The Government of India has issued a press release dated 8th December, 2018 clarifying that no GST is applicable on sale of complex or building and ready to move-in flats where sale takes place after issue of completion certificate by the competent authority.
GST is applicable only on sale of under-construction property or ready to move-in flats where completion certificate has not been issued at the time of sale. The press release also compares the rate of tax and the input tax credit available to the builder pre-GST regime and post-GST regime as follows:
| Period |
Output Tax Rate |
Input Tax Credit details |
Input Tax Credit details |
Effective Rate of Tax |
| Pre- GST | Service Tax: 4.5%. VAT: 1% to 5%. (composition scheme) |
Central Excise on most of the construction materials: 12.5%. VAT: 12.5 to 14.5%. Entry Tax: Yes . |
No input tax credit of VAT and Central Excise duty paid on inputs was available to the builder for payment of output tax, hence it got embedded in the value of properties. Considering that goods constitute approximately 45% of the value, embedded ITC was approximately 10-12%. |
Effective pre-GST tax incidence: 15-18%. |
| GST | Affordable housing segment: 8%, Other segment: 12% after 1/3rd abatement of value of land . |
Major construction materials, capital goods and input services used for construction of flats, houses, etc. attract GST of 18% or more. | ITC available and weighted average of ITC incidence is approximately 8-10%. | Effective GST incidence, for affordable segment and for other segment has not increased as compared to pre- GST regime. |
