GST on inward supplies for construction of an apartment

[D Sridhar]

Hi All, is GST to be paid on all inward supplies for an residential apartment where the flats are sold after receiving OC where no GST is payable. Or, can we, do not pay GST on inward supplies where the builder would like to sell the flat only after OC. Appreciate if anyone can through light on this. What approach to be adopted where the GST is not payable on sale of flats to reduce the cost of construction

[Sadanand Bulbule]

Refer Sl.No 5 of Schedule II to the CGST Act:

5. Supply of services

The following shall be treated as supply of services, namely:-

(a) renting of immovable property;

(b) 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.

Explanation.-For the purposes of this clause-

(1) the expression "competent authority" means the Government or any authority authorised to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely:-

(i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972; (20 of 1972.) or

(ii) a chartered engineer registered with the Institution of Engineers (India); or

(iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority;

(2) the expression "construction" includes additions, alterations, replacements or remodelling of any existing civil structure

In view of the above provision, no tax liability arises if the flats are sold after the receipt of the OC/CC. However you need to pay tax on inwards supplies of goods & services including under RCM as applicable. There is no exemption of tax on inward supplies [purchases] if outward supplies are not taxable.

[D Sridhar]

Dear Sadanand, 

Noted and many thanks for your feedback. 

[KASTURI SETHI]

Reply by Sh.Sadanand Bulbule, Sir is as clear as sunshine.

[Shilpi Jain]

The question is regarding payment of GST on inward supplies?

If even a rupee of advance is paid to the builder before completion certificate, then GST liability will attract.

If entire consideration for the purchase of flat is after CC then no GST liability.

AI Summary

Builder must pay GST on inward supplies despite exempt residential apartment sales under Schedule II CGST Act A builder inquired about GST liability on inward supplies when constructing residential apartments sold after obtaining occupancy certificate (OC), where no GST applies on flat sales. Legal expert clarified that per Schedule II of CGST Act, construction services are exempt from GST only when entire consideration is received after completion certificate issuance or first occupation. However, GST must still be paid on all inward supplies including goods and services under reverse charge mechanism, as there is no exemption on purchases even when outward supplies are non-taxable. Another expert noted that any advance payment before completion certificate triggers GST liability.