Question: What are the rates of GST applicable on construction of residential apartments?

Answer: With effect from 01-04-2019, effective rate of GST applicable on construction of residential apartments by promoters in areal estate project are,

  • for construction of affordable residential apartments –1% without ITC on total consideration.
  • for construction of residential apartments other than affordable residential apartments –5% without ITC on total consideration.

Question: What will be the rate of GST after above changes for on-going projects?

Answer: The above rates are applicable for projects which commences on or after 01-04-2019 as well as in on- going projects. However in case of on-going project, the promoter has an option to pay GST at the old rates i.e. at the effective rate of 8% on affordable residential apartments and effective rate of 12% on other than affordable residential apartments and, consequently, to avail permissible credit of inputs taxes; in such cases the promoter is also expected to pass the benefit of the credit availed by him to the buyers. To continue with the old rates, the promoter/ builder has to exercise one time option in the prescribed form and submit the same manually to the jurisdictional Commissioner within prescribed date.

Question: What is an affordable residential apartment?

Answer: Affordable residential apartment is a residential apartment in a project which commences on or after 01- 04-2019, or in an ongoing project in respect of which the promoter has opted for new rate of 1% (effective from 01-04-2019) having carpet area upto 60 square meter in metropolitan cities and 90 square meter in cities or towns other than metropolitan cities and the gross amount charged for which, by the builder is not more than forty five lakhs rupees.

Question: What is an on-going project?

Answer: A project which meets the following conditions shall be considered as an ongoing project.

  • Commencement certificate for the project, where required, has been issued by the competent authority on or before 31stMarch, 2019, and it is certified by a registered architect, chartered engineer or a licensed surveyor that construction of the project has started (i.e. earthwork for site preparation for the project has been completed and excavation for foundation has started) on or before 31st March, 2019.
  • Where commencement certificate in 3 respect of the project, is not required to be issued by the competent authority, it is to be certified by any of the authorities specified in (a) above that construction of the project has started on or before the 31st March, 2019.
  • Completion certificate has not been issued or first occupation of the project has not taken place on or before the 31st March, 2019.
  • Apartments of the project have been, partly or wholly, booked on or before 31st March, 2019.

Question: What is the rate of GST applicable on construction of commercial apartments [shops, godowns, offices etc.] in a real estate project?

Answer: With effect from 01-04-2019, effective rate of GST, after deduction of value of land or undivided share of land, on construction of commercial apartments [shops, godowns, offices etc.] by promoter in real estate project are as under:

  • Construction of commercial apartments in a Residential Real Estate Project (RREP),  which commences on or after 01-04-2019 or in an ongoing project in respect of which the promoter has opted for new rates effective from 01-04-2019- 5% without ITC on total consideration
  • Construction of commercial apartments in a Real Estate Project (REP) other than Residential Real Estate Project (RREP) or in an ongoing project in respect of which the promoter has opted for old rates– 12% with ITC on total consideration.

Question: Does a promoter/ builder have to purchase all goods and services from registered suppliers only?

Answer: A promoter shall purchase at least 80% of the value of input and input services, from registered suppliers. For calculating this threshold, the value of services by way of grant of development rights, long term lease of land, floor space index, or the value of electricity, high speed diesel, motor spirit and natural gas used in construction of residential apartments in a project shall be excluded.

  • If value of purchases as prescribed above from registered supplier is less than 80%, what would be the applicable GST rate on such purchases?
  • Promoter has to pay GST @ 18% on reverse charge basis on all such inward supplies (to the extent short of 80% of inward supplies from registered supplier) except cement on which tax has to be paid (by the promoter on reverse charge basis) at the applicable rate, which at present is 28% (CGST 14% + SGST 14%).

Question: In case of new rate of 5% / 1%, whether the conditions of payment of tax through Cash Ledger, payment of tax under RCM subject to 80% limit, non- availing of Input Tax Credit, reversal of credit, maintenance of project wise account, reporting of ITC not availed in corresponding GSTR-3B etc. are required to be complied mandatorily by the Developer ?

Answer : Yes. All the specified conditions against clause (i) to (id) of SI. No 3 of Notification No. 11/2017- CTR are mandatory.

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