From 01.04.2019 the effective rate of GST applicable on construction of residential apartments by promoters in a real estate project are

Sl No. Description Effective Rate of GST ( After deduction of Value of Land )
1 Affordable Residential apartments 1% on total consideration (Without ITC )
2 Other than Affordable Residential apartments 5% on total Consideration (without ITC )
3 Commercial Apartments in a Residential Real Estate Project. 5% on total consideration ( without ITC)
4 Commercial Apartments in a Real Estate Project. 12% on total consideration ( with ITC )

Conditions Mandatorily to comply :-

(Sl. No 3 of Notification No. 11/2017- CTR are mandatory)

1. A promoter shall purchase at least 80% of the value of input & input services, from registered suppliers.

2. Payment of tax through cash ledger.

3. Reversal of Credit.

4. Maintenance of Project wise account.

5. Reporting of ITC not availed in corresponding GSTR-3B

For calculating this threshold (of 80% ), the value of services by way of grant of (a) development rights, (2) long term lease of land, (3) floor space index, (3) the value of electricity, used in construction of residential apartments in a project shall be excluded.

Promoter has to pay GST @ 18% on reverse charge basis on all such inward supplies (to the extent short of 80% of inward supplies and cement @28%.

Taxability on Transfer of Development Rights

The TDR to be charged by the Land Owner @18% but the amount of tax shall be limited to 5% (Other than Affordable Residential Apartment) of the value of apartment for which such TDR is used. The promoter is liable to pay GST on supply of TDR on reverse charge basis attributable to the residential apartments that remain un-booked on the date of issuance of completion certificate.

Supply of TDR by the land owner to promoter is exempt for the construction of residential apartments in a project that are booked before issue of completion certificate.

Taxability on Construction Services by the Promoter to Land Owner

Promoter has to charge 5% on the construction services for the flats built for Land owner for the land owners area share.

Basic definitions:

1. Affordable residential apartment

Upto 90 Sq.Mtr / 968 Sq Ft & Gross Amount not more than Rs.45 lacs – Non Metro Cities

Upto 60 Sq.Mtr / 645 Sq Ft & Gross Amount not more than Rs.45 lacs – Metro Cities.

(Gross Amount means – amount charged by the builder)

(Metro Cities means – Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Mumbai.)

2. Residential Real Estate Project

In a Real Estate project 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 project.

3. Real Estate Project

In a Real Estate project in which the carpet area of the commercial apartments is more than 15% of the total carpet area of all the apartments in the project.

Download Excel Template on GST implications in Joint Development Project 

Disclaimer : The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although requisite caution has been taken to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

(Author Can be reached at [email protected])

Author Bio

Qualification: CA in Practice
Company: D.Subramanyam Associates
Location: chennai, Tamil Nadu, IN
Member Since: 07 Dec 2020 | Total Posts: 2

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