GST Rate of tax on Advances received by Landlord share

[Ravikumar Doddi]

Dear sir,

Advances received by Landlord share from the prospective buyer, which construction would take place to complete in 2-4 years, Is GST Applicable, kindly enlighten with statutory provisions. Flats alloted in JDA on these flats only they are getting advances, kindly clarify

[Rajagopalan Ranganathan]

Sir,

Vide Sl. No.16 (iii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended the rate of tax is 9% CGST and 9% SGST. Actually this rate is for Real Estate Service. In my opinion the same rate is applicable to advance received since no separate rate is prescribed for advance received and the advance received is towards sale of the flat/house.

[Shilpi Jain]

If it is an ongoing project and you have not applied to continue under the old scheme of rates of GST for the project i.e. 18% then the advances received would be liable at the effective rate of 5%. Receipt of advance would attract GST liability. However, if the amount received fromt he customer is as per the milestones mentioned in the agreement with the customer, the on receipt of money the lanlord will have to issue an invoice and not treat it as an advance.

AI Summary

GST on advances: advances received by landlords attract GST, with applicable notified real estate service rate or scheme-based rate. Advances received by a landlord under a joint development arrangement attract GST; the notified real estate service rate applies because no separate rate for advances is prescribed. Alternatively, for ongoing projects not continued under the earlier project-rate scheme, advances are taxable at the scheme-determined effective rate. Where receipts correspond to contractual milestones, the landlord must issue an invoice upon receipt instead of treating the amount as an untaxed advance.