builder insists on charging GST on the entire amount, you can escalate the matter to the GST authorities or seek legal advice.

Summary:

Condition	GST Applicability
Booking & Payment before 1 July 2017	No GST
Payment received after 1 July 2017	GST applicable on payments post 1 July 2017
Agreement signed after 1 July 2017	GST applicable on payments after agreement
GST Rate	5% without ITC / 12% with ITC (subject to project type)