Is GST Applicable On Purchase of Flat/Apartment

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In this post we will discuss the following topics:

  1. Is GST applicable on the purchase of a new flat/apartment/building from a developer?

2. Is GST applicable on the purchase of a used flat/apartment/building from the previous owner?

Applicability of GST on purchase of Flat/Apartment: 

The applicability of GST on the purchase of a flat/apartment/building/complex depends entirely upon the timing of your payment of the entire purchase price to the developer or previous owner.

No GST will be applicable, if you have paid the entire purchase price after:

  1. The issuance of completion certificate by the Municipal Authorities; or
  2. After the first occupation of such property.

GST will be applicable, if you have paid the entire purchase price or a part of the purchase price before the earlier of:

  1. The issuance of completion certificate by the Municipal Authorities; or
  2. The first occupation of such property.

Therefore to answer the questions regarding the applicability of GST,

Q1. Is GST applicable on the purchase of a new flat/apartment/building from a developer?

Answer: GST will be applicable if you have paid even a part of the purchase price before the issuance of the Completion Certificate from the Municipal Authorities.

GST will not be applicable only when you have paid the entire purchase price after the issuance of completion certificate.

Note that where a part payment has been made before the issuance of completion certificate, GST will be applicable on the entire purchase consideration and not just on the amount paid before the issuance of the completion certificate.

Q2. Is GST applicable on the purchase of a used flat/apartment/building from the previous owner (re-sale transactions)?

Answer: In this case no GST will be applicable, as this is a re-sale transaction and the purchase price is paid after the first occupation of the property. It is of no consequence if the previous owners had actually stayed at the flat/apartment.

Understanding the Law:

As per Schedule II of the CGST Act, under clause (b) of paragraph 5 the following shall be treated as supply of services:

(b) 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.

As per Schedule III of the CGST Act, under entry 5, the following activities or transactions shall be treated neither as a supply of goods nor as a supply of services under the Act:

5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

Conclusion: 

It follows from the above two schedules, that GST will not be applicable only 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

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