The new GST rate structure notified for real estate sector effective from 01-04-2019 has raised a number of issues. The FAQs below are the top 10 questions that are meant for the understanding of all stakeholders in the real estate sector. They do not have the force of law. In case of conflict, the gazette notifications, which have legal force, shall have precedence.
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S. No. |
Question | Answer | ||||||||||||
| 1. | What are the rates of GST applicable to the construction of residential apartments? | With effect from 01-04-2019, the effective rate of GST applicable to the construction of residential apartments by promoters in a real estate project are as under:
The above rates are effective from 01-04-2019 and are applicable to the construction of residential apartments in a project which commences on or after 01-04-2019 as well as in on-going projects. However, in the case of the on-going project, the promoter has an option to pay GST at the old rates, i.e. at the effective rate of 8% on affordable residential apartments and effective rate of 12% on other than affordable residential apartments and, consequently, to avail permissible credit of inputs taxes; in such cases the promoter is also expected to pass the benefit of the credit availed by him to the buyers. |
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| 2. | What is an affordable residential apartment? | Affordable residential apartment is a residential apartment in a project which commences on or after 01-04-2019, or in an ongoing project in respect of which the promoter has opted for new rate of 1% (effective from 01-04-2019) having carpet area up to 60 square meters in metropolitan cities and 90 square meters in cities or towns other than metropolitan cities and the gross amount charged for which, by the builder is not more than forty-five lakhs rupees. [Cities or towns in the notification shall include all areas other than the metropolitan city as defined, such as villages.]
In an ongoing project in respect of which the promoter has opted for new rates, the term also includes apartments being constructed under the specified housing schemes of Central or State Governments. [Metropolitan cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (the whole of MMR) with their geographical limits prescribed by Government.] |
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| 3. | What is an on-going project? | A project which meets the following conditions shall be considered as an ongoing project.
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| 4. | Does a promoter or a builder have the option to pay tax at old rates of 8% & 12% with ITC? | Yes, but such an option is available in the case of an ongoing project. In case of such a project, the promoter or builder has the option to pay GST at an old effective rate of 8% and 12% with ITC.
To continue with the old rates, the promoter/builder has to exercise one time option in the prescribed form and submit the same manually to the jurisdictional Commissioner by the 10th of May, 2019. However, in case where a promoter or builder does not exercise option in the prescribed form, it shall be deemed that he has opted for new rates in respect of ongoing projects and accordingly new rate of GST i.e. 5%/1% shall be applicable and all the provisions of new scheme including transitional provisions shall be applied. There is no such option available in case of projects which commence on or after 01.04.2019. Construction of residential apartments in projects commencing on or after 01.04.2019 shall compulsorily attract a new rate of GST @ 1% or 5% without ITC. |
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| 5. | What is the rate of GST applicable to the construction of commercial apartments [shops, godowns, offices etc.] in a real estate project? | With effect from 01-04-2019, effective rate of GST, after deduction of the value of land or undivided share of land, on the construction of commercial apartments [shops, godowns, offices, etc.] by the promoter in real estate project are as under:
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| 6. | What is a Residential Real Estate Project? | A “Residential Real Estate Project” means a “Real Estate Project” 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. | ||||||||||||
| 7. | What are the criteria to be used by an architect, a chartered engineer or a licensed surveyor for certifying that construction of the project has started by 31st March 2019 | Construction of a project shall be considered to have been started on or before 31st March 2019, if the earthwork for site preparation for the project has been completed, and excavation for the foundation has started on or before the 31st March 2019. | ||||||||||||
| 8. | Does a promoter/builder have to purchase all goods and services from registered suppliers only? | A promoter shall purchase at least eighty percent. of the value of input and input services, from registered suppliers. For calculating this threshold, the value of services by way of grant of development rights, long term lease of land, floor space index, or the value of electricity, high-speed diesel, motor spirit and natural gas used in the construction of residential apartments in a project shall be excluded. | ||||||||||||
| 9. | If the value of purchases as prescribed above from registered supplier is less than 80%, what would be the applicable GST rate on such purchases? | Promoter has to pay GST @ 18% on reverse charge basis on all such inward supplies (to the extent short of 80% of inward supplies from registered supplier) except cement on which tax has to be paid (by the promoter on reverse charge basis) at the applicable rate, which at present is 28% (CGST 14% + SGST 14%) | ||||||||||||
| 10. | In case of new rate of 5%/1%, whether the conditions of payment of tax through Cash Ledger, payment of tax under RCM subject to 80% limit, non-availing of Input Tax Credit, reversal of credit, maintenance of project-wise account, reporting of ITC not availed in the corresponding GSTR-3B, etc. are required to be complied mandatorily by the Developer ? | Yes. All the specified conditions against clauses (i) to (id) of Sl. No. 3 of Notification No. 11/2017-CTR are mandatory. |