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Real Estate Project (5% with ITC) or Construction Service (18% without ITC)

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Sivaraman A R

1044 Points Posted on 25 February 2023

Promoter (Builder) has obtained right to develop a villa project (say12 villa) in the land of Land owner

Then promoter (Builder) entered into Sale agreement with ULTIMATE BUYER.

Parties in the sale agreement

Only 2 parties (1. Builder) (2. Ultimate Buyer)

Sale agreement states as follows

One VILLA COST IS Rs 44 lakhs (Split up given Rs 10 lakh LAND & Rs 34 Lakh Construction Service)
ULTIMATE BUYER has to pay Rs 10 lakh directly to the Land owner
ULTIMATE BUYER has to pay Rs 34 lakh to Builder.

Project registered under RERA. Builder is Promoter

Question from the point of view of Promoter Builder

What will be the turnover of builder here?
Will this come under RREP( Residential Real Estate Project)? (Concessional GST 5% without ITC)
Or is this coming under construction Service (GST 18% with ITC)

Replies (1)

praveen

Chartered Accountant

6971 Points Posted on 25 February 2023

IMO this will not be considered as a construction service. In case of construction service the client approaches the service provider only for getting the construction done. But in case of a real estate project the client approaches the developer for buying a property which is both construction + land. Irrespective of how you make the agreement it will still fall under real estate.

Since I belive that this is falling under Real Estate the tax rate will be 5% without taking credit.

But for better understanding the entire agreement between the builder and landowner and then the agreement between builder and buyer has to be reviewed.

CA Praveen M R
www.prsrglobal.com