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Change in GST Rates for Real Estate Sector from 1st April 2019

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Change in GST Rates for Real Estate Sector from 1st April 2019


Government has issued notification w.r.t. changes in GST rates for real estate sector with an option to charge new tax Rate from 1st April 2019 for ongoing projects. If no option is exercised then new rates will be applicable. Option is to be exercised by 10th May 2019 in Annexure IV.

GST Rate on Ongoing Real Estate Projects that commences on or after 1st April 2019 as per NEW SCHEME:-

Type of Transaction

Rate of Tax

Condition

Construction of affordable residential apartments by a promoter in a Residential Real Estate Project which commences on or after 1 st April, 2019 or in an ongoing RREP

1.5% Integrated tax

As per annexure “A”

Construction of residential apartments other than affordable residential apartments by a promoter in an RREP which commences on or after 1 st April, 2019 or in an ongoing RREP

7.5% Integrated tax

As per annexure “A”

Construction of affordable residential apartments by a promoter in a Real Estate Project (herein after referred to as REP) other than RREP, which commences on or after 1 st April, 2019 or in an ongoing REP other than RREP

7.5% Integrated tax

As per annexure “A”

Construction of commercial apartments (shops, offices, godowns etc.) by a promoter in an RREP which commences on or after 1 st April, 2019 or in an ongoing RREP

1.5% Integrated tax

As per annexure “A”

Construction of affordable residential apartments by a promoter in a Real Estate Project (herein after referred to as REP) other than RREP, which commences on or after 1 st April, 2019 or in an ongoing

7.5% Integrated tax

As per annexure “A”

Construction of residential apartments other than affordable residential apartments by a promoter in a REP other than a RREP which commences on or after 1 st April, 2019 or in an ongoing REP other than RREP

7.5% Integrated tax

As per annexure “A”


GST Rate on Ongoing Project as per OLD SCHEME:

Type of transaction

Rate of tax

Condition

Construction of an  apartments  in an ongoing RREP

12% Integrated tax

As per annexure “B”

Construction of a complex, building, civil structure or a part thereof, including,-

(i) commercial apartments (shops, offices, godowns etc.) by a promoter in a REP other than RREP,

(ii) residential apartments in an ongoing project, other than affordable residential apartments

18% Integrated tax

As per annexure “B”

ANNEXURE “A”

  1. Tax shall be paid in cash, that is, by debiting the electronic cash ledger only.
  1. Cement to be procured from registered person. In case it is procured from un-registered person, applicable GST on cement is to be paid under reverse charge in the month in which cement is received.
  1. After considering above payment of tax on cement, total 80% of procurement should be from registered person. In case of shortfall, GST should be paid @ 18% under reverse charge. Such computation of 80% should be done on financial year basis.
  1. For calculation of such 80% of procurement, services by way of grant of development rights, long term lease of land (against upfront payment in the form of premium, salami, development charges etc.) or FSI (including additional FSI), electricity, high speed diesel, motor spirit, natural gas shall not be considered.
  1. The tax liability on the shortfall of inward supplies from unregistered person so determined shall be added to his output tax liability in the month not later than June following the end of financial year.
  2. GST ITC not availed shall be reported every month by reporting it as ineligible credit in GSTR-3B.
  1. Tax payer will be entitled to avail credit or liable to pay GST to the extent of amount arrived by considering: -
    1. area of commercial and residential apartment vis-à-vis total area
    2. percentage completion of the project
    3. extent of consideration received compared to total consideration receivable against booked apartments

ANNEXURE “B”

  1. in case of ongoing project, the registered person shall exercise one time option in the Form at Annexure IV to pay integrated tax on construction of apartments in a project at the rates as specified, by the 10th of May, 2019;
  2. if option is not exercised in Form at annexure IV by the 10th of May, 2019, new gst rate shall be deemed to be applicable
  3. invoices for supply of the service can be issued during the period from 1st April 2019 to 10th May 2019 before exercising the option, but such invoices shall be in accordance with the option to be exercised.”;

For better understanding for user we provide some of the key defination

  1. “Ongoing Project”

A project which meets all the following conditions, namely-

  • commencement certificate in respect of the project, where required to be issued by the competent authority, has been issued on or before 31st March, 2019, and it is certified by any of the following that construction of the project has started on or before 31st March, 2019:- 
    1. an architect registered with the Council of Architecture constituted under the Architects Act, 1972 (20 of 1972); or
    2. a chartered engineer registered with the Institution of Engineers (India); or
  • a licensed surveyor of the respective local body of the city or town or village or development or planning authority.
  • where commencement certificate in respect of the project, is not required to be issued by the competent authority, it is certified by any of the authorities specified in subclause (a) above that construction of the project has started on or before the 31st March, 2019;
  • completion certificate has not been issued or first occupation of the project has not taken place on or before the 31st March, 2019;
  • apartments being constructed under the project have been, partly or wholly, booked on or before the 31st March, 2019. Explanation.- For the purpose of sub- clause (a) and (b) above , construction of a project shall be considered to have started on or before the 31st March, 2019, if the earthwork for site preparation for the project has been completed and excavation for foundation has started on or before the 31st March, 2019.
  1. “Affordable residential apartment”:

A residential apartment in a project which commences on or after 1st April, 2019, or in an ongoing project in respect of which the promoter has not exercised option in the prescribed form to pay central tax on construction of apartments at the rates as specified for item (ie) or (if) against serial number 3, as the case may be, having carpet area not exceeding 60 square meter in metropolitan cities or 90 square meter in cities or towns other than metropolitan cities* and for which the gross amount charged is not more than forty five lakhs rupees.

*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 respective geographical limits prescribed by an order issued by the Central or State Government in this regard;

  1. "Real Estate Project(REP)”:

As assigned to in clause (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016); means the development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of land into plots or apartment, as the case may be, for the purpose of selling all or some of the said apartments or plots or building, as the case may be, and includes the common areas, the development works, all improvements and structures thereon, and all easement, rights and appurtenances belonging thereto

  1. “Residential Real Estate Project (RREP)”:

A REP 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 REP;

  1. "Carpet area":

The net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.

Explanation.— The expression "exclusive balconyor verandah area" means the area of the balcony or verandah, as the case may be, which is appurtenant to the net usable floor area of an apartment, meant for the exclusive use of the allottee; and "exclusive open terrace area" means the area of open terrace which is appurtenant to the net usable floor area of an apartment, meant for the exclusive use of the allottee;

  1. "Promoter":
  • a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees; or
  • a person who develops land into a project, whether or not the person also constructs structures on any of the plots, for the purpose of selling to other persons all or some of the plots in the said project, whether with or without structures thereon; or
  • any development authority or any other public body in respect of allottees of
 (a) buildings or apartments, as the case may be, constructed by such authority or body on lands owned by them or placed at their disposal by the Government; or

 (b) plots owned by such authority or body or placed at their disposal by the Government, for the purpose of selling all or some of the apartments or plots; or

  • an apex State level co-operative housing finance society and a primary cooperative housing society which constructs apartments or buildings for its Members or in respect of the allottees of such apartments or buildings; or

any other person who acts himself as a builder, coloniser, contractor, developer, estate developer or by any other name or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale; or

  • such other person who constructs any building or apartment for sale to the general public.

 Explanation.— where the person who constructs or converts a building into apartments or develops a plot for sale and the persons who sells apartments or plots are different persons, both of them shall be deemed to be the promoters and shall be jointly liable as such for the functions and responsibilities specified, under this Act or the rules and regulations made there under;

  1. "Apartment"

Whether called block, chamber, dwelling unit, flat, office, showroom, shop, godown, premises, suit, tenement, unit or by any other name, means a separate and self-contained part of any immovable property, including one or more rooms or enclosed spaces, located on one or more floors or any part thereof, in a building or on a plot of land, used or intended to be used for any residential or commercial use such as residence, office, shop, showroom or godown or for carrying on any business, occupation, profession or trade, or for any other type of use ancillary to the purpose specified;

  1. "Building"

Includes any structure or erection or part of a structure or erection which is intended to be used for residential, commercial or for the purpose of any business, occupation, profession or trade, or for any other related purposes;

Notification link :- http://www.cbic.gov.in/resources//htdocs-cbec/gst/notfctn-3-2019-igst-rate-english.pdf

About Manoj Jain

Manoj

Manoj Jain, a CA and CS, has been working with IRIS for over 8 years and is currently one of the key subject matter experts for IRIS’ GST compliance offerings. He also has been guiding the clients for GST law related matters. Before GST he was handling US compliance analyzing US financial statements and reviewing XBRL filings for US and India market. He enjoys listening to music and traveling.

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