Based on my understanding of the GST Acts, rules and regulations made thereunder and the notifications issued therein, here I have tried to summarise the provisions of GST related to real estate sector.
A series of notifications related to GST on real estate services were issued by the government on 29th March, 2019. The GST rates on most of the real estate services had been reduced by the government subject to conditions mentioned in the notifications. These rates were made applicable from 1st April, 2019. Below is the summary made based on such notifications:
For the sake of simplicity, following abbreviations have been used in the summary mentioned below:
1. ITC – Input Tax Credit
2. RCM – Tax payable under Reverse Charge Mechanism
3. TDR – Transfer of Development Rights
4. FSI – Floor Space Index
5. Date of BU – Date of issuance of completion certificate, where required, by the competent authority or date of first occupation, whichever is earlier
6. Upfront Amount – Amount payable as premium, salami, cost, price, development charges or by any other name
The sections referred in the summary belongs to CGST Act, 2017 and the GST rates mentioned are sum total of CGST and SGST/UTGST or IGST, as may be applicable.
| Classification of Real Estate Projects | Affordable Residential Apartment | Condition -1 | Condition -2 | |
| Gross amount charged per apartment is maximum Rs. 45 lakhs, gross amount includes all the charges except stamp duty and maintenance charges of apartment | Metropolitan cities | Non metropolitan cities | ||
| Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR) | All other cities, towns and villages | |||
| Maximum carpet area per residential apartment shall be 60 square meters | Maximum carpet area per residential apartment shall be 90 square meters | |||
| Non Affordable Residential Apartment | Residential apartment other than affordable residential apartment | |||
| Residential Real Estate Project (RREP) | Real Estate Project where carpet area of commercial apartments is max 15% of total carpet area i.e. min. 85% carpet area should be of residential apartments | |||
| Non RREP | Real Estate Project other than RREP | |||
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| GST Rates | Type of Real Estate Service | Type of real estate project | Construction type | New rates after deduction of land part i.e. 1/3rd of total value | New Rates for projects comm-encing on or after 01/04/ 2019 and ongoing projects if option of continuing old rates is not exercised | Old Rates after de duction of land part i.e. 1/3rd of total value | Old rates as per notifi-cation No. 11/2017-Central Tax (Rate) |
| Construction of complex, building or civil structure | RREP | Affordable Residential | 1% without ITC | 1.5%
without ITC |
8% with ITC | 12%
with ITC |
|
| Non Affordable Residential | 5% without ITC | 7.5%
without ITC |
12% with ITC | 18%
with ITC |
|||
| Commercial | 5% without ITC | 7.5%
without ITC |
12% with ITC | 18%
with ITC |
|||
| NON-RREP | Affordable Residential | 1% without ITC | 1.5% without ITC | 8% with ITC | 12%
with ITC |
||
| Non Affordable Residential | 5% without ITC | 7.5% without ITC | 12% with ITC | 18%
with ITC |
|||
| Commercial | 12% with ITC | 18% with ITC | 12% with ITC | 18%
with ITC |
|||
| Supply of works contract covered under items (iii) to (xi) against Serial No. 3 of Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017 (as amended) | 5%/12% with ITC as applicable | ||||||
| All other construction services | 18% with ITC | ||||||
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| Conditions attached with new GST Rates where GST credit is not available | 1. Tax to be paid by debiting the cash ledger only. | |||
| 2. 80% of inputs and input services (including Exempt supplies but excluding Non-GST supplies) (other than TDR/FSI/Long term lease of land against upfront premium, electricity, high speed diesel, motor spirit, natural gas) till the date of BU shall be received from registered person. If it falls short of 80%, pay RCM u/s 9(4) @ 18% on amount of such shortfall on or before the month of June following the financial year. | ||||
| 3. RCM u/s 9(4) has to be paid on cement and capital goods received from unregistered person as and when these are received (GST Rate on cement : 28% and GST rate on capital goods : as applicable to respective capital goods). | ||||
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| TDR/FSI/
Long term lease of land (i.e. lease for 30 years or more) transferred on or after 01/04/2019 – all are under RCM u/s 9(3) |
Particulars | Taxable/
Exempt under GST |
Proportion on which RCM to be paid | Consideration paid against purchase of TDR/FSI/
Long term lease of land |
Time of supply i.e. when RCM liability arises |
| TDR / FSI/ Long term lease of land related to residential apartments | Exempt s.t. condition that RCM is payable on apartments remaining unbooked on the date of BU | RCM u/s 9(3) to be payable on the apartments remaining unbooked on date of BU | Construction of apartments | Date of BU | |
| Monetary consideration | |||||
| TDR / FSI / Long term lease of land related to commercial apartments | Taxable | RCM u/s 9(3) on whole amount | Construction of apartments | Date of BU | |
| Monetary consideration | Normal as per Section 12/13 | ||||
| Upfront Amount for long term lease of land related to residential apartments | Exempt s.t. condition that RCM is payable on apartments remaining unbooked on the date of BU | RCM u/s 9(3) to be payable on the apartments remaining unbooked on date of BU | Upfront Amount | Date of BU | |
| Upfront Amount for long term lease of land related to commercial apartments | Taxable | RCM u/s 9(3) on whole amount | Upfront Amount | Normal as per Section 12/13 | |
| Periodic rent on long term lease of land | Taxable | RCM u/s 9(3) on whole amount | Periodic Rent | Normal as per Section 12/13 |
This article is based on the personal opinions of the author and the author do not assume and hereby disclaim any liability to any party for any loss, damage, or disruption caused by relying on this article.
(Author can be reached at [email protected])
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