Who are you? (Stakeholder)
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LAND OWNER
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BUILDER
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CONTRACTOR IN LABOUR
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MANUFACTURER & TRADERS
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SERVICE PROVIDERS
Which Transaction?
According to Section 7(2) of the CGST Act of 2017, the sale of land is not considered a supply under GST, read with Schedule III. Because ‘supply’ is the taxable event that attracts GST, land sales transactions are exempt from GST.
Note: Developable land (i.e., land with all necessary permissions from governmental bodies and on which specified development activities have been carried out) can be classified as developable plots. According to the Gujarat Authority of Advance Ruling findings in the question asked by Dipesh Anilkumar Naik, GST @ 18% is applicable on developable land.
Long term lease of land (30 yrs. or more) by any person against consideration in the form of upfront amount and/or periodic rent for construction of a project by a promoter will be charged a GST rate of 18% on a reverse charged basis.
Simplified: (Labour+Goods Contract): – the services provided in connection with constructing a real-estate structure, which includes the supply of Goods (Building materials like cement, sand, bricks, etc.)
a contract for the construction, fabrication, completion, erection, installation, fitting out, improvement, repair, maintenance, renovation, alteration, or commissioning of any immovable property in which the transfer of property in goods is involved [Bengal Peerless Housing Development Company Limited (2019-TIOL-137-AAR-GST]
Meaning: It is an agreement between a landowner and a builder in which the landowner contributes his land and the developer takes over the tasks of obtaining approvals, building, launching, and marketing the project using contractual monetary considerations.
Taxability under a joint development agreement affects both the parties in the agreement, the land owner and the builder. The GST implication on both the parties is different:
Land owner:
- In the case of a Joint Development Agreement signed before March 31, 2019, the landowner must pay for GST on the transfer of development rights.
- But JDA entered into after March 31, 2019, the landowner gets a share in the profits of the JDA, and on the sale of his share he will not be charged any GST.
Builder:
- In the case of a Joint Development Agreement entered into on or after April 1, 2019, GST must be discharged by the builder under the Reverse Charge Mechanism for the transfer of development rights by the landowner. (As per Section 9(3) clause 5(B))
A. Construction Services
The GST rate on construction services is generally 18%. However, this rate varies in the construction sector, where it is 1% for affordable housing. Furthermore, the input service and construction materials rate is 18%, while the other segments have 5%. In the case of ITC incidence, the GST rate on construction services ranges between 8% and 10%.| Particular | Rates | ITC Available | Notes |
| Under Construction Residential Properties (Affordable Housing Scheme) | 1% | Yes | After 1st April, 2019 |
| Under Construction Residential Properties (Other Projects) | 5% | No | After 1st April, 2019 |
| Under Construction Residential Properties (Affordable Housing Scheme) | 8% | Yes | Before 1st April, 2019 |
| Under Construction Residential Properties (Other Projects) | 12% (NOTE-A) | Yes | Before 1st April, 2019 |
| Construction of Commercial Units in a residential apartment building (RREPs) | 5% | No | After 1st April, 2019 |
| Construction of sole commercial projects (REPs) or on-going RREPs on the date of new rate (NOTE-B) | 12% | Yes | After 1st April, 2019 |
- Homes purchased through the Credit-Linked Subsidy Scheme (CLSS) are subject to a 12 percent GST rate. After deducting one-third of the cost of land, the applicable rate will be 8%.
- RREPs: Residential Real-Estate Projects RRPs: Real Estate Projects
Inputs are used to construct a structure, which results in the end product of a house, apartments, factory building, etc. In any manufacturing process, inputs are used and modified in a specific way to create the final finished product. Material such as cement, sand, bricks, paint, and so on are taxed differently based on their HSN grouping.
Iron & Steel | 18% | No |
NOTE-B |
Sanitary fittings | 12% | No | |
Electrical Cables | 18% | No | |
Sand | 5% | No | |
Building Bricks | 5% (NOTE-A) | No | |
Cement | 28% | No |
Note:
- The CBIC has issued notifications increasing the GST rates for Fly Ash Bricks, Bricks of Fossil Meals or Similar Siliceous Earths, Building Bricks, and Roofing Tiles from 5% to 12% with ITC and 6% without ITC. The GST Council recommended these changes at its 45th meeting. These notifications will go into effect on April 1st, 2022.
- According to section 17(5), a taxable person's credit for inward supplies received for construction of an immovable property (other than plant and machinery) on his account is blocked, even if such supplies are used in the course or furtherance of business.
There are many moving parts in the mechanism of real estate. Interior designers, architects, engineers and other professionals provide their services to the project that are vital. These services are taxed at 18%.
