In its 33rd meeting held on 24th February'2019, the GST Council announced a major change in the rate structure of real estate sector. From the earlier rate of 12%/8% (Other Residential /Affordable), the rates were slashed to 5%/1% with the condition that ITC would not be available to the project developers. This change has been made effective from 1st April'2019 and legal notifications (NN 03/2019 to 08/2019 CT(Rate) and NN 16/2019 CT (and respective notifications in SGST/UTGST/IGST)) have been issued for the same which are summarized below.
Conditions for New Rate
In respect of projects commencing after 1st April'2019 , developer has to mandatorily pay under the new rates and comply with the conditions provided for the same. For ongoing projects (as defined above) , develop er has the option to opt for either the old rate or the new rates with conditions. The developer who wants to opt for old rate for ongoing projects has to file Annexure IV on the portal by 10th May'2019 , otherwi se it shall be deemed that new rates are opted by the developer. The conditions are given below:
- a. No ITC except to the extent specified. Such eligible ITC is calculated considering flats sold under old rate and percentage invoicing done for such flats;
- b. Developer pays tax on services provided to land owner against TDR (given below in detail);
- c. Land owner can avail ITC of tax paid to buil der if he sells under construction flats on his account and pays tax on the same;
- d. Cement purchased fr om unregiste red supplier, the builder shall be liable to pay tax under RCM at applicable rate i.e. 28%;
- e. 80% of va lue of input and input services should be received fr om registe red supplier;
- f. Where in a financial year, such 80% threshold is not me t, tax has to be paid by buil der on shortfall @ 18%;
Exemption is provided in TDR used in such projects as given below:
- Exemption by way of supplying services of Transfer of Development Rights (TDR), Floor Space Index (FSI), long term lease on or after 1st April'2019 in proportion to total residential apartments in the project.
- However, on receipt of Completion Certificate (CC) or first occupation, whichever is earlier, tax have to be paid on TDR in proportion to unsold residential apartments on that date. However, such tax payable shall not exceed 5%/1% value of the Other residential/ Affordable residential apartment respectively.
- Value of TDR in case of supply of apartments against such TDR shall be equal to the value of apartments so given to the landowner.
- Such tax on TDR/FSI/Lease shall be paid by the developer (promoter) under RCM as the recipient and not the landowner.
- Time of Supply to pay tax on TDR/FSI/Lease, as well as tax o n s upply of apartments to landowner against such TDR, shall arise at the time of receipt of CC or first occupation, whichever is earlier.
*All projects are called REP (Real Estate Projects) as per RERA (Real Estate Regulation and Development Act). RREP (Residential Real Estate Projects) shall mean a REP in which the carpet area of the commercial apartments is not more than 15 percent of the total carpet area of all the apartments in the project.
**Ongoing project shall mean a project which meets all the following conditions, namely-
- (a) commencement certificate by the competent authority, if required, has been issued up to 31st March, 2019;
- (b) It is certified by any architect/chartered engineer/ licensed surveyor that construction of the project has started on or before 31st March, 2019;
- (c) completion certificate has not been issued or first occupation of the project has not taken place on or before the 31st March, 2019; 11
- (d) apartments under the project have been, partly or wholly, booked on or before the 31st March, 2019.
***Affordable residential apartment shall mean:
(a) In terms of size - having carpet area up to 60 square meter in metropolitan cities or 90 square meter in cities other than metropolitan cities.
(b) In terms of cost - The gross amount charged is not more than 45 lakhs.
Metropolitan cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR).
With Warm Regards,
Atul Kumar Gupta
B Com (Hons) FCA, FCMA, LLB, MIMA, CIQA, PGDEMM
Vice President, ICAI
M: 9810103611 E: email@example.com