Real estate sector is one of the major economic sector for any country, especially India where this sector is getting the attention in the recent years. In this article we are going to discuss about GST implication in Real estate sector more predominantly real estate residential housing sector.
Following are some of the activities which are treated as supply for charging GST in Real Estate –
♦ Renting of residential property
♦ Construction of a residential complex, building including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate by the competent authority or after its first occupation
♦ Works Contract i.e. a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any residential property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract
With effect from 01.04.2019, rate of GST applicable on supply of construction service involving transfer of property in land shall be as follows –
|Type of Apartment||Rate of GST (after deduction of value of land)|
|Affordable Residential Apartment||1% without ITC on total consideration|
|Other than Affordable Residential Apartment||5% without ITC on total consideration|
|Commercial Apartments (shops, godowns, offices etc.)|
|Residential Real Estate Project (RREP)||5% without ITC on total consideration|
|Other than Residential Real Estate Project (RREP)||12% without ITC on total consideration|
Affordable residential apartment is a residential apartment in a project which
a. For the purpose of determining the threshold of the gross amount of Rs. 45 lakhs, all the charges or amounts charged by the developer from the buyer shall form part of the gross amount charged. However, the value shall not include –
b. Value of Land – 1/3rd of the total contract value shall be considered to be the value of land and will be exempt from GST.
c. For the purpose of availing above GST rates, atleast 80% of the total value of inputs and input services should be purchased from registered suppliers.
Residential Real Estate Project means a real estate project which
Works contract is a composite supply as it is a construction where goods as well as services are given. For the purpose of levying GST, principal supply is considered to be supply of service. Construction service is just a part of works contract. Therefore, construction of a residential unit in various housing projects and other than housing projects shall be taxed at 12%.
When any contract is further sub-contracted then the GST shall also be levied at 12%.
GST is not leviable on sale to ready-to-move-in homes. On completion of its construction and after receiving the occupancy certificate, a property is categorised as to ready-to-move-in. Such kind of property does not come under the ambit of GST. GST would be applicable only of the sale of under-construction properties that have yet to receive the occupancy certificate.
When an arrangement is made with the builder for construction of Floors/Flats, (other than approved housing projects) and where the some of the floors/flats are given to the builder as consideration for the construction then GST shall not be applicable on undivided share of land but GST shall be taxable at the rate of 18% on the transfer of the floors/flats by the builder to the land owner.
No GST is levied on rental income as long as residential property is rented out. However, 18% GST is applicable if such property is on rent for business purposes or rent amount per year exceeds Rs. 20 lakhs. 18% GST is applicable on renting commercial properties.
As per Schedule III of the CGST Act sale of land shall be treated neither as a supply of goods nor a supply of services. Since, sale of land is not a supply under GST and hence falls outside its purview.
No GST will be levied on sale of Plot. However, a plot with any sort construction on it would attract GST.
About the Author
Author is Amit Jindal, ACA working as Manager Taxation in Neeraj Bhagat & Co. Chartered Accountants, a Chartered Accountancy firm helping foreign companies in setting up business in India and complying with various tax laws applicable to foreign companies while establishing their business in India.