GST and ITC on building purchased and intended to be sold while under construction - issues for brain storming.

[DEVKUMAR KOTHARI]

A trader or investor has entered into agreement with builder and promoter for purchase of some units in a complex or building

Construction and completion will take about 5-6 years. Therefore, the buyer has option to sell or transfer the building / unit during construction before completion.

Builder is charging GST on proportionate sale value of land and construction in phases in Tax Invoice raises  as per agreement.

Buyer will also have to levy GST in tax invoice,if he sells the building or any part of it before completion.

Therefore, prima facie, GST paid must be eligible for credit for ITC and accumulated in ITC ledger. 

ITC so accumulated should also be eligible for credit adjustments against GST payable by buyer.

Relevant questions for brain storming are:

Whether,GST is correctly levied by builder, is thee any exception?

Whether, ITC must be allowed to be credited, accumulated and utilised in normal course?

Whether, credit of ITC can be availed against any sale of any goods or services by buyer of property  in progress and before completion?

Or whether, credit shall be allowed only against sale of the same property which was bought during construction and GST was levied by builder?

Whether,buyer of property need to get registered under GST laws to avail ITC even if he has no other business? 

If yes, whether registration has to be obtained after entering into agreement to buy or it can be obtained before selling property under construction when he will be liable to get registered?

If registration is obtained later at the time of selling, whether ITC for earlier period payment of GST invoices can be claimed,

Any other relevant legal and procedural aspects. 

Please suggest safest normal course to avoid litigation.

AI Summary

GST on under-construction property, resale, and blocked ITC under section 17(5)(d) CGST Act explained for buyers A buyer enters into an agreement with a builder to purchase under-construction units, with GST charged on land and construction in phases. The buyer may resell the property before completion and questions arise on: correctness of GST levy by the builder; eligibility, accumulation, and utilization of input tax credit (ITC); whether ITC can be used against any taxable supplies or only the resale of the same property; and the necessity and timing of GST registration, including retrospective ITC claims. The respondent notes that, due to section 17(5)(d) of the CGST Act, ITC on under-construction property is generally blocked for buyers. The safest approach suggested is early registration if reselling, or preferably selling after completion when no GST applies.