The GST council in the 34th GST council meeting held on 19th March, 2019 at New Delhi decided new GST rates and other related issues on real estate sector. Followings are the main provisions (other than transition related provisions) as have been published by way of press release by CBIC on its website.
Q1: What is the new GST rate on Real Estate Sector?
A1: 1% without ITC on construction of affordable houses.
5% without ITC on construction of all houses other than affordable houses.
Q2: What would be the GST rate on commercial apartments in case they are constructed in a residential real estate project?
A2: 5% without ITC if carpet area of commercial apartments is not more than 15% of total carpet area of the residential project. In all other cases GST rate on commercial apartments shall be 18% (effective rate 12%)
Q3: What is the definition of affordable house?
A3: Carpet area is not more than 60 Sq. Mtr. (645.834625 Sq. Ft.) in case residential unit is situated in a metro area
Carpet area is not more than 90 Sq. Mtr. (968.751938 Sq. Ft.) in case residential unit is situated in other than metro area.
Affordable houses being constructed in ongoing projects under the existing central and state housing schemes presently eligible for concessional rate of 8% GST (after 1/3rd land abatement).
Q4: In case of ongoing projects which rate should be followed (Old/New)?
A4: The promoters shall be given a one –time option to continue to pay tax at the old rates (effective rate of 8% or 12% with ITC). Option should be exercised once within a prescribed time limit. Where the option is not exercised within the prescribed time limit, new rates shall apply.
Q5: Which projects are to be considered as ongoing?
A5: Buildings where construction and actual booking have both started before 01.04.2019.
Q6: Whether inputs or input services for constructions of buildings can be purchased from unregistered persons?
A6: Maximum 20% of total value of inputs and input services to complete a project can be purchased from unregistered persons. Therefore, 80% or more of total value of input and input services shall be purchased from registered persons. On shortfall of purchases from 80%, tax shall be paid by the builder @18% on RCM basis. However, tax on cement purchased from unregistered person shall be paid @28% on RCM basis.
Capital goods, TDR/JDA, FSI, long term lease (premiums) shall be excluded to compute the above mentioned 80%
Tax on capital goods purchased from unregistered persons shall be paid under RCM at applicable rates.
Q7: What are the treatments of TDR/FSI and long term lease for projects commencing on or after 01.04.2019?
A7: Supply of TDR, FSI, long term lease (premium) of land by a landowner to a developer shall be exempted subject to the condition that the constructed flats are sold before issuance of completion certificate and tax is paid on them. Exemption of TDR, FSI, long term lease (premium) shall be withdrawn in case of flats sold after issue of completion certificate, but such withdrawal shall be limited to 1% of value in case of affordable houses and 5% of value in case of other than affordable houses. This will achieve a fair degree of taxation parity between under construction and ready to move property.
The liability to pay tax on TDR, FSI, long term lease (premium) shall be shifted from land owner to builder under the reverse charge mechanism (RCM).
The date on which builder shall be liable to pay tax on TDR, FSI, long term lease.
(Premium) of land under RCM in respect of flats sold after completion certificate is the date of issue of completion certificate.
The liability of builder to pay tax on construction of houses given to land owner in a JDA is also being shifted to the date of completion.
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