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Service in the interest of Justice

GST versus Service Tax for Delayed Possession

The GST came into effect as on 01.07.2017, the construction of residential complexes or a part thereof were covered under the taxable service as notified under chapter 99 of the Service Tax Act.

The Buyers Agreement between builder & buyer cannot provide government charges and taxes including but not limited to Service Tax, whether levied now or in future as well any retrospective Tax to the account of the Buyer.

The consumers/homebuyers whose possession is not delivered till 2017 have incurred an incremental liability of 2.02% by virtue of GST i.e., a central levy merging into two further components to CGST and SGST@9% each.

GST Delay in Possession RERA Lawyer Punjab Haryana

The breakup of the preGST tax payment structure by the Opposite Party and after imposition of GST structure is explicitly explained as follow:

Prior to GST i.e. as on 30.06.2017

  1. Service Tax Rate- 15% (including cess approximately)

For Real estate-

  1. Service Tax on Basic and EDC/IDC was levied at 30%

I.e. 70% land abatement, Effective Rate -4.5%

Service Tax on Prime Location Charges (PLC) was levied at 15% on full value

Haryana Value Added Tax (HVAT) - Based on Actual tax born by developers

Rate-1.05% of applicable amount

  1. Post GST on 01.07.2017

GST-18% (both CGST and SGST)

Abatement for land- On third on Value (including basic, PLC and EDC/IDC)

Effective Rate -12%


Anti-Profiteering benefit-3.9% on applicable amount on which GST is charged from Opposite Party. The builders may pass on benefit at the time of offer of possession to its all customers.

Working / impact

Service Tax- 4.5% on 95% and 15% on 5%=5.03%

HVAT – 1.05%

Total – 6.08%


GST- 12%

Less- Anti profiteering Benefit – 3.9%

Net Tax -8.1%

Net impact due to delay – 8.10% minus 6.08%

=2.02% on payment of GST.


That is respectfully submitted in light of the abovementioned calculations, it is clear that the additional burden on the homebuyers after incoming of GST is 2.02%. In any case when the homebuyers are offered possession after 01.07.2017, they are asked to bear the additional burden of 2.02% which is unfair trade practice on the part of builders.

If the delay wouldn’t have been caused, there was no need to pay 2.02% by homebuyers. Consumer Courts and RERA Authority (Punjab & Haryana Panchkula) specifically are passing on judgments where the GST liability is solely born by developer or mutually with home buyer.

Before filing a case in RERA Punjab or Haryana RERA Panchkula Authority, one must understand the impact of GST on their case if the possession is not delivered before the incoming of GST. The same thing goes for Punjab & Haryana State Consumer Commission and District Consumer Forum Chandigarh Panchkula Mohali.

For case specific advice, one can call a good/competent RERA or Consumer Court advocate to understand the issue in detail.

For more info, please call 99888-17966.

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