Gujarat High Court offers GST relief to homebuyers of certain properties

Currently, 18% GST is levied on construction services in real estate. However, one-third abatement is given for land, due to which effective value of taxation comes to 12%

Buyers of properties whose land value is more than a third of that of the home, will get relief as the Gujarat high court has said that the current mechanism in the goods and services tax (GST) gives only one-third deduction while levying tax on construction in the real estate is arbitrary.

Currently, GST of 18 per cent is levied on construction services in real estate. However, one-third abatement is given for land, because of which the effective value of taxation comes to 12 per cent. It should be noted that GST is levied only when the house is purchased without occupancy certificate.

However, the court held that one-third abatement is arbitrary.

Abhishek A Rastogi, partner of Khaitan & Co. who is arguing various writs in different courts on GST, said there is no GST on transfer of land and building and hence the actual value of land must be excluded when GST is made applicable on such contracts.

In light of this logic, it should be ensured that the higher deduction towards the value of land is available and it is not restricted to just one third deduction.