2. GST Rates for Real Estate Sector to be effective from 1st April, 2019
3. Definition of affordable housing:
4. Option in respect of ongoing projects
a. One -time option (to be exercised once within a prescribed time frame) 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) and which have not been completed by 31.03.2019.
b. New rate of 1% without input tax credit (ITC) on construction of affordable houses shall be available for,
i. all houses which meet the definition of affordable houses as decided by GSTC (area 90 sqm in non- metros /60 sqm in metros and value upto RS. 45 lakhs), and
ii. affordable houses being constructed in ongoing projects under the existing central and state housing schemes presently eligible for concessional rate of 8% GST (after 1/3rd land abatement).
c. New rate of 5% without input tax credit shall be applicable on construction of,‑
i. All houses other than affordable houses in ongoing projects whether booked prior to or after 01.04.2019. In case of houses booked prior to 01.04.2019, new rate shall be available on instalments payable on or after 01.04.2019.
ii. All houses other than affordable houses in new projects.
iii. 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.
5. Conditions for the new tax rates:
The new tax rates of 1% (on construction of affordable) and 5% (on other than affordable houses) shall be available subject to following conditions,‑
a) Input tax credit shall not be available,
b) 80% of inputs and input services (other than capital goods, TDR/ JDA, FSI, long term lease (premiums)) shall be purchased from registered persons. On shortfall of purchases from 80%, tax shall be paid by the builder @ 18% on RCM basis. However, Tax on cement purchased from unregistered person shall be paid @ 28% under RCM, and on capital goods under RCM at applicable rates.
6. Transition for ongoing projects opting for the new tax rate
7. Treatment of TDR/ FSI and Long term lease for projects commencing after 01.04.2019
Supply of TDR, FSI, long term lease (premium) of land by a landowner to a developer shall be exempted subject to the condition that the constructed flats are sold before issuance of completion certificate and tax is paid on them. Exemption of TDR, FSI, long term lease (premium) shall be withdrawn in case of flats sold after issue of completion certificate, but such withdrawal shall be limited to 1% of value in case of affordable houses and 5% of value in case of other than affordable houses. This will achieve a fair degree of taxation parity between under construction and ready to move property.
8. Treatment of TDR/ FSI and Long term lease for projects commencing after 01.04.2019
9. Amendment to ITC rules
ITC rules shall be amended to bring greater clarity on monthly and final determination of ITC and reversal thereof in real estate projects. The change would clearly provide procedure for availing input tax credit in relation to commercial units as such units would continue to be eligible for input tax credit in a mixed project.