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SALE OF LAND AND BUILDING – WHETHER GST ATTRACTED?
Land and building are immovable properties and hence cannot be classified as goods. Hence a transaction for sale of land and sale of building shall neither be treated as supply of goods nor a supply of services. Thus, sale of land and building will not be subject to GST as per Schedule III of CGST Act.
As per Schedule II of CGST Act, 2017, construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier is Supply of Service.
Further as per CGST Amendment Act and as per Sec 17(3) of CGST Act 2017, relating to proportionate reversal of ITC, when taxable person is engaged in both taxable and exempt supplies, the value of exempt supplies shall include- Value of sale of land & building (when sold after completion certificate).
While calculating the value of supply, in case of sale of under-construction property, 1/3rd of total amount charged for transfer is deducted, to arrive at the taxable value of supply. Accordingly, value of taxable supply shall be 2/3rd of total value of supply. 1/3rd of the total amount is deemed as value of land or undivided share of land supplied to the buyer and is not taxable under GST.
Rate of GST:
- Construction services – 18% (Effective rate: 18% x 2/3 = 12%)
- Composite Works contract service –
For affordable housing – 12% (Effective rate: 12% x 2/3 = 8%)
Other points: (to be effective from 01/04/2019)
- GST shall be levied at effective GST rate of 5% without ITC on residential properties for non affordable segment.
- GST shall be levied at effective GST of 1% without ITC on affordable housing properties.