GST on the construction of residential and commercial properties is 18% currently. When it comes to smaller projects specifically, some clients aren't willing to pay an extra 18% on the entire project cost. At the same time, it is hard to stay competitive with other players who don't claim gst. What can be an alternative?
4 Replies
sabyasachi mukherjee
(27574 Points)
Replied 12 April 2023
Big residential projects waive a certain portion of gst which they receive as input credit from their counterparts.
Ria
(Student)
(69 Points)
Replied 12 April 2023
Hello, thank you for this. Can you please elaborate or direct to the relevant provision/section so I can read more about it?
CA Mayank A Jain
(Chartered Accountant in Practice)
(1260 Points)
Replied 12 April 2023
Construction of residential projects is presently 1.5% or 7.5% without ITC benefit.
Where the customer is not willing to pay entire GST, as a business decision, you can bear a portion of GST so that the customer pays the balance.
Pankaj Rawat
(GST Practitioner)
(55052 Points)
Replied 13 April 2023
Dear Ria.
As per Notification 11/2017 CT (rate)
Construction of affordable residential apartments: Rate is 1.5 percent without ITC (Deduction of value of land 1/3rd . so 1.5X2/3 comes to 1% without ITC).
Construction of residential apartments other then affordable residential apartments : Rate is 7.5 % (Deductible 1/3rd value of undivided share of land. so 7.5 x 2÷3 comes to 5% without ITC)
so as per your query you do not cover under the construction services provided as in capacity of promotor in Residential Real Estate Projects (RREP) . You are providing construction services as work contractor (ie individual house construction) so in that case the rate is 18% with ITC.
So as such yes its hard to survive kind of your business model.
Note : Recipient of your services (Construction services) cannot claim ITC.
As per Notification 11/2017 CT (rate)
Construction of affordable residential apartments: Rate is 1.5 percent without ITC (Deduction of value of land 1/3rd . so 1.5X2/3 comes to 1% without ITC).
Construction of residential apartments other then affordable residential apartments : Rate is 7.5 % (Deductible 1/3rd value of undivided share of land. so 7.5 x 2÷3 comes to 5% without ITC)
so as per your query you do not cover under the construction services provided as in capacity of promotor in Residential Real Estate Projects (RREP) . You are providing construction services as work contractor (ie individual house construction) so in that case the rate is 18% with ITC.
So as such yes its hard to survive kind of your business model.
Note : Recipient of your services (Construction services) cannot claim ITC.
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