GST on sale of right in underconstructed flat by an agent

[NAMAN DOKANIA]

An agent, a Pvt Ltd company, does the business of purchase & sale of underconstructed flat. He gave advance for the underconstructed flat for say Rs. 80 lakhs, and after 10 months sold his right for Rs. 110 Lakhs. Will GST be leiveid under the same? if yes, then what will be HSN/SAC/Rate . If any provision/circular is quoted, that woudl be of much help, with explanation thereof.

[Sadanand Bulbule]

in the situaion explained by you, the specific role of agent is to be determined. If he is merely acting as a broker, then the commission amount earned is liable to tax @ 18% under SAC 9971, Real Estate Agent Services. But this is not your case.

Here it is trading of unconstructed flat on own account. Refer Section 7[1][a] of the CGST Act and Notification No.11/2017-Central Tax (Rate). Since there is no specific circular on such transactions, seek an advance ruling.

[KASTURI SETHI]

Dear Querist,

Such transaction is taxable. Consideration stands received prior to the issuance of Completion Certificate or First Occupation. Not covered under Exclusion clause no. 5(b) of Schedule-II   

I  fully concur with the views of Sh.Sadanand Bulbule, Sir. 

[Shilpi Jain]

If you are not entering into any agreement of sale then you can pay GST on the margin earned or the so called commission.

If not then there is a risk of GST @5% on the unit sold on entire 1.1 crs

[NAMAN DOKANIA]

Shilpi Madam,

 

Will they be allowed to take ITC of 5% charged by the builder to them while paying the output tax in the above case?

AI Summary

GST on sale of rights in under-construction flats: taxability depends on broker versus trader treatment and applicable rate. GST taxability depends on the agent's role: as a broker, commission is taxable under SAC 9971; as a trader selling rights on own account, the transfer is a taxable supply under Section 7(1)(a) and applicable rate notifications. Resale prior to completion certificate or first occupation is not covered by Schedule II exclusion and is taxable. Commentators note the margin scheme may apply where no sale agreement exists, otherwise the full consideration may attract the notified rate. The question of claiming input tax credit for tax paid to the builder when remitting output tax is also raised.