GST for ready to move resale flat without flat completion certificate

GST Update on First occupancy requires clarity first Clause (d) of Section 7 of Central Goods and Service Tax Act, 2017 The Schedule II of the CGST Act, 2017 specifies activities to be treated as supply of goods or services. The paragraph 5(b) of the aforementioned Schedule provides that:- “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”  shall be covered under supply of service. The reading of this item of Schedule II may lead to a conclusion that in following two situations the sale of building will not be covered under the definition of supply , accordingly will be excluded from the purview of GST:- 1) Where entire consideration has been received after issuance of completion certificate, or 2) after first occupation Whichever is earlier. Upon completion of the building construction, the builder or the developer of the apartment needs to apply for the ‘building completion certificate’ with the local authorities. Civic authorities issues Completion Certificate. So, in cases where the entire consideration is received after getting the completion certificate or first occupation; the sale of building will come out of purview of GST. However, the word "first occupancy" is very critical in the entire issue. The language suggests that even if a single flat is occupied, the entire project will come out of purview of GST. Practically, the project may compromise of more than one building, say 10 buildings may be there in a single project. Say, if two buildings are under-construction and remaining 8 buildings have not yet started and occupancy of one flat out of the two under-construction buildings is given, the entire project (i.e. all the 10 buildings) will come out of the purview of GST.

Hi Narayandas, Thank you for your reply. Below answer I have received from CBIC Mitra Helpdesk. Dear Sir/Mam, Thank you for contacting CBIC Mitra Helpdesk. We have received your support request, and we understand you want clarification in case resale of flat which was purchased before GST regime regarding:-

• Additional taxes applicable.
• Difference amount that need to be pay.
• VAT applicability at the time of purchase.

This is to inform you that,

• You don’t need to pay any additional amount at the time of resale of flat.
• Also, there is no such difference amount that need to pay by you.
• To have clarification regarding the VAT applicability, kindly contact to the state tax authority.

For further clarification regarding the invoice kindly refer the CGST rules, click http://www.cbic.gov.in/htdocs-cbec/gst/18.07.2019_CGST_Rules-2017-Part-A.pdf Regards,

Hi Narayandas, Thank you for your reply. First owner has paid entire consideration including VAT to to builder. Though this flat has not received CC but flat is in ready to move condition and CC will be received in the last week of December. I am buying this flat from first owner and not paying any amount to builder. Then to whom I need to pay GST amount. Regards, Sanjay        

Hi Narayandas, Thank you for your reply. I am purchasing this flat from first owner. First Owner has paid entire consideration including VAT to builder. First owner has individual sale agreement for that flat. This flat is ready to move flat only completion certificate is not received. I am not paying any amount to builder so to whom I need to pay GST amount? Regards, Sanjay  

GST on resale flats is not applicable if the builder has obtained completion certificate. However, if the builder or developer has not obtained the CC then the real trouble begins. Those flats will be at sub par with the under construction property, hence GST will be applicable as such.

The developers cannot afford to pass this cost on to the buyers so I believe they absorb the cost and keep the sale cycle going.