GST For Real Estate Sector, A number of issues have been raised regarding the new GST rate structure notified for real estate sector effective from 01-04-2019. A compilation of Frequently Asked Questions (FAQs) is presented below. The answers to the FAQs have been given in simple language for guidance and easy understanding of all stakeholders in the real estate sector. They do not have force of law. In case of conflict, the gazette notifications, which have legal force,shall have precedence
Question-1: What are the rates of GST applicable on construction of residential apartments?
Answer: With effect from 01-04-2019, effective rate of GST applicable on construction of residential apartments by promoters in a real estate project are as under:
| Description | Effective rate of GST (after deduction of value of land) |
|---|---|
| Construction of affordable residential apartments | 1% without ITC on total consideration. |
| Construction of residential apartments other than affordable residential apartments | 5% without ITC on total consideration. |
The above rates are effective from 01-04-2019 and are applicable to construction of residential apartments in a project which commences on or after 01-04-2019 as well as in on-going projects. However, in case of 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 of12% 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.
Question-2: What is an affordable residential apartment?
Answer: 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 meter in metropolitan cities and90 square meter 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 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 (whole of MMR) with their geographical limits prescribed by Government.]
Question-3: What is an on-going project?
Answer: A project which meets the following conditions shall be considered as an ongoing project.
(a) Commencement certificate for the project, where required, has been issued by the competent authority on or before 31stMarch, 2019, and it is certified by a registered architect, chartered engineer or a licensed surveyor that construction of the project has started (i.e. earthwork for site preparation for the project has been completed and excavation for foundation has started) on or before 31st March, 2019.
(b)Where commencement certificate in respect of the project, is not required to be issued by the competent authority, it is to be certified by any of the authorities specified in (a) above that construction of has started onor before the 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.(d)Apartments of the project have been, partly or wholly, booked on or before 31stMarch, 2019. GST For Real Estate Sector
Question-4: Does a promoter or a builder has option to pay tax at old rates of 8% & 12% with ITC?
Answer: 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 option to pay GST at 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 10thof 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 new rate of GST @ 1% or 5% without ITC.
Question-5: What is the rate of GST applicable on construction of commercial apartments [shops, godowns, offices etc.] in a real estate project?
Answer: With effect from 01-04-2019, effective rate of GST, after deduction of value of land or undivided share of land, on construction of commercial apartments [shops, godowns, offices etc.] by promoter in real estate project are as under
| Description | Effective rate of GST (after deduction of value of land) |
|---|---|
| Construction of commercial apartments in a Residential Real Estate Project (RREP), as explained in question no. 6 below,which commences on or after 01-04-2019 or in an ongoing project in respect of which the promoter has opted for new rates effective from01-04-2019 | 5% without ITC on total consideration. |
| Construction of commercial apartments in a Real Estate Project (REP) other than Residential Real Estate Project (RREP) or in an ongoing project in respect of which the promoter has opted for old rates | 12%with ITC on total consideration. |
Question-6:What is a Residential Real Estate Project?
Answer: A “Residential Real Estate Project” means a „Real Estate Project” in which the carpet area of the commercial apartments is not more than 15 per cent. of the total carpet area of all the apartments in the project.
Question-7: What is 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 31stMarch, 2019?
Answer: Construction of a project shall be considered to have been started on or before 31stMarch, 2019, if the earthwork for site preparation for the project has been completed, and excavation for foundation has started on or before the 31stMarch, 2019.
Qwestion-8: Does a promoter/ builder have to purchase all goods and services from registered suppliers only?
Answer: 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 5construction of residential apartments in a project shall be excluded.
Qwestion-9: If value of purchases as prescribed above from registered supplier is less than 80%, what would be the applicable GST rate on such purchases?
Answer: 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%)
Qwestion-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 corresponding GSTR-3B etc. are required to be complied mandatorily by the Developer ?
Answer: Yes. All the specified conditions against clause (i) to (id) of Sl.No 3 of Notification No. 11/2017-CTR are mandatory.
Qwestion-11: What is the rate of GST applicable on transfer of development rights, FSI and long term lease of land?
Answer: Supply of TDR or FSI or long term lease of land used for the construction of residential apartments in a project that are booked before issue of completion certificate or first occupation is exempt. Supply of TDR or FSI or long term lease of land,on such value which is proportionate to construction of residential apartments that remain un-booked on the date of issue of completion certificate or first occupation,would attract GST at the rate of 18%, but the amount of tax shall be limited to1% or 5%of value of apartment depending upon whether the residential apartments for which such TDR or FSI is used, in the affordable residential apartment category or in other than affordable residential apartment.TDR or FSI or long term lease of land used for construction of commercial apartments shall attract GST of 18%. The above shall be applicable to supply of TDR or FSI or long term lease of land used in the new projects where new rate of 1% or 5% is applicable. GST For Real Estate Sector
Question-12: Who is liable to pay GST on TDR and floor space index?
Answer: The promoter is liable to pay GST on TDR or floor space index supplied on or after 01-04-2019 on reverse charge basis.
Question-13: At what point of time, the promoter should discharge its tax liability on TDR. ?
Answer: The liability to pay GST on development rights shall arise on the date of completion or first occupation of the project, whichever is earlier. Therefore, promoter shall be liable to pay tax on reverse charge basis, on supply of TDR on or after 01-04-2019, which is attributable to the residential apartments that remain un-booked on the date of issuance of completion certificate, or first occupation of the project. GST For Real Estate Sector
Question-14: At what point of time, the promoter should discharge its tax liability on FSI(including additional FSI).?
Answer: On FSI received on or after 1.4.2019, the promoter should discharge his tax liability on FSI as under:
(i)In case of supply of FSI wherein consideration is in form of construction of commercial or residential apartments, liability to pay tax shall arise on date of issuance of Completion Certificate.
(ii)In case of supply of FSI where in monetary consideration is paid by promoter, liability to pay tax shall arise on date of issuance of Completion Certificate only if such FSI is relatable to construction of residential apartments. However, liability to pay tax shall arise immediately if such FSI is relatable to construction of commercial apartments.
Question-15: At what point of time, the promoter should discharge its tax liability on supply of long term lease.?
Answer: On long term lease received on or after 1.4.2019, the promoter should discharge his tax liability on long term lease as under: In case of supply of long term lease of land for construction of commercial apartments, tax shall be paid by the promoter immediately. However, for construction of residential apartment, liability to pay tax on the upfront amount payable for long term lease shall arise on the date of issuance of Completion Certificate.
Source http://www.cbic.gov.in