12% GST on Payment made after GST Rollout towards Under Construction Properties [Read Clarification]

The Government has clarified the applicability of Goods and Services Tax (GST) on under construction properties.

As per the new tax law, GST would not be applicable to ready-to-move-in properties constructed after the implementation of GST on 1^st July 2017.

It was clarified that in case of under construction properties, where entire payment was made before the rollout of GST, 4.5% GST would be levied.

A clarification issued by the Government said that “this transaction will attract Service Tax at the rate of 4.5% because as for the point of Taxation Rules, 2011 applicable to service tax, where the invoice was raised or payment was made prior to the appointed date under GST, the point of taxation arose before the appointed day and thus such transaction attracts service tax and not GST.”

In case of part payment made to the builder in respect of under construction properties, before the rollout of GST, 4.5% of Service Tax is applicable on such invoices raised or consideration received. However, payment made by the buyer to the builder on or after 1^st July against invoices issued on or after 1^st July shall attract 12 per cent GST.