GST on Sale of Buildings
An Interactive Guide to Understanding Tax Implications in India
The General Rule: Schedule III of the CGST Act, 2017
The Central Goods and Services Tax (CGST) Act specifies certain activities that are treated neither as a supply of goods nor a supply of services. As per Paragraph 5 of Schedule III of the Act, the "sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building" is excluded from the scope of "supply". This means if a completed building is sold, and the entire payment (consideration) is received after the issuance of a completion/occupancy certificate, no GST is applicable.
Scenario Explorer
Has the Occupancy Certificate (or Completion Certificate) been issued by the competent authority at the time of the transaction?
What portion of the total payment for the property was received before the OC was issued?
Was the sale deed registered before or after the OC was issued?
Analysis
Common Scenarios Explained
Situation: An individual purchases a ready-to-move-in apartment. The Occupancy Certificate (OC) has already been issued. The entire payment is made and the sale is registered after the OC date.
GST Implication: No GST is applicable.
Reason: This is a straightforward sale of a completed building where the entire consideration is received after the completion certificate. It falls squarely under Schedule III of the CGST Act and is not considered a supply.
Situation: A buyer books an under-construction flat and pays 20% of the value as an advance. The builder receives the OC a few months later. The remaining 80% is paid and the sale is registered after the OC is issued.
GST Implication: GST is applicable only on the 20% portion paid before the OC.
Reason: Any consideration received before the OC is for the supply of a service (construction service) as per Schedule II. The portion of consideration received after the OC is for the sale of a completed building, which is not a supply. Therefore, GST is levied only on the pre-OC payment.
Situation: A buyer purchases an under-construction property. The entire payment is made and the sale is registered before the builder applies for or receives the OC.
GST Implication: GST is applicable on the entire transaction value.
Reason: Since the entire consideration is received before the issuance of the completion certificate, the transaction is treated as a supply of construction services under Schedule II of the CGST Act. The exclusion under Schedule III does not apply.
Glossary
- Supply
- In GST law, "supply" is the taxable event. It includes all forms of supply of goods or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made for a consideration.
- Consideration
- Refers to the payment made or to be made, whether in money or otherwise, for the supply of goods or services.
- Occupancy/Completion Certificate (OC)
- A legal document issued by a local government agency or planning authority, certifying that a building is compliant with all applicable building codes and laws, and is in a condition suitable for occupancy.
- Schedule II & III
- Schedules to the CGST Act. Schedule II classifies certain activities as either a supply of goods or a supply of services. Schedule III lists activities that are not considered a supply at all.
