Real Estate Business To Pay 18% GST On Consideration Received From Home Buyers: AAR

The Maharashtra Authority of Advance Ruling (AAR) has ruled that real estate business to pay 18% Goods and Service Tax (GST) on consideration received from home buyers.

The bench of D. P. Gojamgunde and Priya Jadhav have observed that rate of Got to be paid by the applicant would be the normal rate of tax i.e. 18% [(9% CGST+ 9% SGST) with ITC]. Applicable deduction for value of transfer of land or undivided share of land, which is to be 1/3rd of the total amount charged will be available.

The AAR further stated that the applicant is bound by the option exercised by the then-promoter of payment of GST at the effective rate of 12% with input tax credit for sale of residential premises and also for premises already sold by the then promoter of the Project. The applicant is required to discharge the GST at the rate of 12% with input tax credit on the balance consideration received from the Buyers to whom premises are already sold by the then promoter.

The applicant, Godrej Residency is engaged in the real estate business.

The applicant enters into agreements for the sale of under-construction residential or commercial properties with prospective buyers. The applicant has entered into an agreement with Neelkamal Realtors Towers Private Limited (hereinafter referred to as 'the then-promoter') for purchasing the project land with the existing structure thereon and all the identified liabilities including the liability of amounts collected from customers of the project through a conveyance deed signed on 24th December 2022 for an agreed consideration.

The applicant sought the advance ruling in respect of GST rate that is to be paid by the applicant on the consideration for sale of residential premises to buyers.

The AAR held that since the applicant has exercised the option for paying tax at the rate as specified in clause (if) of SI. No. 3ofNotification No. 11/2017 Central Tax (Rate), dated 28-6-2017 as amended by Notification No. 03/2019- Central Tax (Rate), dated 29-3-2019 in respect of the ongoing project "VRINDHAVAN", the old rate of tax at 18% [9% CGST +9%SGST] with input tax credit is applicable for all the apartments/ villas comprised in the project- "VRINDHAVAN". Therefore, the applicability of normal rate will be for the entire project and the applicant will not have the option to opt for a GST rate of 5% without ITC for new buyers.

Ruling Details

Applicant Name: Godrej Residency

Date: 27/03/2025

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