GST on Real Estate Sector

GST on Real Estate Sector

Real Estate Sector plays a very important role in the development of an economy. There are many concerns raised by builders/developers/construction companies regarding high GST rates on the real estate sector. The Government has granted relief to some extent by reducing the GST rates on real estate projects. The builders, developers and others can avail the benefit of the reduced rates as per revised scheme applicable w.e.f. April 1, 2019.

Brief summary of new scheme:

1. The new scheme is mandatory for all projects commenced on or after 1-4-2019.
2. The revised scheme applies to all residential real estate projects and the commercial apartments in residential real estate projects which are covered under RERA [Real Estate (Regulation and Development) Act, 2016].
3. GST Rates under New Scheme: –  

These concessional rates of GST apply where the consideration amount includes cost of land also.
With the implementation of new rule input tax credit shall not be available.

4. Affordable residential apartment: Affordable residential apartment is a residential apartment having carpet area up to 60 square meter in metropolitan cities and 90 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.The term affordable residential apartment also includes apartments being constructed under the specified housing schemes of Central or State Governments.[Metropolitan cities are Chennai, Bengaluru, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Kolkata, Hyderabad and Mumbai (whole of MMR) with their geographical limits prescribed by Government.
5. GST applicable rate on construction of commercial apartments:

6. In respect of new projects, the tax (CGST, SGST/UTGST or IGST as applicable) shall be paid in cash by debiting the electronic cash ledger only [No Input Tax Credit allowed].

7. If landowner – promoter transfers development right or FSI (including additional FSI) to a promoter (developer- promoter) against consideration, wholly or partly, in the form of construction of apartments, the developer- promoter shall be liable to pay tax on supply of construction of apartments to the landowner-promoter. The landowner – promoter can take credit of taxes charged from him by the developer promoter, if the landowner-promoter further supplies such apartments to his buyers.

8. No GST is payable where the entire amount of consideration has been received after issuance of the completion certificate by the competent authority or after its first occupation, whichever is earlier.

9. All cement for the project must be purchased from a registered supplier only. If not so received, the promoter is required to pay GST @ 28% under reverse charge by the promoter (even if total value of supplies received from unregistered suppliers is less than 80%).

10. In case of capital goods purchased from unregistered person, the promoter will be liable to pay GST under reverse charge at the applicable rate of tax on such capital goods.

11. Project-wise account of inward supplies needs to be maintained for supplies procured from registered suppliers and unregistered suppliers. Such details are to be electronically submitted on the portal before 30th of June of subsequent year in the prescribed form. It is advisable to have separate GST registration for each project.

Ongoing Projects:

• In relation to ongoing projects as on 31-3-2019, the promoter/ developer has option to shift to new scheme w.e.f. 1-4-2019 (without ITC) or continue under earlier scheme (with ITC)
• If promoter/ developer wishes to continue under old scheme of GST, he has to submit declaration in specified form to jurisdictional Commissioner before 20-5-2019. If the promoter does not submit such declaration, he is deemed to have opted for the new scheme.
• If the promoter intends to shift to new scheme (of 1%/5%) w.e.f. 1-4-2019, he is required to refund excess ITC availed as on 31-3-2019 or get credit of ITC less claimed as on 31-3-2019.
• This option is available only for the ongoing projects as follows:

• • Constructions which started before 1st April, 2019; and
  • Actual bookings which started before 1st April, 2019; and
  • The project has not been completed by 31st March, 2019

34th_GST_Council (PDF)