The Central Board of Indirect Taxes & Customs (“CBIC”) has issued a Press Release dated December 08, 2018 which specifies the effective rate of taxes on complex, building, flat etc. It is further stated that there is no GST on sale of complex/ building and ready to move-in flats where sale takes place after issue of completion certificate by the competent authority. GST is applicable 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 following are effective rate of tax and credit available to the builders for payment of tax are summarized in the table for Pre – GST and Post GST regime:-
| Period | Output Tax Rate |
Input Tax Credit |
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 (ITC) 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% |
| Post -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 to10%. |
Effective GST incidence, for affordable segment and for another segment has not increased as compared to pre- GST regime. |
The affordable housing scheme will attract GST at the rate of 8%. It is further guided that to offset the liability the builders should utilise their accumulated Input Tax Credit. For projects other than affordable housing segment, it is expected that builders should pass on the benefits of lower tax burden to the buyers of property by way of reducing prices or by instalments.
Press Release can be accessed at: http://www.cbic.gov.in/resources//htdocs-cbec/press-release/Press_Release_0812.pdf;jsessionid=2ACB214126B5D960B74DEB2711814F16