GST-RERA Connection: What Every Construction Business Must Know About RERA Registration and GST Compliance

The construction industry in India is governed by several important laws, two of the most significant being RERA (Real Estate Regulatory Authority Act, 2016) and GST (Goods and Services Tax Act, 2017). Both play a crucial role in regulating real estate transactions, safeguarding buyers’ interests, and ensuring developers comply with tax regulations. Yet, many small and medium construction businesses struggle to understand the connection between RERA registration and GST compliance, especially when notices arrive from the tax department. This article explains the relationship between RERA and GST, why you might receive a notice, and how to respond properly.

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Understanding RERA and GST

RERA was introduced to bring transparency and accountability to the real estate sector. Its key objectives include:

• Protecting the interests of homebuyers.

• Ensuring timely completion of real estate projects.

• Promoting accountability among developers.

• Maintaining standardized project information such as approvals, timelines, and pricing.

On the other hand, GST is an indirect tax that applies to the supply of goods and services, including construction services. Developers providing construction or real estate services must comply with GST regulations, which includes registration, invoicing, and periodic returns filing.

Although these two laws serve different purposes—RERA focusing on transparency in real estate and GST on tax compliance—they intersect in practical terms because both require project-level data and revenue reporting.

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Why You Might Receive a GST Notice After RERA Registration

Suppose you are a small construction business and have recently registered a new project under MahaRERA. You might be surprised to receive a notice from the GST department asking why GST registration has not been done. Why does this happen?

The primary reason is that government departments are legally allowed to share information among themselves to ensure transparency and tax compliance. When you register a project with RERA, details such as your PAN (Permanent Account Number) and project information may be automatically accessible to the GST department. If your PAN does not show an active GST registration, an automatic notice may be generated asking why GST compliance has not been fulfilled.

This is a routine process and should not cause panic. It is intended to ensure that all construction businesses comply with tax laws from the start.

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Do You Need GST Registration If Construction Hasn’t Started?

Many developers assume that GST registration is only required once construction begins or flats are sold. This is not entirely correct.

According to Section 22 of the CGST Act, 2017, GST registration is mandatory if the aggregate annual turnover exceeds ₹20 lakh (₹10 lakh for certain special category states).

Key points to understand:

1. Aggregate turnover is not limited to completed sales; it includes:

   • Advance payments received from customers for bookings.

   • Any other taxable receipts related to the project.

2. Even if no flats have been sold yet, receiving advances for bookings can push your turnover above the threshold.

So, if your total turnover (including advances and other taxable income) exceeds ₹20 lakh per year, GST registration is mandatory even before construction begins.

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How to Respond to a GST Notice

Receiving a GST notice can be stressful, but ignoring it can lead to serious consequences. Here’s a step-by-step guide to responding correctly:

1. Do Not Ignore the Notice

If ignored, the GST department may proceed with ex-parte orders, which can include fines, penalties, and interest. Responding promptly ensures your case is considered fairly.

2. Consult a Professional

Reach out to a tax consultant or chartered accountant (CA) to:

• Review your turnover and project receipts.

• Determine whether GST registration is required based on actual income.

• Draft a proper response to the notice.

3. Analyze Your Turnover

Check whether your aggregate turnover has exceeded the ₹20 lakh threshold. This includes:

• Advance payments from clients.

• Booking amounts.

• Other taxable income related to your project.

4. Respond Appropriately

• If turnover exceeds ₹20 lakh: Apply for GST registration immediately. Include the Application Reference Number (ARN) in your response to the notice, indicating that registration is in progress.

• If turnover is below ₹20 lakh: Prepare a detailed explanation stating that your turnover is currently below the GST threshold. Attach supporting documents such as:

  • Bank statements

  • Booking registers

  • Any relevant receipts

Make it clear that you will register for GST as soon as the turnover crosses the threshold, ensuring compliance with the law.

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Common Questions Developers Ask

Q1. Does RERA registration automatically create GST liability?

No. RERA registration provides project details to the government but does not automatically register you for GST. GST registration depends on your turnover and taxable supplies.

Q2. Are booking advances taxable under GST?

Yes. Booking advances are considered part of aggregate turnover and may be subject to GST if they exceed the threshold.

Q3. Can small developers avoid GST compliance by delaying RERA registration?

No. Delaying RERA registration does not exempt you from GST. Both laws have independent compliance requirements, and failure in either can lead to penalties.

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Importance of Compliance

Compliance with both RERA and GST has several benefits:

1. Builds credibility: Registered developers are seen as transparent and trustworthy by buyers.

2. Avoids penalties: Proper registration and timely filing prevent fines and legal issues.

3. Ensures smooth operations: GST registration allows you to claim input tax credit on construction materials and services, reducing overall project costs.

4. Facilitates future business: Banks, investors, and customers prefer dealing with tax-compliant developers.

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Step-by-Step Checklist for Developers

To make sure you are on the right side of both RERA and GST:

1. Register all projects with RERA before marketing or selling flats.

2. Maintain accurate records of advances and other receipts.

3. Monitor aggregate turnover to check if GST registration is required.

4. Consult a CA regularly for compliance advice.

5. Respond to notices promptly with correct documentation.

6. Apply for GST registration immediately once turnover exceeds ₹20 lakh.

7. Maintain RERA and GST documents systematically for audits or inspections.

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Conclusion

The connection between RERA registration and GST compliance can seem confusing for small and medium construction businesses. However, understanding the legal framework is crucial.

• RERA registration does not automatically mean GST registration, but it triggers information sharing that may prompt GST notices.

• GST registration depends on aggregate turnover, including booking advances and other taxable receipts.

• Ignoring a GST notice can lead to fines, but responding with accurate information and proper documentation keeps you compliant and avoids complications.

By staying informed and maintaining proper records, developers can focus on building projects confidently, knowing they are aligned with both RERA and GST regulations.

In today’s real estate market, transparency, compliance, and timely action are the keys to long-term business success. A proactive approach not only ensures legal compliance but also builds trust with buyers and financial institutions.