GST on Real Estate have undergo many changes since July 2017.The GST Council has considered the changing scenario in real estate and taken considerable changes for Rate Reductions. Central Board of Indirect taxes and Customs (CBIC) has issued notifications relating to a reduction in GST rates for real estate projects and transition related issues. Apart from change in the rate of tax, the amendments are accompanied by changes related to restrictions on claim of input tax credit, condition of 80% procurement from registered dealers.
Let us understand the detail changes:
- Existing GST Rates for Builders
- Summary of Notifications issued on 29.03.19 wef 1.4.19
- Changes in rates for Real Estate Projects wef 1.4.19
- New definitions
- One-time option to select old or new rates for ongoing projects
- 80% of value of input & input services -mandatory purchase in New Scheme
- ITC transition policy for ongoing projects
- Changes in taxing policy for TDR/FSI
Existing GST Rates for Builders
- GST @ 12% with deduction for cost of land for low cost affordable housing projects, Infrastructure Status & other schemes as notified, effectively 8%
- GST @ 18% with deduction for cost of land for other than affordable housing projects & commercial premises, effectively 12%
- No segregation of projects as “ Residential” or “ Commercial” project.
- Full Input tax credit allowed except proportionate reversal of ITC -based on value on issue of OC/Completion.
- RCM on GTA, Legal Advocate, Security services.
- JDA Agreement- GST Liability as per Notification No 04/2018 dated 25/01/2018
Summary of Notifications issued on 29.03.19 which are applicable from1.4.19
03/2019 Changes in GST rates – Affordable /non-affordable, Commercial- New scheme option to continue the old scheme
04/2019 Exemption – supply of TDR, FSI and land premium
05/2019 RCM for TDR, FSI and land premium
06/2019 Time of Supply for JDA /redevelopment project
07/2019 RCM criteria to effect 80% of inputs/input services from Registered persons
08/2019 Rate for RCM – cement and others
16/2019 –CGST Amendments in GST Rules (Rule 41, Rule 42 and Rule 43)
04/2019 (ROD) Credit attributable to be determined based on carpet area- Section 17(2)
Changes in rates for real estate Projects and Conditions-Old Projects opting for New Rates/Rates for New Projects w.e.f from 01.04.2019
| Nature of Project | GST Rate |
| RREP | |
| Affordable units | 1 |
| Other-residential units | 5 |
| Commercial units | 5 |
| REP | |
| Affordable units | 1 |
| Other-residential units | 5 |
| Commercial units | 12 (with ITC) –Proportionate |
Conditions: Tax payment to be made in cash . No Input Tax Credit shall be utilized except to the extent of ITC as per Annex I/ II of 3/2019. No ITC can be taken post 1st April, 2019. 80% Procurement from Registered Dealer.
New definitions
Real Estate Project (REP)
The development of a building or apartment, the development of land into plots,
all improvements and structures thereon.
Residential Real Estate Project (RREP)
A REP in which the carpet area of the commercial apartments in not more than 15% of the total carpet area of all the apartments in the REP carpet area.
Affordable residential apartment
Carpet area not exceeding 60(metro)/90(Non-metro) sq.mt and gross amount charged is not more than Rs.45 lakhs. Value to be considered in gross amt.- consideration for land, preferential location charges, development charges, parking charges, common facility charges.
Ongoing project means a project which satisfies all the following conditions:
a) Commencement certificate is issued by the competent authority on or before 31st March, 2019; and b) Any of the following authorities certifies that construction has started on or before 31st March, 2019;
b) Registered Architect;• Registered Chartered Engineer • Licensed surveyor of local body and
c) Completion certificate has not been issued or first occupation of the project has not taken place on or before the 31st March, 2019; and
d) Apartments have been, partly or wholly, booked on or before the 31st March, 2019.
A Project which does not qualify as ongoing project will qualify as “New Project” which commences on or after 1st April 2019.
One-time option to select old or new rates for ongoing projects
The new scheme of charging 5%/ 1% with no ITC is mandatory for all new RREP. It is also mandatory to new REP to the extent of residential units.
For ongoing projects as define above, the developer-promoter can choose to continue with old scheme of charging GST @ 12%/ 8% with availment of ITC or new scheme of charging GST @ 5%/ 1% with no ITC.
Developer has to decide the option for paying at full rate or reduced rate by submitting details on project wise basis by 10th May 2019. If the developer does not upload the details of option selected, it would be deemed to have selected the new rates.
80% of value of input & input services, shall be received from registered person-For New Projects and New Rates from 01.04.2019
- For calculating 80%, do not consider / include supplies of TDR, Long term lease, FSI,electricity, high speed diesel, motor spirit, natural gas.
- Cement purchased from URD suppliers shall be payable on RCM basis @ 28% & on capital goods @ specified rate on monthly basis.
- Calculation shall be made for each Financial Year or Part thereof (year of receiving OC) In case of shortfall of 80%, GST is to be paid on shortfall value on RCM basis @ 18% before the month of June of subsequent year
- Project wise details of RD & URD is to be maintained.
- Services on which RCM is paid, like GTA, security etc.; shall be considered purchases from registered suppliers.
ITC transition policy for ongoing projects.
Transitional procedure in respect of accumulated ITC balance for ongoing
projects to be followed as per formula in Annex I & II of 3/2019. Reversal of ITC in case of transitional period i.e. old rate of tax to new rate of tax in case of on-going projects.
Changes in taxing policy for Transfer of development rights (TDR)/ Floor Space Index (FSI) (including additional FSI)/ Long lease premium
Exemption granted for supply of TDR, FSI, long term lease on or after 01.04.2019 provided it is used for construction of:
- residential flats which are sold before issuance of completion certificate; and
- such service is liable to GST
Exemption to apply to transfer of development rights pursuant to Joint Development Agreement (whether area share or revenue share) for residential complex for sale.
Exemption will be withdrawn in respect of unsold flats as on the date of completion. GST shall not exceed 1% of the value in case of Affordable residential apartments or 5% of the value in case of other than affordable residential apartments, remained un-booked on date of completion certificate.
This article is written by CA Rahul Shah, Partner in P R AND CO LLP, Chartered Accountants. In case of any queries regard in this article, please feel free to reach out to Rahul on his email ID – [email protected]
DISCLAIMER: The basis of this article is the GST law in India as on the date of writing this article. The article is for informational purpose only and is solely aimed at providing the reader an insight to the GST pertaining to real estate. No part of this article shall be construed as any kind of legal advice.
Author Bio
Sir, whether this new Rates for Real Estate Project is applicable to Developer/ Land owner of Colony (i.e developing only plot of land and no construction of house ).
Dear Sir,
If the promoter had procured a part of input and input services before the notification date i.e. in previous FY, do the same can be considered in computing 80% of purchase value from registered supplier?