Recently, the GST Council has discussed the operational details for implementation of recommendations made by the council in 33rd meeting in its 34th GST Council meeting held on March 19, 2019. The council proposed various recommendations to boost the residential segments of the real estate sector. Notification in this regard is pending which shall provide a better understanding of the entire updations.
Key Highlights of the GST Council Meeting are as under:-
A. New GST rate structure:-
|In case of Affordable housing ||Others|
|1% ( without ITC)||5% ( without ITC)|
*Definition of Affordable housing:-
In terms of metropolitan cities:- A residential house/flat of carpet area of 60 sqm. having value upto Rs.45Lacs. Both conditions have to be fulfilled simulatiously. Metropolitan cities are Bengalaru, Chennai, Delhi NCR (Limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai ( whole of MMR)
In terms of non-metropolitan cities:- A residential house/flat of carpet area of 90 sqm. having value upto Rs.45Lacs. Both conditions have to be fulfilled simulatiously
Note:- Construction of commercial units shall be taxable @ 12% effectively except commercial units in a residential real estate project, having not more than 15% of total carpet area of all apartments.
Conditions for New Tax Rates for Both Projects:-
- Input tax credit shall not be available.
- 80 per cent of inputs and input services (other than capital goods, transfer of development rights (TDR) ,floor space index(FSI), long term premiums shall be purchased from a registered person. In case of shortfall of purchases below 80 percent, builders shall be liable to pay GST under Reverse charge mechanism (RCM)
- Cement purchased from unregistered person GST shall be paid at 28 percent
- In case of other input /input services GST shall be paid at 18 percent
- Capital goods purchased from the unregistered person shall be subject to GST under RCM at the applicable rates
B. Option to Pay GST at old Rates :-
In case of ongoing Projects, one time option is available to promoters (builders) to pay tax at old rates i.e. the effective rate of 8 percent or 12 percent with the input tax credit. However, the option shall be required to be exercised within the prescribed time limit subject to fulfillment of the below mentioned conditions cumulatively:-
1. Construction have been started before 01.04.2019
2. Actual bookings have been started before 01.04.2019
Transition for ongoing projects opting for the new tax rate:-
- Ongoing projects (buildings where construction and booking both had started before 01.04.2019) and have not been completed by 31.03.2019 opting for new tax rates shall transition the ITC as per the prescribed method.
- Transition of ITC shall be available on a pro-rata basis in case of ongoing projects of houses other than affordable and commercial apartments fulfilling the condition mentioned above.
- For a mixed project transition shall also allow ITC on pro-rata basis in proportion to carpet area of the commercial portion in the ongoing projects (on which tax will be payable @ 12% with ITC even after 1.4.2019) to the total carpet area of the project.
C. Treatment of TDR/FSI and a long-term lease for projects commencing after 1 April 2019:-
Supply of TDR/FSI, long term lease shall become exempt if below mentioned conditions are fulfilled:-
- Constructed flats are sold before issuance of completion certificates(CC)
- Tax has been paid on the constructed flats
If both the conditions mentioned above are not fulfilled, Supply of TDR/FSI, long term lease shall become taxable and in such scenario below mentioned provisions shall apply:-
- Tax on the supply of TDR/FSI, the long term lease shall be paid by the builder under RCM
- Time of supply be a date of issuance of completion certificate
- GST rate would be 1 % for affordable housing and 5% in other cases
D. Time of Supply in case of Supply of Constructed houses to the landowner in a Joint Development agreement shall be the date of Completion certificate.
With Warm Regards,
Atul Kumar Gupta
B Com (Hons) FCA, FCMA, LLB, MIMA, CIQA, PGDEMM
Vice President, ICAI
Author of "Comprehensive Guide to Service Tax (14th Edition)"
& "GST Concept & Roadmap (3rd Edition)"
M: 9810103611 E: email@example.com