GST TAX LIABILITY FOR BUILDERS

[Davinder Singh]

Dear Sir,

Question for builders dealing in construction of Residential Flats.

1. GST Liability for those flats which had constructed before 01.07.17. Investment made by owner with his funds and flats ready for sale.

2. GST Liability of those flats which are under construction and booked by some one before 01.07.17., and an amount of Flat paying in installments and booking after 01.07.17. explain the GST treatment for the same.

3. Eligibility for Input credit in Opening Stock ( Finished Flats ) and work in Progress flats.

[Mehak Malhotra]

As per my understanding as the questions above in my opinion

1. Since the flats are ready for sale before then GST will not be applicable. As per the provisions of the GST, if the construction is completed and we have received completion certificate then this would not be covered under GST.

2. where tax was paid on any supply, both under VAt laws and Service Tax laws, TAX SHALL BE LEVIABLE UNDER GST ACT and the taxable person shall be entitled to take credit of vat or service tax paid under existing law TO THE EXTENT OF SUPPLIES made after the appointed day ie 01/07/2017.

This means the proportion of the supplies made after 01/07/2017, we will get the proportionate amount of credit.

3. If the builder is covered under composition scheme then point no 2 is relevant.

if builder is not covered under composition under the vat laws then he will be eligible for the input credit.

Important Conditions are as follows :

a) credit should have been allowed in the VAT laws. If credit was not allowed under vat then if would not be allowed in GST also.

b) Credit is allowed under the GST. If the input was allowed under Vat but are not allowed in GST then no credit would be allowed.

c) The tax have been paid on the inputs buy the suppliers

d) Returns have been timely filed.

AI Summary

GST liability for residential flats depends on completed supply status; transitional input credit available proportionately after appointed day. GST liability depends on whether construction was a Completed Supply before the appointed day: completed flats with completion formalities before that day are not taxable under GST. Transitional input tax credit for under-construction units is available proportionately for supplies made after the appointed day, subject to that credit having been allowable pre-GST, being allowable under GST, supplier tax payment, and timely filing of returns; composition scheme status affects eligibility.