GST on construction services

[Ashish Diwedi]

We have entered into contract with a society for redevelopment of 7 floors and additionally 3 floors where -

(i) Each flat owner will get additional 250 sqft of area in addition to the existing area of 1000 sq ft

(ii) Apart from these the developer will develop 3 floors for sale to outsiders.

(iii) Existing Flat owners will get monthly compensation for relocation

A. Will the transaction be considered as Works contract service or construction service?

B. What shall be the rate of GST?

C. On what value GST will be payable?

D. Will there be GST only on additional area given to existing flat owners or on the entire area constructed?

E. Will GST be applicable on relocation charges

[Himansu Sekhar]

Kindly bring more clarity

[Shilpi Jain]

A. Will the transaction be considered as Works contract service or construction service?

WORKS CONTRACT SERVICE. FURTHER I ASSUME THERE IS A JDA ENTERED FOR THIS TRANSACTION POST 1.4.19.

B. What shall be the rate of GST?

5%

C. On what value GST will be payable?

IT WOULD BE THE FIRST SALE VALUE IN THE PROJECT

D. Will there be GST only on additional area given to existing flat owners or on the entire area constructed?

ENTIRE CONSTRUCTED AREA

E. Will GST be applicable on relocation charges

IT WILL NOT BE SEPARATELY APPLICABLE AND CAN BE CONSIDERED TO BE BUNDLED WITH THE DEVELOPMENT SERVICES. SO THE ADOPTION OF THE FIRST SALE VALUE FOR THE VALUATION SHOULD TAKE CARE OF THIS.

AI Summary

Works contract service classification leads to GST based on first sale value covering entire constructed area, relocation bundled.
The redevelopment arrangement is treated as a works contract service under a post-1.4.2019 joint development agreement; GST is leviable at the stated rate, valued by the first sale value for the project, covers the entire constructed area (not only additional allotments), and relocation compensation is bundled with development services and not separately taxable.