GST on Construction of Residential , Commercial and Industrial Complex

Analysis of GST on Construction of Residential , Commercial and Industrial Complex in India

If there any GST on Construction of Residential , Commercial and Industrial Complex ?

yes

Service Accounting Code Heading for services is 9954.

Services covered under this heading are

•  Construction of building (99541),
•  General construction of civil engineering works (99542),
•  Site preparation services (99543),
•  Assembly and erection of pre-fabricated construction (99544),
•  Special trade construction services (99545),
•  Installation Service (99546) and
•  Building completion and finishing services (99547).

As per para 5(b) of Schedule II of CGST Act.(Activities to be treated as supply of goods or supply of services) : Following is ‘supply of service‘ under CGST Act  :-

“ 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.

Comment :- If entire consideration is received ‘after its first occupation’, a builder or developer is not liable to pay GST, even if completion certificate or occupancy certificate is not obtained from authorities.

Thus if builder sold flat to Mr A without taking completion certificate, and Mr A further Sale this house then , MR A is not liable to Pay GST.

“construction“ includes additions, alterations, replacements or remodelling of any existing civil structure.

“competent authority” means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely –       (i) an architect registered with the Council of Architecture constituted under the

Architects Act, 1972; or

(ii) a chartered engineer registered with the Institution of Engineers (India); or

(iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority.

What are the GST Rates for Construction of Residential , Commercial and Industrial Complex ?

CGST & SGST rates are 9% each and IGST Rate is 18% for Following Services :-

(i) 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.

Provisions of paragraph 2 of notification shall apply for valuation of this service which says :-

“In case of supply of service involving transfer of property in land or undivided share of land, as the case may be, the value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, as the case may be, and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply.

Explanation.—For the purposes of paragraph 2, “total amount” means the sum total of,—

(a) consideration charged for aforesaid service; and

(b) amount charged for transfer of land or undivided share of land, as the case may be.

Comment : If builder charges a amount which is inclusive of land or undivided share of land. In that case, the land value will be taken as one third (33.33%) of total amount (i.e. value including land value) and GST is payable on balance amount. Thus, effectively GST rate is 12% (6% CGST plus 6% SGST) or 12% IGST.

[Notification No 11/2017 Central Tax (Rate) Dated 28th June 2017  and Notification No 8/2017 Integrated Tax (Rate) Dated 28th June, 201 ]

Is there any GST Exemption to Construction of Residential , Commercial and Industrial Complex ?

GST Exemption to the following services has been provided  :-

“ Services by way of pure labour contracts of construction, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex.”

“original works” means- all new constructions;

(i) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable;

(ii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise;

[  para 2(zs)]

“Single residential unit” means a self-contained residential unit which is designed for use, wholly or principally, for residential purposes for one family

[  para 2(zze) ]

 “Residential complex” means any complex comprising of a building or buildings, having more than one single residential unit

[ Para 2 ]

[ Notification No 12/2017 Central Tax (Rate) Dated 28th June 2017  and Notification No 9/2017 Integrated Tax (Rate) Dated 28th June, 2017 ] 

Whether Refund of unutilized Input Tax Credit can be claimed  for  Construction Service as mentioned in Para 5(b) of Schedule II of CGST Act )  ?

Refund of unutilized ITC will not be available

[ Notification No. 15/2017-Central Tax (Rate) dated 28-6-2017. ]

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