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GST UPDATE ON ADDITIONAL CHARGES COLLECTED BY BUILDER

GST UPDATE ON ADDITIONAL CHARGES COLLECTED BY BUILDER
 
GST UPDATE ON ADDITIONAL CHARGES COLLECTED BY BUILDER:-

There has been confusion regarding the rate of GST leviable on additional charges collected by builder in lieu of sanitary fittings, power backup etc. It is pertinent to mention that recently government has released FAQ on GST in respect of construction of residential complex by builders/developers wherein this issue has also been covered. It has been stated in question no. 12 of the FAQ that if the consideration is in respect of the additional services provided before the first occupation or before the receipt of occupancy certificate, the additional charges will form part of the transactional value or total consideration for the supply of the construction service and so GST is payable on such additional charges at the rate applicable for construction of residential complex service. It is further clarified that if the consideration is towards sanitary fittings, power back up charges which is undertaken after the first occupation or receipt of occupancy certificate, such additional consideration will not be part of construction of residential complex service. In that case, the additional charges would be treated as towards an independent works contract service which is distinct from the initial construction of residential complex service. Hence, in this case, additional charges would attract GST @ 18% without any abatement from the value. From the above clarification, it appears that the rate of GST will be determined on the basis of time at which such additional charges are recovered from the prospective flat buyers.
 
Similarly, there is confusion as regards the rate of GST applicable in case of ‘other charges’ collected by the builders from the buyers such as preferential location charges, parking charges, firefighting installation etc. It is clarified vide FAQ that such charges are naturally bundled and supplied in conjunction with the construction service and so GST at the rate of 18% on 2/3rd value of such naturally bundled services is payable on the said charges.  Although, there is disclaimer at the end of the FAQ that the replies given have no legal backing but the assessees may place reliance on the answers and prove their bonafide belief.
 
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