GST -Real Estate Sector effective from 1st April, 2019

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B.Venkateswaran, IRS

In order to boost the Real Estate  sector, (Residential) the GST council in its 34th GST Council Meeting,  has recommended GST Rate of 1% for Residential Construction Projects (For Homes Purchased Under Credit-Linked Subsidy Scheme) and 5% for other construction projects. The same has been notified now and is applicable with effect from 1st April 2019.

Rates of GST:

–      Affordable housing:  1% without ITC

–      Other than affordable segment: 5% without ITC

Definition of affordable housing:

A residential house/flat of carpet area of up to 90 Sqm in non- metropolitan cities/towns and 60 Sqm in metropolitan cities having value up to Rs. 45 lacs (both for metropolitan and non- metropolitan cities).

Metropolitan Cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR).

New rate of 1% is available for,

  1. All houses which meet the definition of affordable houses as decided by GSTC (area 90 sqm in non- metros / 60 sqm in metros and value upto RS. 45 lakhs), and
  2. affordable houses being constructed in on-going projects under the existing Central and State housing schemes presently eligible for concessional rate of 8% GST (after 1/3rd land abatement).

New rate of 5% is available for:

  1. All houses other than affordable houses in on-going projects whether booked prior to or after 01.04.2019. In case of houses booked prior to 01.04.2019, new rate shall be available on instalments payable on or after 01.04.2019.
  2. All houses other than affordable houses in new projects.
  3. Commercial apartments such as shops, offices etc. in a residential real estate project (RREP) in which the carpet area of commercial apartments is not more than 15% of total carpet area of all apartments.

Mandatory condition for opting new rate of tax:

–      At least 80% of the total purchases (excluding capital goods, TDR, FSI, high speed diesel, electricity, motor spirit, etc) should be procured from registered dealers.

–      The criteria of 80% should be applied to each project on a financial year basis.

–      In case of shortfall, tax has to be paid on Reverse charge only to the extent of shortfall.

–      The rate of tax applicable for shortfall would be 18%, in case of goods and services other than cement.

–      In case of cement the rate of tax would be 28%.

–      In case of capital goods each and every purchase of capital goods should be procured from registered dealers only.

–      In case of purchase of capital goods from unregistered dealer, the entire liability to pay tax would be on the promoter under reverse charge mechanism.

Option in respect of on-going projects

–      One-time option (to be exercised once by 10th May, 2019) to continue to pay tax at the old rates (effective rate of 8% or 12% with ITC) on on-going projects where construction and actual booking have both started before 01.04.2019 and which have not been completed by 31.03.2019 or can oft for new rate subject to reversal of ITC already availed.

–      On-going projects opting for new tax rates shall reverse the ITC as per method prescribed under Annexure-I (For REP Projects) and Annexure-II (For RREP Projects) of the Notification No. 11/2017- Central Tax(Rate) dated 28-06-2017as amended by Notification No. 03/2019 CT dated 29-03-2019 .

Hope the new rate now prescribed will provide necessary Oxygen for Real Estate Sector and fulfil the dreams of the Millions to get affordable house.

(The Author is Asst.Commissioner Central GST (Retired) and Consultant for GST,Customs, Excise and Service Tax)
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