The term Real Estate Project (REP) shall have the same meaning as assigned to it in section 2 (zn) of the Real Estate (Regulation and Development) Act, 2016 (RERA) i.e. ‘Real Estate Project’ 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 apartments, 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.
The Real Estate Project can be classified into two parts (a) a Residential Real Estate Project (termed as RREP) or (b) Real Estate Project (other than RREP).
The term “Residential Real Estate Project (RREP)” shall mean a REP in which the carpet area of the commercial apartments is not more than 15% of the total carpet area of all the apartments in the REP.
GST Rate w.e.f. 01-04-2019 on various types of real estate projects
|Residential Real Estate Project||Other Than Residential Real Estate Project|
|Supply involve transfer of land or undivided share||Supply does not involve transfer of land or undivided share||Supply involve transfer of land or undivided share||Supply does not involve transfer of land or undivided share|
|Construction of affordable residential apartments||CGST 0.5% + SGST 0.5% (Without ITC)||CGST 0.75% + SGST 0.75% (Without ITC)||CGST 0.5% + SGST 0.5% (Without ITC)||CGST 0.75% + SGST 0.75% (Without ITC)|
|Construction of residential apartments (other than affordable residential apartment)||CGST 2.5% + SGST 2.5% (Without ITC)||CGST 3.75% + SGST 3.75% (Without ITC)||CGST 2.5% + SGST 2.5% (Without ITC)||CGST 3.75% + SGST 3.75% (Without ITC)|
|Construction of commercial apartment (shops, offices, godowns etc.)||CGST 2.5% + SGST 2.5% (Without ITC)||CGST 3.75% + SGST 3.75% (Without ITC)||CGST 6.0% + SGST 6.0% (With ITC)||CGST 9.0% + SGST 9.0% (With ITC)|
|Note 1:- No GST is payable where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or its first occupation, whichever is earlier. ( This is categorized as ready-to-move-in )
Note 2:- When the total amount charged for sale of residential or commercial apartment includes value of land, the tax is payable on total amount charged less value of land. The value of land will be taken as one third of total amount charged.
Note 3:- Promoter is required to procure all capital goods and at least 80% of inputs and input services from registered suppliers. If not so procured, tax is payable by promoter on the balance amount.
Note 4:- Where cement is received from unregistered person, the promoter shall pay tax on supply of such cement at the applicable rate. This tax will be paid in the same month of purchases.
Apportionment of Input Tax Credit between taxable supply or exempt supply in case of Real Estate Project-
Section 17 (3) of CGST Act envisaged that apportionment of ITC between taxable supply or exempt supply shall be on basis of value, but As per scheme of GST on real estate w.e.f. 01-04-2019, it is envisaged that the apportionment shall be on basis of area of construction of complex.
GST is payable on following services-
1. Transfer of Development Rights ( by land owner or society or tenant to promoter )
2. Transfer of Development Rights by Government ( In case of slum rehabilitation project )
3. Transferable Development Rights ( Transfer of FSI )
4. Upfront amount for granting long term lease of land for thirty years or more or.
1. Transfer of development rights
In some projects the land owner transfer development rights to promoter and in consideration of which the landowner gets some fully constructed apartments from promoter as consideration.
Landowner or owner of apartment in society / tenant gives land development rights to promoter, for which he is given some apartments. This is a barter transaction, in such case GST is payable on such transfer of development rights. GST should be payable in respect of free apartments given to landowner.
2. Transfer of development rights in case of slum development project
In redevelopment of old buildings or societies, apartments are given free to original inhabitants as they transfer TDR/FSI to promoter and in case of slum development projects, TDR/FSI is received from government from promoter. The promoter gives apartments free to slum dwellers. In both the cases, GST is payable as consideration is received in form of TDR/FSI because it is taxable supply.
3. Transferable Development Rights i.e. transfer of FSI
TDR is right given by authority to construct/develop land upto certain permissible Floor Space Index (FSI) within permissible limits of Development Control Regulations. The Transferable Development Right is different from Transfer of Development right because in Transferable Development Rights, Government ( local authority ) gives an instrument to land owner ( for surrender of his right ) to either use it or sale it, but in case of Transfer of Development Right, the owner of land allows promoter to develop the land and construct apartments in his land.
4. GST on Upfront amount payable for long term lease of land
Long term lease of land is not sale of land. Hence GST is payable on services relating to long term lease of land which may be even 99 years or 999 years. The upfront amount may be called as premium, salami, cost, price, development or by any other name.
GST liability in case of transfer of development rights or FSI or long term lease of land
GST on these transactions is payable by promoter under reverse charge in case of transactions entered into after 01-04-2019. The GST @ 18% (9% CGST + 9% SGST/UTGST) is payable on (a) commercial apartments and (b) unbooked residential apartments as on date of issue of completion certificate/occupancy certificate or first occupation of the project.
If development rights were transferred prior to 01-04-2019, reverse charge does not apply even if consideration for the same, in cash or kind, is received after 01-04-2019.
Exemption in respect of residential apartments
In respect of aforesaid transactions, exemption has been granted only to be extent of services of transfer of development rights or FSI or payment of long term lease amounts, relating to residential apartments, where sale is made before completion or occupation ( as in that case, GST is payable @ 1%/5% without ITC).
Disclaimer:- The above article is only for information purpose and is on based on the author’s interpretation of the relevant provision. The same should not be considered as professional advice.