GST on Under-Construction Property - Builder Charging on Full Amount

[Rohit Koth]

Im seeking some advice and clarification rgarding GST on an under-construction flat purchase.

I recently booked a flat, and my builder is asking for GST to be paid on the full agreement value. However, based on my research, I believe the GST should only be applicable on two-thirds of the total amount.

My understanding is that GST is not applicable on the land value. For under-construction properties, the law considers one-third of the total flat price as the land value, and thus GST should be levied only on the remaining two-thirds.

Ive already discussed this with my builder, but they insist on charging GST on the entire amount. Ive also checked with a couple of other builders, and theyve given me the same information.

My Questions:

 * Is my understanding of the GST law correct? Is it true that GST for an under-construction property is legally applicable on only two-thirds of the agreement value?

 * How can I effectively convince my builder? What official documents or legal provisions can I refer to to make them comply with the law?

 * If I am forced to pay GST on the full amount, can I claim a refund for the extra amount from the government later? If so, what is the process?

Id be grateful for any insights, advice, or references to the relevant GST laws.

Thank you in advance!

AI Summary

GST on under-construction flat must exclude one-third deemed land value; builder cannot charge tax on full consideration A homebuyer of an under-construction flat questions a builder's demand for GST on the full agreement value, asserting that only two-thirds is taxable due to a deemed one-third land deduction. Respondents confirm that, under GST notifications on construction services, one-third of the consideration is mandatorily treated as land, so GST applies only on the remaining two-thirds, making the builder's levy on the entire value incorrect. They explain that the commonly quoted 5% and 1% rates are 'effective' rates on the total price, derived from higher nominal rates (e.g., 7.5%, 1.5%) applied on two-thirds after land abatement. Refund by the buyer is difficult; correction must generally be sought from the builder.