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 resale of under-construction flats by agents depends on broker status and Section 7(1)(a) CGST Act rules An agent, operating as a private limited company, purchased an under-construction flat and later sold the right to it at a higher price. The GST applicability depends on whether the agent is acting as a broker or trading on their own account. If merely a broker, GST at 18% applies on commission under SAC 9971. However, since the agent is trading the flat, GST is levied under Section 7(1)(a) of the CGST Act and relevant notifications, with no specific circular available, so an advance ruling is advisable. The transaction is taxable as the consideration is received before the issuance of the completion certificate, and it does not fall under Schedule II exclusion. If no sale agreement exists, GST may be payable on the margin; otherwise, GST at 5% on the entire sale value could apply. Input tax credit on GST paid to the builder may be questioned in this scenario.