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Goods and Service Tax:

1. Apartment:

As per RERA – An “ apartment”

> whether called block, chamber, dwelling unit, flat, office, showroom, shop, godown, premises, suit, tenement, unit or by any other name, means

>  a separate and self-contained part of any immovable property,

>  including one or more rooms or enclosed spaces, located on one or more floors or any part thereof,

    • in a building or
    • on a plot of land, used or intended to be used for any residential or commercial

>  use such as residence, office, shop, showroom or godown or for carrying on any business, occupation, profession or trade, or for any other type of use ancillary to the purpose specified;

 2. Residential Apartment:

An apartment intended for residential use as declared to the Real Estate Regulatory Authority or to the competent authority.

>  An apartment intended for residential use

>  As declared to the RERA or to the competent authority

3. Commercial Apartment: 

An apartment other than a residential apartment 

4. Affordable Housing Unit:

A residential apartment in a project having a carpet area not exceeding

>  60 sq.mts(645 SFT) in metropolitan cities or

>  90 sq.mts(969 SFT) in cities or towns other than metropolitan cities and

>  for which the gross amount charged is not more than 45 Lakhs rupees

 5. Real Estate Project [REP]:

The same meaning as assigned to it in clause (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016) The Development of a building or building consisting of apartments

>  Converting an existing building into apartments

>  Development of land into plots or apartments

>  for the purpose of selling all or some of them

6. Residential Real Estate Project [RREP]: 

>  It means a REP in which the carpet area of the commercial apartments is not more than 15 per cent. of the total carpet area of all the apartments in the REP;

>  REP where Commercial apartment is <=15% of Total Carpet Area

 7. Floor Space Index [FSI]: 

The ratio of a building’s total floor area (gross floor area) to the size of the piece of land upon which it is built

 8. Carpet area: 

The same meaning is assigned to it in clause (k) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);

>  The net usable floor area of an apartment

>  Excludes area covered by external walls, services shafts, exclusive balcony or veranda exclusive open terrace area

>  Includes area covered by internal partition walls 

9. Developer – Promoter : 

A promoter who is constructing or converts a building into apartments or develops a plot for sale.

10. Landowner – Promoter: 

A promoter who transfers the land or development rights or FSI to a developer-promoter for the construction of apartments and receives constructed apartments against such transferred rights and sells such apartments to his buyers independently.

11. Gross value for the Apartment: 

Sum total of:

>  The amount charged for Construction services

>  The amount charged for the transfer of land or undivided share of land, as the case may be including by way of lease or sublease; and

>  Any other amount charged by the promoter from the buyer of the apartment including preferential location charges, development charges, parking charges, common facility charges etc.

12. GST Rate for Builders for the supply of Residential or commercial projects:

Supply of Apartments with Land: 

Nature of Project Rate Deduction for Land Value Rate of Tax Conditions
Affordable Residential 1.5%*1/3 = 0.5 1% No Input Tax Credit
Non-Affordable Residential 7.5%*1/3 = 2.5 5% No Input Tax Credit
Pure Commercial Projects 18%*1/3 = 6 12% With Input Tax Credit

13. GST Rate for Builders for the supply of Residential and commercial projects:

a. Real Estate Project where Commercial Apartment is less than 15% of Total Carpet Area:

Nature of Project Rate Deduction for Land Value Rate of Tax Conditions
Affordable Residential 1.5%*1/3 = 0.5% 1% No Input Tax Credit
Non-Affordable Residential 7.5%*1/3 = 2.5% 5% No Input Tax Credit
For Commercial Portion 7.5%*1/3 = 2.5% 5% No Input Tax Credit

b. Real Estate Project where Commercial Apartment is more than 15% of Total Carpet Area: 

Nature of Project Rate Deduction for Land Value Rate of Tax Conditions
Affordable Residential 1.5%*1/3 = 0.5% 1% No Input Tax Credit
Non-Affordable Residential 7.5%*1/3 = 2.5% 5% No Input Tax Credit
For Commercial Portion 18%*1/3 = 6% 12% With Input Tax Credit

14. Supply by Sub-Contractor: 

Nature of Project Rate Deduction for Land Value Rate of Tax Conditions
Pradhan MantriAwasYojana [PMAY] and it likes NA 12% With Input Tax Credit
Other than the above NA 18% With Input Tax Credit

Conditions to avail 12% under PMAY Scheme:

>  Under PMAY Scheme, an Affordable Home Carpet Area is more than 50% Carpet Area of a Non-Affordable Home.

15. Conditions under New GST Rate for the Builders: 

>  Do not avail of Input tax credit and the same report is ineligible in GSTR 3B

>  GST has to be paid on the transfer of Development Rights under RCM by the Builder

>  At least 80% of Procurement should be bought from registered vendors other than TDR, long-term lease premium, salami, FSI, electricity, high-speed diesel, motor spirit, and natural gas.

>  GST has to be paid @18% on purchases from an unregistered person when the purchases fall less than 80% rule other than cement. For cement GST rate @ is 28%. 

16. Joint Development Agreement for Builder Perspective: 

Area Sharing Agreement: 

Nature of Project Rate Deduction for Land Value Rate of Tax Conditions
Sold units before completion certificate [CC] / Occupancy Certificate [OC].

Sale of Flats – GST levy

7.5%*1/3 = 2.5% 5%

[Forward

charge]

Amount to be collected from Customer.

No Input Tax Credit

Unsold Units after completion certificate [CC] / Occupancy Certificate [OC].

Sale of Immovable property, No GST levy. However, the same portion of amount to be paid for the Transfer of Development Rights

7.5%*1/3 = 2.5% 5%

[Reverse Charge]

It should be paid by the Builder from his own pocket.

No Input Tax Credit

17. Joint Development Agreement for Land Owner Perspective: 

Area Sharing Agreement: 

Nature of Project Rate Deduction for Land Value Rate of Tax Conditions
Sold units before completion certificate [CC] / Occupancy Certificate [OC].

Sale of Flats – GST levy

7.5%*1/3 = 2.5% 5%

[Forward

charge]

Amount to be collected from Customer.

Avail of Input Tax Credit

Unsold Units after completion certificate [CC] / Occupancy Certificate [OC].

Sale of Immovable property, No GST levy. However, the same portion of amount to be paid for the Transfer of Development Rights

Treated as Immovable Property NIL GST Levy ITC to be reversed since the services are exempted.
Development Rights which are to be paid by the Builder Exempted for Builder NIL GST Levy ITC is to be reversed since the services are exempted

18. Construction Services by Sub-Contractors: 

TYPE OF SERVICES RATE OF TAX
Commercial Apartment 18% – With ITC
Residential Apartment 18% – With ITC
Affordable Housing Apartment 12% – With ITC
Partly Affordable Where Affordable Housing >50% of Non-Affordable Housing 12% – With ITC

19. Computation of GST on Development Rights: 

Value for Development Rights:

Value of similar apartments charged by the promoter from the independent buyers nearest to the date on which such development rights or FSI is transferred to the promoter Rate of Tax: 18%

Time of Supply : Date: JD Date / Allotment Letter Date

Computation of GST on Development Rights

  • Land Owner Share of Units * Launch Price(JD Date) * 18% (OR)
  • Carpet Area of LO Share * Launch Price per unit of Carpet Area * 18

20. GST under RCM on TDR for Promoters: 

The carpet area of the residential apartments was un-booked on the date of issuance of the completion certificate or first occupation
GST payable on TDR *
The total carpet area of the residential apartments in the project

Subject to a Maximum of •

  • Value of un sold Apartments * ( 5% or 1%)
  • Remaining un-booked on the date of issuance of completion certificate or first occupation

Author Bio

I am Manimaran Kathiresan, practicing Chartered Accountant partner in Sekharan Associates. I am also running a YouTube channel name called 'GST India Daily' [ https://www.youtube.com/channel/UCE7ghAhEZOVtjT8mfO6WK6w ]. Website: www.gstindiadaily.com View Full Profile

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2 Comments

  1. veerendar kumar bhandari says:

    I can read that GST on Transfer of Development right has to be paid by Builder on RCM on JD perhaps after development or during development before CC is obtained all such sale of apt attracts gst with ITC to the builder then does it mean that on the same developmed area two time gst has to be paid once on transfer of DR and another agreement to sale is entered with buyers by builder?

  2. sagar says:

    Contractor and sub contractor rate has increased to 18% w.e.f 18th July 2022. Please check. This will be applicable for all PMAY, affordable housing etc

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