F.No. 354/52/2018-TRU
Government of India
Ministry of Finance
Department of Revenue
(Tax Research Unit)
Room No. 146 G, North Block
New Delhi,
****
Dated: 7th May, 2018

Sub: Request for clarification to enable availing 8% GST on Affordable Housing- Reg.

I am directed to refer to your letter no. CREDAI/MoF/2018/14 dated 19th March, 2018 on above subject and to give our comments on the issues raised therein as under,

SI. No. Issues TRU Comments
1. Authenticated document to be relied upon by the developer to charge concessional rate of GST on CLSS housing. A civil structure or any other original works pertaining to the “houses constructed or acquired under the Credit Linked Subsidy Scheme for Economically Weaker Section (EWS)/ Lower Income Group (LIG)/ Middle Income Group-1 (MIG-1/ Middle Income Group-2 (MIG-2)” under the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana (Urban) attracts concessional GST of 8% (provided value of land is included in the price of the house).

As per the detailed Operational Guidelines available on Ministry of Housing and Urban Affairs website to avail the CLSS benefit, the interest subsidy will be credited to the loan account of beneficiaries through Primary Lending Institutions (PLIs), such as, banks, etc resulting in reduced effective housing loan and Equated Monthly installments (EMI). According to the said guidelines, PLIs such as banks, housing Finance corporations, NBFCs etc.are required to register with Central Nodal Agencies (CNAs). The CNAs are required to release subsidy under the scheme to the PLIs in respect of loans sanctioned by them to borrower/ beneficiaries. The PLIs are required to provide each borrower/ beneficiary a statement, which will make him/ her understand the amount given as subsidy, how the subsidy has been adjusted and the impact of the subsidy on his/ her monthly installments (EMI). PLIs will also provide the utilization/end use certificate and also a certificate in relation to the physical progress of the construction of the housing unit financed under the scheme to the CNAs on a quarterly basis. Thus PLIs are closely involved in the implementation of the CLSS Scheme. MHUA may prescribe a certificate by PLIs on the basis of which the builder may charge reduced rate of GST on houses constructed/acquired under CLSS.The certificate may be addressed to the beneficiary with a copy to the builder, certifying that the borrower is a beneficiary of the CLSS. The certificate may contain relevant details such as the name, address, account number of the borrower, complete address and other details of the housing unit for which the CLSS benefit has been granted, Aadhar number. The details of CLSS beneficiaries and the housing units for which CLSS benefit has been sanctioned are published quarterly/ monthly on the websites of MHUA/CNAs and the builders charge concessional rate of GST based on the same.

The administrative Ministry may be requested to prescribe a certificate by PLIs (which will be based on the interest subsidy they credit to the beneficiaries’ account) to the beneficiary & Builder/ developer based on which the builder would be eligible to pay concessional GST of 8% for CLSS housing [S No 3(iv)(db) of notification No 11/2017-CTR].

2 Requirement of specific approval/ certificate for residential projects to qualify as `Infrastructure status’

 

Low cost houses up to a carpet area of 60 .square metres per house in an affordable housing project, which has been given infrastructure status under notification F. No. 13/6/2009-INF, dated the 30th March, 2017 of MOF (DEA), attract concessional GST of 8% (the value of the undivided share of land is included in the price of the house). Whether the housing project qualifies as affordable housing project or not,shall be determined by the builder/ developer as per the definition of affordable housing given in the above mentioned notification (i.e., affordable housing has been defined as a housing project using at least 50% of FAR/FSI for dwelling units with carpet area of not more than 60 SQM). No certificate from any authority is required.

It is also pertinent to point out here that low cost houses up to a carpet area of 60 square metres per house in a housing project approved under the affordable housing in partnership framed by MHUA or any housing scheme of a State Government, also attract concessional GST of 8% (the value of the undivided share of land is included in the price of the house).

 

3 Mechanism for reversal of already charged GST to a customer who at a later date becomes eligible for CLSS benefit. CREDAI has stated that customers initially book flats from their own fund and later on apply for loan. So, the Developer will initially apply regular rate to the customer and then once customer becomes eligible for CLSS benefit, concessional rate of GST would apply. Therefore, it may be clarified that concessional rate of GST can be given to the customer from the date of booking/ 25th January, 2018 whichever is later irrespective of GST having been already being charged at regular rate. The view taken by CREDAI in their letter dated 19-03-2018 is found to be correct.

Construction of houses is normally a continuous supply of service [section 2(33) of CGST Act, 2017]. In case of continuous supply of service, invoice shall be issued on or before the due date of payment or the date of receipt of payment by the supplier or completion of an event to which payment is linked. [Section 31(5) of COST Act, 2017]. The time of supply of the service shall be determined accordingly under section 13 of the CGST Act. Portion of continuous supply of service, time of supply of which is on 25th January, 2018 (the date of issue of notification prescribing concessional GST for CLSS) or later shall be eligible for the  concessional rate of GST applicable to houses acquired under CLSS irrespective of when the house is booked or approval for CLSS benefit is obtained.

Where the builder has collected higher GST from the buyer in earlier months, the excess can be adjusted by the builder against his future GST liability (by issue of credit notes). It is pertinent to point out here that the definition of taxable supply given in GSTR-3B, excludes value of credit notes. This means that the GST liability on the date of filing of return by the builder gets proportionate reduced on account of credit note issued. [Credit notes can be issued by the builder/developer, infer a/ia, when the tax charged in a tax invoice is found to exceed the tax payable in respect of such supply, under section 34 of CGST Act. The same shall contain the particulars prescribed under rule 53 of CGST Rules including name and address of the recipient of the flat.]

 

2. This issues with approval of Finance Secretary.

(Susanta Mishra)
Technical Officer, TRU II,
susanta.mishra87@gov.in
Tel: 011-23095558

 

 

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16 Comments

  1. Jayant says:

    Hello, I am planning to buy 2 BHK in Pune Maharashtra in 2020 but builder are saying they are following old regime of GST i.e. 8% and they are making cost sheets accordingly. Just need your help to understand that still old regime is applicable or now 1% or 5% is applicable. Thanks.

  2. Vashimakram says:

    Hello Sir,

    I am working as accountant in builders office. we have ongoing residential house project since 2016 and our project is not falling in PM yojna Scheme. but Carpet area of house are less than 60sqmtr & price also below 45Lakhs.
    Now i want to Know that weather we are legible for concessional rate of 8% or Not. And if YES can we claim refund or adjust exess payment which we already paid GST @ 12% since July 2017.

    Kindly Suggest What to do.

  3. Rocky says:

    Hi Team,
    I need Clarification on GST on Affodable house.
    I booked an apartment in the month of Oct 2017, total cost of the property is 30L (App) excluding tax (in which 10L app is land cost), my builder has charged 12% GST on Full 30 L. or 18% on 20L.
    since GST benefit under affordable house scheme is introduced in the year 2018 (rate decreased to 8%), should i get benefit of 4% on full value or whatever the installments i paid after introduction of this clause.
    Pl suggest

  4. pasupathi says:

    Dear Sir,
    I have entered into a sale agreement, with a renowned builder for a 1 bhk Apartment, (MSB). It is within 60 Sqmtr and value <32 lacs. (not falling under PM yojana scheme)
    Can you please suggest what is the GST rate applicable, as per the latest GST council recommendation.
    My builder is insisting 12%, without base price revision. He says ITC(12%) is same for 1 and 2.5 bhk and is accounted so, in the base price.
    I am insisting 8% without Price revision and ITC benefit passed to customer. Is it right?
    Kindly clarify.
    Pasupathi
    Chennai

  5. Murli Mulchandani says:

    I am in Accounting Profession. My Client has charged GST @ 8%wef 25.1.18 but as there was no slab rate of 8% in GSTR1 , he has paid GST @ 12% on the total amount received from Customers. From 1.4.19 there is a slab rate of 8%. How do I recover the differnece of 4% (12% GST paid instead of 8%). Please clarify .

  6. TANMAY RANJAN MISHRA says:

    My name is Tanmaya Ranjan Mishra. I have a house loan from HDFC bank.
    I have already availed the subsidy under CLSS and my bank has issued a certificate showing my account no, date and amount of subsidy credit, revised EMI etc. But my builder is asking for a certificate showing the property address and CC to him for GST subsidy whereas the bank is denying to give the same.
    Please advise how can avail the concessional GST.

  7. MUNIR says:

    DEAR SIR
    I AM ACCOUNTANT , CROSS CHECH MY WORK CONTRACT BILL

    I HAVE BOOKED FLAT IN APR-17 IN 2000000 , DASTVEJ 2000000 AS APRL-17 I HAVE TO SERVCIE TAX 120000 ( 40% OF 2000000 = 800000 X 15% = 120000.00, HE ASKING FOR 12% GST
    BUT I TOLD HIM YOU HAVE ALREADY CHARG ME VAT % EXCISE
    NOW 12% GST = 240000.00
    I HAVE TOLD HIM TO PAY HAF GST – INSTED GO EXCISE & VAT

  8. Jacintha says:

    Dear Sir/Madam,
    I have booked house on Apr 18 and I’m eligible under CLSS (PMAY). So I asked the builder to reduce the GST 12 to 8% but he asked to get sanction letter from bank. I got Letter stating same. Now he is telling they should get a letter from NHB that it’s been approved, whereas the banker tells we can only apply the application after the registration.Kindly advise me now how to avail the GST reduction

    1. Naresh says:

      @Jacintha: Could you reduce your GST to 8% from builder…? I am also facing the same issue. Even after giving the letter from bank, builder is not ready to refund GST amount.

  9. Nirav says:

    Dear Sir/Mem
    If Builder refuse to charge from 12% GST to 8% GST

    There is any Official Notification Indicating Amended GST Rate 8%.

    Thanks

  10. vswami says:

    As selected:
    TRU Comments, on Issues under Sl. No. 1, that, – such of the projects as qualify for category of “the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana (Urban) attracts concessional GST of 8% (PROVIDED VALUE OF LAND IS INCLUDED IN THE PRICE OF THE HOUSE). (FONT supplied)
    The purport or import of the portion highlighted above is not at all clear but extremely confusing, for mainly two reasons:

    A) It seems to have been wrongly assumed, unimaginatively so, that for pricing, ‘value of land’ would ever have been left out of account.

    On the contrary, in practice, land being a major component of a project- cost to promoter, in pricing that would not but ordinarily, -rather in the nature of things and invariably, – have been included with a ‘substantial mark -up’ of its actual cost.

    B) In issuing the subject Notification , the authority has inferably been misguided by the same convoluted thinking / deplorably fictitious idea behind the concept of ‘ deemed works contract’ given a statutory recognition, for bringing a pure and simple contract of ‘SALE’, of a composite indivisible / im-partitionable immovable property, within the purview of GST.

    These aspects are to be found adequately covered, and dealt with in details, in the published Articles and other material on display in public domain, to which attention has been drawn in the Posts on FB, etc.

    The tragedy is, so far as known, no Expert, at large, supposed to have a better grip and intimate understanding of the issues the matter involves, has , to one’s regret, cared to come out and share independent views; particularly, if any to the contrary, for serving the intended altruistic purpose, in ‘public interest’ . So much so, the matter happens to being muddled up, more and more, with no satisfactory solution in sight.

  11. Kishor K Wani says:

    Good afternoon sir
    we are a pvt ltd co having registration n Maharera.our project is in village where subsidy of 2.5 lac is not available. our plot size is 904 sq ft & build up area is 650 for 2 bhk & 800 for 3 bhk.our selling range is 10 lac to 10 to 11 lacs
    can we avail GST @ 8% or not
    pl give your valluable suggetions
    yous
    Kishorbhai Wani
    Nandurbar 425412 Maharastra

    1. Veerabhadra Rao Pippalla says:

      Sir. You village has to come under listed towns under PMAY scheme. If PMAY benefit is available, then only you can charge 8% GST.

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