GST on construction of Property

[YUWRAJ KOTHARI]

In the case of Builder constricting 28 storey tower, Has received Part Occupation certificate from Municipal Corporation for 23 floors. So for unsold Flats upto 23 floors and sold after Part OC. whether GST payable or to wait upto full and final occupation Certificate. Experts please opine.

[Sadanand Bulbule]

refer the following:

2025 (4) TMI 549 - KARNATAKA HIGH COURT - M/s. Rohan Corporation India Pvt Ltd., Versus Union Of India, The Commissioner Of Central Excise & Central Tax (Gst) Mangaluru, The Assistant Commissioner Of Central Excise & Central Tax, Mangaluru, Shri Sanjay Kumar Mishra, Liquidator For Lotus Shopping Centers Pvt. Ltd., The Assistant Commissioner Of Commercial Taxes Mangaluru.

[Jayaram Yarram]

Assuming it is a residential project. GST is payable when the sale of flat is happeing before received OC. If any sale after OC, there is no need to pay GST on those flats. Unsold as on date of part OC, GST is not required to be paid as the sale happens after OC. 

Please topup if this is pertaining to JDA/ TDR transaction.

[Shilpi Jain]

This entire building must have been registered under RERA as one project. In that case the completion certificate for the entire project would be relevant.

Pls note that there is no reference of OC/occupancy certificate in the GST law.

Also note that the law mentions first occupation or issuance of CC for the project. So advance for any unit received after issuance of CC or first occupation, not liable to GST.

[Yash Shah]

According to entry no 5(b) of Schedule II, construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

The above is the given definition of construction services, which excludes the transaction where the entire consideration is received after issuance of the completion certificate or after its first occupation. This is why it results in the sale of immovable property after completion and which is neither the supply of goods nor the supply of services as per entry no 5 of Schedule III.

In the given case, Part OC has been received for 23 floors out of 28 floors tower, which to my understanding is not possible, as rightly pointed out by Shilpi Ji, that under RERA, it is one project and due to which Part OC as a concept I am not able to understand, however assuming it is possible -

Upto 23 floors: For unsold flats which were sold after receipt of part OC is neither supply of goods nor supply of services (outside purview of GST) as per entry 5 of Schedule III. Thus, GST is not payable on the same.

However, if a few of the flats from the 23 floors were sold before receipt of Part OC then the same supply will fall under entry no 3 of Notification no 11/2017(R), thus being a supply of services would be taxable @18% generally or any other deferred rates as per said entry.

For 24-28 floors: Even if Part OC is received, that is for up to 23 floors. Thus, 24-28 floors are still to be said as going under construction, and before receipt of OC for the said floors, if sale is made, then it will not be exempt and will be taxable as supply of services under entry no 3 of notification no 11/2017. Thus, GST would be payable on the said transaction.

AI Summary

Builder with partial occupation certificate for 23 floors faces GST confusion on unsold flats A builder constructing a 28-storey tower received partial occupation certificate for 23 floors and seeks clarification on GST liability for unsold flats. Legal experts provided varying opinions: one referenced a Karnataka High Court case, another stated GST applies only to pre-OC sales while post-OC sales are exempt. A third expert noted RERA registration treats the entire building as one project, making completion certificate for the whole project relevant. The final expert detailed that floors 1-23 with partial OC would be GST-exempt if sold post-OC, but floors 24-28 remain taxable until full completion certificate is obtained.