Advances from flat buyers: when the GST falls due, and what a cancellation does to it

Short answer: a developer's GST on a unit under construction is payable instalment by instalment, from the booking amount onward, at the earlier of the invoice or the receipt. A cancellation can be reversed by credit note only within the statutory window — 30 November of the following financial year, or the annual return if earlier. Outside that window, the developer cannot reverse the tax; the buyer has a refund route of their own.

The supply is the construction, and it is paid for in pieces

A flat sold before the completion certificate is a supply of construction service. The price is collected on a construction-linked plan — booking, agreement, plinth, each slab, finishing, possession — and each collection is a payment for that service.

Time of supply follows the money. For each instalment the tax falls due at the earlier of the invoice for it and its receipt. Where the plan fixes dates, the invoice is due on or before each date whether or not the buyer has paid.

The practical consequence: the GST working for a project is a monthly reconciliation of demands raised and collections received, unit by unit. A developer who pays GST on possession, or on the agreement, has been late on every instalment in between.

The booking amount

Taxable on receipt. An application or booking amount received for a unit under construction is consideration for the construction service, and the GST on it is payable in the month it arrives.

The common treatment — a refundable deposit until the agreement is signed, taxed only then — does not survive where the amount is adjusted against the price, which it invariably is. A deposit that is genuinely refundable in full if the buyer walks away is a different thing, and the receipt should say which.

Rate, and the land deduction

Those effective rates already reflect a one-third deduction for land from the total amount charged. They are applied to the full instalment as invoiced; a further land deduction is not taken.

The one-third basis has been challenged: the Gujarat High Court, in Munjaal Manishbhai Bhatt (2022), read the mandatory deduction down to an option where the actual value of the land is separately ascertainable. Other High Courts have not all followed, and the department continues to apply the one-third basis, so the question should be treated as live rather than settled, and where a project's land value is high relative to construction — a small plot in a central location — it is worth a considered position rather than an assumption either way.

The residential rates were left untouched by the September 2025 rate rationalisation; see the JDA pillar for how they sit with the rest of the project's GST.

Cancellations, and the window that closes

A buyer who cancels two years after booking has paid GST on every instalment to date. Whether that tax comes back depends on when.

Inside the window — by 30 November of the financial year following the one in which the supply was made, or the date of filing the annual return for that year if earlier — the developer issues a credit note, declares it, and the tax is reduced on the developer's return. The refund of price to the buyer carries the GST with it.

Outside the window the developer cannot reverse the tax by credit note. A commercial credit note can still adjust the price, but the GST already paid stays paid on the developer's side.

The buyer's route

For that second case the Board has clarified a route: an unregistered buyer whose booking is cancelled, where the developer can no longer issue a credit note because the time limit has lapsed, may apply for refund of the GST borne on the cancelled unit — within two years from the date of the cancellation letter the developer issues, which makes that letter a document worth dating and keeping.

Three things follow for the developer:

• It is the buyer's application, not the developer's, and it depends on the developer having actually paid the tax on the instalments — the buyer will need the invoices and proof.
• The cancellation clause should say who bears the GST on cancellation and what is refunded, so the price refund and the tax position are not argued separately.
• A cancellation identified early — while the credit note window is open — is reversed cleanly on the developer's side. One identified at the annual return is often already outside it.

Showing the tax to the buyer

GST is shown separately on the tax invoice for each instalment. Beyond GST compliance, that matters for the buyer's own obligation: on a purchase above the threshold the buyer deducts tax at source on the consideration for the property, and the deduction base should be the consideration identified separately from the GST, so that neither side computes it on the wrong figure.

The monthly discipline

1. Demand schedule against collections, unit by unit, every month — invoices raised on or before each due date.
2. Booking amounts taxed on receipt, not on agreement.
3. Cancellations logged with dates, and credit notes issued while the window is open.
4. Post-completion sales separated — a unit sold after the certificate is outside GST, and its collections should not be in the working at all.
5. The same figures reconciled to RERA quarterly filings, because the department reads both — see RERA filings vs GST returns.

The rate applied to an advance follows the project's classification, and the affordable test turns on a gross amount that includes parking and preferential location charges — see RREP or REP.

This is a working reference, not the statute. For anything you are relying on, confirm the section, notification and circular text directly.