Real estate construction GST rate applies to villa projects with deemed land deduction, including pre-completion supplementary works.
Construction of villas was treated as construction of residential apartments by a promoter in a residential real estate project, so the amended real estate notification applied the GST rate of 7.5% with the statutory deemed one-third deduction for land. The rate applied whether the construction agreement was executed before or after the sale deed for land, and the applicant could not claim 5% on the gross amount. Supplementary pre-completion works, including structural changes, additional area and interior work, were treated as naturally bundled with the principal construction service, so their value formed part of the taxable supply and was subject to the same valuation mechanism and 7.5% rate.
Issues: (i) Whether construction of villas by the applicant is taxable at 7.5% under the post-01.04.2019 real estate notification irrespective of whether the construction agreement is executed before or after execution of the sale deed for land. (ii) Whether supplementary works such as structural changes, additional area and interior works carried out before completion of construction form part of the total amount charged and are taxable at the same rate with the same valuation mechanism.
Issue (i): Whether construction of villas by the applicant is taxable at 7.5% under the post-01.04.2019 real estate notification irrespective of whether the construction agreement is executed before or after execution of the sale deed for land.
Analysis: The applicable entry in Notification No. 11/2017-Central Tax (Rate), as amended by Notification No. 03/2019-Central Tax (Rate), covers construction of residential apartments other than affordable residential apartments by a promoter in a residential real estate project. The villas were treated as residential apartments, the project as a real estate project, and the applicant as a promoter within the statutory definitions drawn from the notification and the Real Estate (Regulation and Development) Act, 2016. The valuation rule in paragraph 2 applies a deemed one-third deduction towards land or undivided share of land from the total amount charged.
Conclusion: The applicant is not entitled to 5% on the gross amount as claimed. GST is payable at 7.5% on the construction service, subject to the conditions in the notification, whether the construction agreement is entered into before or after the sale deed for land.
Issue (ii): Whether supplementary works such as structural changes, additional area and interior works carried out before completion of construction form part of the total amount charged and are taxable at the same rate with the same valuation mechanism.
Analysis: Supplementary items of work undertaken before completion were treated as part of the overall construction service and as naturally bundled with the principal supply. On that basis, the amount charged for such additional work forms part of the total amount charged for the supply for the purpose of paragraph 2 of the notification, and the same valuation rule, including the deemed one-third land deduction, applies.
Conclusion: The supplementary works are includible in the taxable value and are liable to GST at the same 7.5% rate, subject to the conditions in the notification.
Final Conclusion: The ruling confirms the higher real-estate construction rate for the villa project and brings supplementary pre-completion works within the same taxable supply and valuation framework.
Ratio Decidendi: Where a villa project qualifies as construction of residential apartments by a promoter in a real estate project, the notified concessional real-estate rate applies with the statutory deemed one-third land deduction, and pre-completion allied works naturally bundled with the construction are included in the same taxable supply.
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AI Drafter ✕
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