GST or Goods and Services Tax is an indirect tax which is applicable to the supply of service related to the construction of the building. However, GST is not applicable to completed constructions.
However, GST is not applicable if the whole of the consideration for a property is paid after issuance of completion certificate by a competent authority or after its first occupancy, whichever is earlier.
Hence, if you are purchasing a property from a builder directly and if payments are made to the builder towards the property prior to occupation, GST would be payable on the amount paid. However, if a property is purchased in a secondary transaction from an owner, then GST would not be applicable as the payment is being made after issuance of completion certificate or first occupancy.
GST on Under Construction Property
As per GST law, construction of a complex, building, civil structure intended for sale to a buyer is considered a service and liable for GST – if any consideration is received before issuance of completion certificate.
The GST rate payable on construction services is 18%. However, the effective rate paid on property transaction would be 12%, as GST at the rate of 18% is levied only on 2/3rd of the amount for the property; 1/3rd of the amount is deemed as the value of land or undivided share of land supplied to the buyer and is not taxable under GST.
GST on Completed Flats
In case of purchase of completed flats, GST would not be applicable to the sale. GST is only applicable on payments made to a builder for providing the services of construction. Hence, in case of purchase of a completed or used flat, the question of providing construction service does not arise. Thus, there would be no GST applicable on purchase of completed flats.
A key criterion for determination of the applicability of GST on a property is the issuance of completion certificate by the concerned authority. If completion certificate for a property is obtained before making any payment to the seller, GST will not be applicable as it is considered a ready-to-move-in property and there is no transfer or supply of goods or services.