In the 34th GST Council Meeting held on 19.03.2019, the Council has come up with the operational details for implementation of the recommendations made by it in the previous meeting. However, as on date, no official notifications have been released by the CBIC.
Ongoing Projects (not completed by 31.03.2019):
- The promoters shall be given a one -time option to continue to pay tax at the old rates (effective rate of 8% or 12% with ITC) on ongoing projects (buildings where construction and actual booking have both started before 01.04.2019).
- The option shall be exercised within the prescribed time frame; else the new rates shall apply.
- The new tax rates are mandatory for projects starting on or after 01.04.2019.
- The new rates are at the option for ongoing projects as on 31.03.2019
(B) New Rate:
- For all ongoing projects of affordable houses under the existing central and state housing schemes presently eligible for concessional rate of 8% GST (after 1/3rd land abatement) is 1%
- For all ongoing projects of other than affordable houses whether booked prior to or after 01.04.2019 is 5%. In case of houses booked prior to 01.04.2019, the new rate shall be available on installments payable on or after 01.04.2019.
- For all new Affordable Housing Projects (i.e. area within 60 sqm in other cities / 90 sqm in metros and value up to RS. 45 lakhs) is 1%.
- For all new projects of houses other than affordable houses is 5%.
- For all commercial apartments such as shops, offices etc. in a residential real estate project (RREP) [in which the carpet area of commercial apartments is not more than 15% of total carpet area of all apartments] is 5%.
(C) Conditions for New Tax Rates:
- Input Tax Credit shall not be available.
- 80% of inputs and input services (other than capital goods, TDR/ JDA, FSI, long term lease (premiums)) shall be purchased from registered persons. If purchases from registered persons are less than 80%, the tax shall be paid by the builder @ 18% on RCM basis. However, the tax on cement purchased from the unregistered person shall be paid @ 28% under RCM, and at applicable rates under RCM for capital goods.
(D) Transitional Provisions on ITC for ongoing projects opting for new tax rates:
- The council has not defined the formula for admissible ITC in case of transition. However, the same shall be allowed on the pro-rata basis considering the percentage of work completed, booking of flats and invoices issued.
- For a mixed project, ITC shall be allowed in proportion to the carpet area of the commercial portion in the ongoing projects (on which tax will be payable @ 12% with ITC even after 1.4.2019) to the total carpet area of the project.
Though the scheme is expected to bring relief to the buyers, the same might cause hardships to the builders with regard to admissible ITC who have ongoing projects.
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