Regarding GST on under construction flat

Dear Sir,

In reference to your query, the simplest way of identifying whether your builder has exercised the option or not is to check the invoice issued by him post 1-Apr-2019. If the builder has filed the application, then the effective rate would be 1%/5% as applicable otherwise 8%/12%.

Should there be a scenario, wherein the builder has not raised any invoice till date from thereon, then you being a customer and well within your rights, can approach the builder seeking reply from him whether he has availed such option or not.

However, please note that this option was provided to the builder and not flat buyers. So if your builder has chosen to continue under old rates, i.e. 8%/12% as applicable, then you as a customer have no recourse, save to the extent of seeking passing on the reduction of ITC under anti profiteering provisions.

In case your builder has opted to switch to new scheme, then in that case, the builder would be charging you tax at reduced rate of 1%/5% as applicable, however he would be denied the benefit of ITC, which would somewhere increase his cost and the same would ultimately be factored in somewhere in recoveries made from you.

In a nutshell, if your builder has not availed the option of reduced rate, then you as a flat buyer have no recourse and will have to pay the taxes so charged by the builder at higher rate.

Please advise in case of any other clarification.

Thanks & Regards,

CA Aditya Dhanuka.

Hi

This needs to be checked with the builder only.

Further, in your case, since entire payment was made before the date of the lower rate option availability to builder, the old rates will be applicable. 

The amendment of reduced rates from 1st April 2019 was prospective therefore where any amount is charged or given after 1st April 2019 will be eligible for reduced rate if the builder has opted for reduced rates without ITC.

How to know whether builder has opted or not? The builder was required to submit a written application to the department manually. You can ask the builder for such application duly received by the department under stamp and signature.

That will be the proof as to whether the builder has opted or not. Apart from this there can be no conclusive evidence.

Even GST returns cannot be relied upon.

Hope this helps.

1) The cut-off date for exercising option of reduced rates was 01.04.2019. All installments paid before 01.04.2019 attracts old GST rates of 8%/12%. Installments paid on or after 01.04.2019 may attract new GST rates if builder has not exercised old option.

2) If you had paid installments on or after 01.04.2019 with 8%/12% and you want to confirm the applicability of such rates then you may contact other owners who booked flat on or after 01.04.2019. Also you may contact jurisdictional GST officer of builder to check the correct rates.