Paying GST on Residential House Construction

Rules 315 views 3 replies

Anuj Kumar

Proprietor

23 Points Joined February 2025

Hi, I have a small business where we construct residential houses for clients on turnkey basis. We give a payment schedule to clients and they pay us in advance. We than use the money to buy materials for the construction. When client makes us payment we dont give them any gst bill as per my knowledge construction of residential building do not falls under gst regime. But we still have our own gst number where we fall under general contracts etc. moreover suppose 1. we add gst to the payment given to us by the client than the amount becomes huge and the client will never pay that extra gst but will himself construct the house Instead of giving the work to us. 2. Now if we pay gst to govt we will be at a huge loss as the client has refused to pay gst. Can somebody please explain if there is a easy and legal way to tackle this challenge.

Replies (3)

Rama chary Rachakonda

Master in Accounts & high court Advocate

9157 Points Joined December 2011

Your concern is valid, as the GST implications can significantly impact your business. GST Applicability on Residential Construction You're correct that construction of residential buildings is exempt from GST, as per Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017. GST Registration and Compliance Although your business is exempt from GST on residential construction, you have a GST registration for other services (general contracts). You must comply with GST regulations, including filing returns and paying GST on inputs. GST Implications on Advance Payments When clients make advance payments, you're not required to issue a GST invoice, as the service (residential construction) is exempt from GST. Addressing Your Concerns Regarding your concerns: 1. _Adding GST to client payments_: You're correct that adding GST would increase the payment amount, potentially deterring clients. 2. _Paying GST to the government_: As the service is exempt from GST, you wouldn't be required to pay GST on the construction service. Easy and Legal Solution To tackle this challenge: 1. _Clearly outline GST implications in your agreement_: Include a clause in your agreement with clients stating that GST is not applicable on residential construction services. 2. _Maintain separate accounts for GST-exempt and taxable services_: Keep separate records for GST-exempt (residential construction) and taxable services (general contracts) to ensure accurate GST compliance. 3. _File GST returns and pay GST on taxable services_: Continue to file GST returns and pay GST on taxable services, while excluding the GST-exempt residential construction services. By following these steps, you can ensure compliance with GST regulations while minimizing the impact on your business and clients. Please consult a tax professional or chartered accountant to confirm the applicability of GST to your specific business and ensure compliance with the latest GST regulations.

sabyasachi mukherjee

27942 Points Joined May 2017

WORKS CONTRACT TAX IS APPLICABLE

Anuj Kumar

Proprietor

23 Points Joined February 2025

Originally posted by : Rama chary Rachakonda
	Your concern is valid, as the GST implications can significantly impact your business. GST Applicability on Residential Construction You're correct that construction of residential buildings is exempt from GST, as per Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017. GST Registration and Compliance Although your business is exempt from GST on residential construction, you have a GST registration for other services (general contracts). You must comply with GST regulations, including filing returns and paying GST on inputs. GST Implications on Advance Payments When clients make advance payments, you're not required to issue a GST invoice, as the service (residential construction) is exempt from GST. Addressing Your Concerns Regarding your concerns: 1. _Adding GST to client payments_: You're correct that adding GST would increase the payment amount, potentially deterring clients. 2. _Paying GST to the government_: As the service is exempt from GST, you wouldn't be required to pay GST on the construction service. Easy and Legal Solution To tackle this challenge: 1. _Clearly outline GST implications in your agreement_: Include a clause in your agreement with clients stating that GST is not applicable on residential construction services. 2. _Maintain separate accounts for GST-exempt and taxable services_: Keep separate records for GST-exempt (residential construction) and taxable services (general contracts) to ensure accurate GST compliance. 3. _File GST returns and pay GST on taxable services_: Continue to file GST returns and pay GST on taxable services, while excluding the GST-exempt residential construction services. By following these steps, you can ensure compliance with GST regulations while minimizing the impact on your business and clients. Please consult a tax professional or chartered accountant to confirm the applicability of GST to your specific business and ensure compliance with the latest GST regulations.