GST on Real Estate under new regime from 01-04-2019 & Reversal of ITC for supply which has time of supply after 31-03-2019

GST Council in the 34th meeting held on 19th March, 2019 at New Delhi discussed the operational details for implementation of the recommendations made by the council in its 33rd meeting for lower effective GST rate of 1% in case of affordable houses and 5% on construction of houses other than affordable house. The council decided the modalities of the transition as follows.

1) Option in respect of ongoing projects: 

The promoters shall be given a one -time option 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) which have not been completed by 31.03.2019. The option shall be exercised once within a prescribed time frame and where the option is not exercised within the prescribed time limit, new rates shall apply.

2) New tax rates: 

The new tax rates shall be applicable to new projects or ongoing projects which have exercised the above option to pay tax in the new regime are as follows.

a. 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 60 sqm in metros / 90 sqm in non- 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).

b. 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 installments 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.

c. Ongoing projects (buildings where construction and booking both had started before 01.04.2019) and have not been completed by 31.03.2019 opting for new tax rates shall transition the ITC as per the prescribed method. The transition formula approved by the GST Council, for residential projects (refer to para 2(b)(ii)) extrapolates ITC taken for percentage completion of construction as on 01.04.2019 to arrive at ITC for the entire project. Then based on percentage booking of flats and percentage invoicing, ITC eligibility is determined. Thus, transition would thus be on pro-rata basis based on a simple formula such that credit in proportion to booking of the flat and invoicing done for the booked flat is available subject to a few safeguards. 

d. For a mixed project transition shall also allow ITC on pro-rata basis in proportion to carpet area of the commercial portion in the ongoing projects (on which tax will be payable @ 12% with ITC even after 1.4.2019) to the total carpet area of the project.

e. Conditions for the new tax rates:

i. Input tax credit shall not be available,

ii. 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.

3) Treatment of TDR/ FSI and Long term lease for projects commencing after 01.04.2019

The following treatment shall apply to TDR/ FSI and Long term lease for projects commencing after 01.04.2019.

i. 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.

ii. The liability to pay tax on TDR, FSI, long term lease (premium) shall be shifted from land owner to builder under the reverse charge mechanism (RCM).

iii. The date on which builder shall be liable to pay tax on TDR, FSI, long term lease (premium) of land under RCM in respect of flats sold after completion certificate is being shifted to date of issue of completion certificate.

iv. The liability of builder to pay tax on construction of houses given to land owner in a JDA is also being shifted to the date of completion. Decisions from para 7.1 to 7.4 are expected to address the problem of cash flow in the sector.

Reversal of ITC as on 31-03-2019 on transition from old regime to new regime of lower tax rates. Refer the illustrations for practical calculation

Real estate project (REP) other than Residential Real estate project (RREP)

Input tax credit attributable to construction of residential portion in a real estate  project (REP) other than residential real estate project (RREP), which has time of supply on or after 1st April, 2019, shall be calculated project wise for all projects which commence on or after 1st April, 2019 or ongoing projects in respect of which the promoter has not exercised option to pay central tax on construction of apartments at the revised rates:

1. Where% completion as on 31st  March, 2019 is not zero or where there is inventory in stock

(a) Input tax credit on inputs and input services attributable to construction of residential portion in a REP, which has time of supply on or after 1st April, 2019, shall be calculated as under:

T=Te – Tx

T    = Total ITC as on 31-03-2019

Te  = Total ITC eligible Pre Transition period (01-07-17 to 31-03-19)

Tx  = Total ITC eligible Post Transition period (From 01-04-19 onwards)

C% = Completion % as on 31st March, 2019 (to be used in estimating total ITC by reverse calculation)

Illustration: If ITC available as on 31-03-19 for 20% completion = 1, then for 100% completion the ITC would be equal to 100 (÷) 20% = 5. % Completion of construction as on 31st March, 2019” will be equal to the % completion declared under RERA or as certified by a registered architect or engineer.

(b) The amounts T, ‘Tx’ and ‘Te’ shall be computed separately for input tax credit of central tax, State tax, Union territory tax and integrated tax.

(c) Where,Tx is positive, i.e. Te<T, the registered person shall pay, by debit in the electronic credit ledger or electronic cash ledger, an amount equal to the difference between T and Te. Such amount shall form part of the output tax liability of the registered person and the amount shall be furnished in FORM GST ITC- 03.

(d) Where Tx is negative, i.e. Te>T, the registered person shall be eligible to take ITC  on goods and services received on or after 1st April, 2019 for construction of residential portion in the REP, for which he shall not otherwise be eligible, to the extent of difference between Te and T.

(e) The registered person may calculate Tc and utilize credit to the extent of Tc for payment of tax on commercial apartments, till the complete accounting of Tx is carried out and submitted.

2. Where% completion as on 31st March, 2019 is zero but invoicing has been done having time of supply before 31st March, 2019, and no input services or inputs have been received as on 31st March, 2019, “Te shall be calculated as follows: – 

(a) Input tax credit on inputs and input services attributable to construction of residential portion in a REP, which has time of supply on or before 31st March, 2019 may be denoted as Te which shall be calculated as under,

Te = Tc + Tr    Where, –

Tc is the ITC attributable to construction of commercial portion in the REP and

Tr is the ITC attributable to construction of residential portion in the  REP which has time of supply on or before 31st March, 2019.

(b) The registered person shall be eligible to take ITC on goods and services received on or after 1st April, 2019 for construction of residential portion in the REP, for which he shall not otherwise be eligible, to the extent of the amount of Te.

(a) The amount ‘Te’ shall be computed separately for input tax credit of central tax, State tax, Union territory tax and integrated tax.

3. Imposition of upper Cap of 25% + percent completion as on 31-03-19.

Notwithstanding anything contained above Te shall be determined in the following situations as under:

(a) Where percentage invoicing is more than the percentage completion and the difference between  percentage invoicing (per cent points)  and the percentage completion (percent points)  of construction is more than 25% ; the value of  percentage invoicing shall be deemed to be percentage completion plus 25 percent points.

(b) Where  the value of invoices issued on or prior to 31st March, 2019 exceeds the consideration  actually received on or prior to 31st March, 2019 by more than 25% of consideration  actually received; the value of such invoices for the purpose of determination of percentage invoicing shall be deemed to be actual consideration received plus 25% of the actual consideration received; and

(c) Where,the value of procurement of   inputs and input services   prior to 1st  April, 2019 exceeds the value of actual consumption of the inputs and input services used in the percentage of construction completed as on 31st March, 2019 by more than 25 perce of value of actual consumption of inputs and input services, the jurisdictional commissioner or any other officer authorized in this regard may fix the Te based on actual per unit consumption of inputs and input services based on the documents duly certified by a chartered accountant or cost accountant submitted by the promoter in this regard, applying the accepted principles of accounting.

(d) Refer the under mentioned tables for calculations of reversal 

Illustrations of calculation of ITC to be reversed/availed on 31-03-19 on transition to New regime of CST (Real Estate Projects)
 

Real estate project (REP) other than Residential Real estate project (RREP)

Fill Figures only in yellow Cells

Illustration – 1

Details of REP ( Residential + Commercial)
Details of Total Carpet Area of the REP No. Carpet SQM
(each)
Total Carpet Area
a Residential Apartments 75 70 5250
b Commercial Apartments 25 30 750
c Total Area (R+C) 6000
 
Details of Area under construction No. Carpet SQM
(each)
Total Carpet Area
d Total Residential Area 75 70 5250
e Area Booked before transition 40 70 2800
f Area Invoiced (out of Booked area) 20% 8 70 560
Value of Area in Rs. Cr. No. Value per apartment (Rs. Cr) Total Value
( Rs. Cr)
g Residential Area 75 0.60 45.00
h Area Booked before transition 40 0.60 24.00
i Area Invoiced (out of Booked area) 8 0.60 4.80
Proportionate Areas Ratios
j Commercial Area to Total Project Area   b  (÷)  c 0.125
k Residential Area to Total Project Area a  (÷)  c 0.875
l Residential Area booked to Total Residential Area e  (÷)  d 0.533
m Residential Area invoiced to Total Residential booked Area f   (÷)  e 0.200
n Project Percentage completion (%) as on 31-03-19 20% 1  (÷)  5 5
o Total ITC available as on 31-03-2019                           Rs. Cr 1.000
 
Eligible ITC and Reversal of ITC Rs. Cr.
p ITC for eligible Residential Apartment invoiced (o*k*l*m*n) 0.47
q ITC for eligible Commercial Apartment invoiced (o*j) 0.13
r ITC Eligible as on 31-03-19 (p+q) 0.59
s ITC to be reversed on transition (o-r) 0.41

Illustration – 2
Details of REP ( Invoice more than Completion)
Details of Total Carpet Area of the REP No. Carpet SQM
(each)
Total Carpet Area
a Residential Apartments 75 70 5250
b Commercial Apartments 25 30 750
c Total Area (R+C) 6000
Details of Area under construction No. Carpet SQM
(each)
Total Carpet Area
d Total Residential Area 75 70 5250
e Area Booked before transition 40 70 2800
f Area Invoiced (out of Booked area) 60% 24 70 1680
Value of Area in Rs. Cr. No. Value per apartment (Rs. Cr) Total Value
(Rs. Cr)
g Residential Area 75 0.60 45.00
h Area Booked before transition 40 0.60 24.00
i Area Invoiced (out of Booked area) 8 0.60 4.80
Proportionate Areas   Ratios
j Commercial Area to Total Project Area   b  (÷)  c 0.125
k Residential Area to Total Project Area a  (÷)  c 0.875
l Residential Area booked to Total Residential Area e  (÷)  d 0.533
m Residential Area invoiced to Total Residential booked Area f   (÷)   e 0.600
n Project Percentage completion (%) as on 31-03-19 20% 1  (÷)  5 5
o Total ITC available as on 31-03-2019 Rs. Cr 1.000
Eligible ITC and Reversal of ITC Rs. Cr.
p ITC for eligible Residential Apartment invoiced (o*k*l*m*n) 1.40
q ITC for eligible Commercial Apartment invoiced (o*j) 0.13
r ITC Eligible as on 31-03-19 (p+q) 1.52
s ITC to be reversed on transition (o-r) -0.52

Illustration – 3
Details of REP ( Single Cap Percentage completion + 25%)
Details of Total Carpet Area of the REP No. Carpet SQM
(each)
Total Carpet Area
a Residential Apartments 75 70 5250
b Commercial Apartments 25 30 750
c Total Area (R+C) 6000
 
Details of Area under construction No. Carpet SQM
(each)
Total Carpet Area
d Total Residential Area 75 70 5250
e Area Booked before transition 40 70 2800
f Area Invoiced (out of Booked area) 60% 24 70 1680
g Invoicing after Cap (PC%+25%) 45% 18 70 1260
Value of Area in Rs. Cr. No. Value per apartment (Rs. Cr) Total Value
(Rs. Cr)
h Residential Area 75 0.60 45.00
i Area Booked before transition 40 0.60 24.00
j Area Invoiced (out of Booked area) 24 0.60 14.40
k Area Invoiced (out of Booked area) +(PC%+25%) 18 0.60 10.80
Proportionate Areas Ratios
l Commercial Area to Total Project Area   b  (÷)  c 0.125
m Residential Area to Total Project Area a  (÷)  c 0.875
n Residential Area booked to Total Residential Area e  (÷)  d 0.533
o Residential Area invoiced to Total Residential booked Area f   (÷)  e 0.600
p Area Invoiced (out of Booked area) +(PC%+25%) 45% g   (÷)  e 0.450
q Project Percentage completion (%) as on 31-03-19 20% 1  (÷)  5 5
r Total ITC available as on 31-03-2019                           Rs. Cr 1.000
 
Eligible ITC and Reversal of ITC Rs. Cr.
s ITC for eligible Residential Apartment invoiced (o*k*l*m*n) 1.05
t ITC for eligible Commercial Apartment invoiced (o*j) 0.13
u ITC Eligible as on 31-03-19 (p+q) 1.17
v ITC to be reversed on transition (o-r) -0.17

Illustration – 4
Double Cap (Completion%+25%) & (Consideration received + 25%)
Details of Total Carpet Area of the REP No. Carpet SQM
(each)
Total Carpet Area
a Residential Apartments 75 70 5250
b Commercial Apartments 25 30 750
c Total Area (R+C) 6000
 
Details of Area under construction No. Carpet SQM
(each)
Total Carpet Area
d Total Residential Area 75 70 5250
e Area Booked before transition 40 70 2800
f Area Invoiced (out of Booked area) 60% 24 70 1680
g Invoicing after Cap (PC%+25%) 45% 18 70 1260
Value of Area in Rs. Cr. No. Value per apartment (Rs. Cr) Total Value
(Rs. Cr)
h Residential Area 75 0.60 45.00
i Area Booked before transition 40 0.60 24.00
j Area Invoiced (out of Booked area) 24 0.60 14.40
k Area Invoiced (out of Booked area) +(PC%+25%) 18 0.60 10.80
Value of Area invoiced & Received + Cap 25% in Rs. Cr. Cap % Value per apartment (Rs. Cr) Total Value
(Rs. Cr)
l Consideration Received 8.00
m Consideration Received + Cap 25% 25 10.00
Proportionate Areas Ratios
n Commercial Area to Total Project Area   b  (÷)  c 0.125
o Residential Area to Total Project Area a  (÷)  c 0.875
p Residential Area booked to Total Residential Area e  (÷)  d 0.533
q Residential Area invoiced to Total Residential booked Area f   (÷)   e 0.600
r Area Invoiced (out of Booked area) +(PC%+25%) 45% m   (÷)  i 0.420
s Project Percentage completion (%) as on 31-03-19 20% 1  (÷)  5 5
t Total ITC available as on 31-03-2019                           Rs. Cr 1.000
 
Eligible ITC and Reversal of ITC Rs. Cr.
u ITC for eligible Residential Apartment invoiced t*(o*p*r*s) 0.98
v ITC for eligible Commercial Apartment (t*j) 0.13
w ITC Eligible as on 31-03-19 (u+v) 1.10
x ITC to be reversed on transition (t-w) -0.10

Illustration – 5
Residential Real Estate Project-1
Details of Total Carpet Area of the REP No. Carpet SQM
(each)
Total Carpet Area
a Residential Apartments 100 70 7000
b Commercial Apartments 0 0 0
c Total Area (R+C) 7000
 
Details of Area under construction No. Carpet SQM
(each)
Total Carpet Area
d Total Residential Area 100 70 7000
e Area Booked before transition 80 70 5600
f Area Invoiced (out of Booked area) 20% 16 70 1120
Value of Area in Rs. Cr. No. Value per apartment (Rs. Cr) Total Value
(Rs. Cr)
g Residential Area 100 0.60 60.00
h Area Booked before transition 80 0.60 48.00
i Area Invoiced (out of Booked area) 16 0.60 9.60
Proportionate Areas Ratios
j Commercial Area to Total Project Area   b  (÷)  c 0.000
k Residential Area to Total Project Area a  (÷)  c 1.000
l Residential Area booked to Total Residential Area e  (÷)  d 0.800
m Residential Area invoiced to Total Residential booked Area f   (÷)   e 0.200
n Area Invoiced (out of Booked area) +(PC%+25%) 45%  
o Project Percentage completion (%) as on 31-03-19 20% 1  (÷)  5 5
p Total ITC available as on 31-03-2019                           Rs. Cr 1.000
 
Eligible ITC and Reversal of ITC Rs. Cr.
q ITC for eligible Residential Apartment invoiced (o*k*l*m*n) 0.80
r ITC for eligible Commercial Apartment invoiced (o*j) 0.00
s ITC Eligible as on 31-03-19 (p+q) 0.80
t ITC to be reversed on transition (o-r) 0.20

Illustration – 6
Residential Real Estate Project-2
Details of Total Carpet Area of the REP No. Carpet SQM
(each)
Total Carpet Area
a Residential Apartments 100 70 7000
b Commercial Apartments 0 0 0
c Total Area (R+C) 7000
 
Details of Area under construction No. Carpet SQM
(each)
Total Carpet Area
d Total Residential Area 100 70 7000
e Area Booked before transition 80 70 5600
f Area Invoiced (out of Booked area) 60% 48 70 3360
g Invoicing after Cap (PC%+25%) 0 70 0
Value of Area in Rs. Cr. No. Value per apartment (Rs. Cr) Total Value
(Rs. Cr)
h Residential Area 100 0.60 60.00
i Area Booked before transition 80 0.60 48.00
j Area Invoiced (out of Booked area) 48 0.60 28.80
k Area Invoiced (out of Booked area) +(PC%+25%) 0 0.60 0.00
Proportionate Areas Ratios
l Commercial Area to Total Project Area   b  (÷)  c 0.000
m Residential Area to Total Project Area a  (÷)  c 1.000
n Residential Area booked to Total Residential Area e  (÷)  d 0.800
o Residential Area invoiced to Total Residential booked Area f   (÷)   e 0.600
p Area Invoiced (out of Booked area) +(PC%+25%) 45%   0.000
q Project Percentage completion (%) as on 31-03-19 20% 1  (÷)  5 5
r Total ITC available as on 31-03-2019                           Rs. Cr 1.000
 
Eligible ITC and Reversal of ITC Rs. Cr.
s ITC for eligible Residential Apartment invoiced (o*k*l*m*n) 2.40
t ITC for eligible Commercial Apartment (o*j) 0.00
u ITC Eligible as on 31-03-19 (p+q) 2.40
v ITC to be reversed on transition (o-r) -1.40

Illustration – 7
Residential Real Estate Project-3 Single Cap
Details of Total Carpet Area of the REP No. Carpet SQM
(each)
Total Carpet Area
a Residential Apartments 100 70 7000
b Commercial Apartments 0 0 0
c Total Area (R+C) 7000
 
Details of Area under construction No. Carpet SQM
(each)
Total Carpet Area
d Total Residential Area 100 70 7000
e Area Booked before transition 80 70 5600
f Area Invoiced (out of Booked area) 60% 48 70 3360
g Invoicing after Cap (PC%+25%) 45% 36 70 2520
Value of Area in Rs. Cr. No. Value per apartment (Rs. Cr) Total Value
(Rs. Cr)
h Residential Area 75 0.60 45.00
i Area Booked before transition 80 0.60 48.00
j Area Invoiced (out of Booked area) 48 0.60 28.80
k Area Invoiced (out of Booked area) +(PC%+25%) 36 0.60 21.60
Proportionate Areas Ratios
l Commercial Area to Total Project Area   b  (÷)  c 0.000
m Residential Area to Total Project Area a  (÷)  c 1.000
n Residential Area booked to Total Residential Area e  (÷)  d 0.800
o Residential Area invoiced to Total Residential booked Area f   (÷)   e 0.600
p Area Invoiced (out of Booked area) +(PC%+25%) 45%   0.450
q Project Percentage completion (%) as on 31-03-19 20% 1  (÷)  5 5
r Total ITC available as on 31-03-2019                           Rs. Cr 1.000
 
Eligible ITC and Reversal of ITC       Rs. Cr.
s ITC for eligible Residential Apartment invoiced (o*k*l*m*n) 1.80
t ITC for eligible Commercial Apartment invoiced (o*j) 0.00
u ITC Eligible as on 31-03-19 (p+q) 1.80
v ITC to be reversed on transition (o-r) -0.80

Illustration -8
Residential Real Estate Project-4 Double Cap
Details of Total Carpet Area of the REP No. Carpet SQM
(each)
Total Carpet Area
a Residential Apartments 100 70 7000
b Commercial Apartments 0 0 0
c Total Area (R+C) 7000
 
Details of Area under construction No. Carpet SQM
(each)
Total Carpet Area
d Total Residential Area 100 70 7000
e Area Booked before transition 80 70 5600
f Area Invoiced (out of Booked area) 60% 48 70 3360
g Invoicing after Cap (PC%+25%) 45% 36 70 2520
Value of Area in Rs. Cr. No. Value per apartment (Rs. Cr) Total Value
(Rs. Cr)
h Residential Area 100 0.60 60.00
i Area Booked before transition 80 0.60 48.00
j Area Invoiced (out of Booked area) 48 0.60 28.80
k Area Invoiced (out of Booked area) +(PC%+25%) 36 0.60 21.60
Value of Area invoiced & Received + Cap 25% in Rs. Cr. Cap % Value per apartment (Rs. Cr) Total Value
(Rs. Cr)
l Consideration Received 16.00
m Consideration Received + Cap 25% 25 20.00
Proportionate Areas Ratios
o Commercial Area to Total Project Area   b  (÷)  c 0.000
p Residential Area to Total Project Area a  (÷)  c 1.000
q Residential Area booked to Total Residential Area e  (÷)  d 0.800
r Residential Area invoiced to Total Residential booked Area f   (÷)   e 0.600
s Area Invoiced (out of Booked area) +(PC%+25%) 45%   0.420
t Project Percentage completion (%) as on 31-03-19 20% 1  (÷)  5 5
u Total ITC available as on 31-03-2019                           Rs. Cr 1.000
 
Eligible ITC and Reversal of ITC Rs. Cr.
v ITC for eligible Residential Apartment invoiced (o*k*l*m*n) 1.68
w ITC for eligible Commercial Apartment invoiced (o*j) 0.00
x ITC Eligible as on 31-03-19 (p+q) 1.68
y ITC to be reversed on transition (o-r) -0.68

Purchase of inputs and input services from non-registered supplier
 
Sl.No Name of input goods and Services Percentage of input goods and services received during the financial year Whether inputs received from registered supplier?
( Y/N)
1 Sand 10 Y
2 Cement 15 N
3 Steel 20 Y
4 Bricks 15 Y
5 Flooring Tiles 10 Y
6 Paints 5 Y
7 Architect/ designing/ CAD drawing etc 10 Y
8 Aluminum windows, Ply, commercial wood 15 Y
In this example, the promoter has procured 80 per cent. of goods and services [other than services by way of grant of development rights, long term lease of land (against upfront payment in the form of premium, salami, development charges etc.) or FSI (including additional FSI), electricity, high speed diesel, motor spirit, natural gas], from a GST registered person. However, he has procured cement from an unregistered supplier. Hence at the end of financial year, the promoter has to pay GST on cement at the applicable rates 28% on reverse charge basis

Sl.No Name of input goods and Services Percentage of input goods and services received during the financial year Whether inputs received from registered supplier?
( Y/N)
1 Sand 10 Y
2 Cement 15 N
3 Steel 20 Y
4 Bricks 15 Y
5 Flooring Tiles 10 Y
6 Paints 5 N
7 Architect/ designing/ CAD drawing etc 10 Y
8 Aluminum windows, Ply, commercial wood 15 N
In this example, the promoter has procured 80 per cent. of goods and services including cement from a GST registered person. However, he has procured paints, aluminum windows, ply and commercial wood etc. from an unregistered supplier. Hence at the end of financial year, the promoter is not required to pay GST on inputs on reverse charge basis

Sl.No Name of input goods and Services Percentage of input goods and services received during the financial year Whether inputs received from registered supplier?
( Y/N)
1 Sand 10 N
2 Cement 15 N
3 Steel 15 Y
4 Bricks 10 Y
5 Flooring Tiles 10 Y
6 Paints 5 Y
7 Architect/ designing/ CAD drawing etc 10 Y
8 Aluminum windows 15 N
9 Ply, Commercial wood 10 N
In this example, the promoter has procured 50 per cent. of goods and services from a GST registered person. However, he has procured sand, cement and aluminum windows, ply and commercial wood etc. from an unregistered supplier. Thus, value of goods and services procured from registered suppliers during a financial year falls short of threshold limit of 80 per cent. To fulfill his tax liability on the shortfall of 30 per cent. from mandatory purchase, the promoter has to pay GST on cement at the applicable rate on reverse charge basis. After payment of GST on cement, on the remaining shortfall of 15 per cent., the promoter shall pay tax @ 18 per cent. under RCM

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24 Comments

  1. vswami says:

    INASTANT (in continuation of earlier posted comment):

    “……1) Option in respect of ongoing projects:
    The promoters shall be given a one -time option 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) which have not been completed by 31.03.2019. The option shall be exercised once within a prescribed time frame and where the option is not exercised within the prescribed time limit, new rates shall apply.”….
    FONT to Focus (: Instances have come to surface in which varying interpretations are sought to be made/ stance impertinently taken by realtors.
    To dilate: According to a plain reading, the option for realtor to apply, and also, collect GST at the old rate of 12% with (not without ) ITC benefit to buyer, only if in a given case both the specified conditions- namely, the construction has started and the actual booking been made before the specified cut-off date of April 1, 2019.
    Premised so, accordingly, therefore, in a given buyer’s case in which even if construction has started but actual booking not been made , or is not permitted to be made by law, then there is no other option open to realtor but to apply and collect GST only at the new, reduced rate of 5% (gross).
    Now, much before the mentioned date of 31-03-2019, the RERA Act governing all ongoing projects, has already been enacted and been in force. As mandated by the RERA Act, unless and until the project has been duly registered, no ‘booking’ is permitted. And, for that matter, no letter of allotment could be issued on a date preceding the date on which project is duly registered and realtor has duly entered into an ‘agreement to sell’ with any concerned buyer; so also Registration Number been allotted.
    To sum up, if in a concerned buyer’s case, ‘agreement to sell’ is executed by realtor and signed by both the parties not earlier but only after the cut-off date, the old rate (12% with ITC) could have no application. To be precise, the stated proposition will equally hold good even if realtor has been paid by buyer any amount by way of advance , prematurely, at any time before the actual construction has started but no ‘agreement to sell’ been formally entered into.
    Incidentally it calls for a special noting that as per the view taken by the RERA in decided cases, the regulatory provisions could be invoked and applied, even if a project requiring to be registered but not so done.
    For a better appreciation, own thoughts and viewpoints shared in Pr. Posts on such and similar other intricate points, – it is recommended, -may be looked/re-looked through in own, bedsides in the larger public interest.

    It goes without having to add, but simply to repeat and reiterate – the above mentioned and the like other angles might have to be kept in due focus, and appropriately taken care of by a CA engaged for and in submitting his audit report / ‘certification’ under the GST law.

    courtesy

  2. Mahesh Kale says:

    Hi
    We all highly appreciate your article and the detailed explanation & taxguru team has been a God’s treasure to the whole of India for day to day taxation matters.

    Sir coming to my query
    In the above mentioned formula
    WHAT WILL BE TOTAL RESIDENTIAL AREA?
    Total AREA BOOKED BEFORE TRANSITION ?
    (if the project is a JDA (50%50%) affordable residential project, and total flats are 56, now 28flat belong to land owner & 28flats belong to developer,
    The Land owner’s portion of 28flats they will retain for their family & only 28flat of the developer will be sold in the market)
    So TOTAL RESIDENTIAL FLATS will be land owner’s portion + developer’s portion?
    Or
    Only developers portion ?

    And
    TOTAL FALTS BOOKED will be owners portion + developers portion?
    OR
    Only developer’s portion?

    Thank you.

  3. husain bhatta says:

    Dear Sir,

    I want to know that how to make Input Credit Reversal in GST portal? It is Through ITC 03 or Through GSTR 3B? Any time limit for ITC 03?

  4. husain says:

    Dear Sir,

    i want to know that how to reverse credit. It is Through ITC 03 or through GSTR 3B? And any time limit for ITC 03?

  5. prashant says:

    Dear Sir
    A prestigious project located in bangalore, launched in pre-GST era (2016) with more than 1000 units, is denying ITC benefits to all home buyers who have done booking in POST GST era. Developer is saying that no ITC benefit will be passed on and will continue with 12 % rate only. Developer says ITC is already passed on in the baseprice. Actually no reduction in price has been done, how does home buyer gets justice and what is the correct method to follow. Appreciate your expertise Sir, kindly guide.

    1. CA Lalit Munoyat says:

      If he has claimed transitional credit for the taxes levied in the pre GST era, then he must pass on the credit. You can complain to the National Anti Profiteering Authority. The matter surely will be looked into.

  6. Pratik says:

    I booked my flat before 31st march 2017 when GST was not implemented, And now even after revision in GST from 12% to 5% builder wants me to pay as per 12% and says the ITC will be calculated end of possession and will be transferred to me.

    1. Wanted to know if its legal on the part of builder to charge me 12% with no guarantee of the percentage of refund i will be getting after the possession?
    2. What percentage of tax credit i can expect from builder?

    1. CA Lalit Munoyat says:

      The rate of GST is at the choice of the builder. You can’t compel him to adopt pre/post rates.For on going projects as on 31-03-2019, if the builder changes to 5% without GST then ITC to be passed onto buyers, is calculated as per a formula (Very complicated). Look into the attached Excel formula for it

  7. PARAS CHHAJED says:

    What will be GST rate for RERA registered project in which the developer sold Land to the buyers and then entering into a construction agreement with land owners. The houses being constructed have same drawing, same front elevations and specifications. Please guide. Thanks

    1. CA Lalit Munoyat says:

      Assuming that the developer is engaged in the business of construction of house and sale thereof. If there are ongoing projects as on 31-03-19 he has to select 1 option from 2 options given.

      1) Till the completion of the project he can select to remain under old provision of 18% and 12% with ITC.

      2) If he does not exercise Option 1 by 20-05-2019 then will be automatically shifted to new regime 5% and 1% without ITC and the part of ITC available as on 31-03-19 which has POS after 31-03-19 will have to be reversed.

      3) The method of reversal is given in the annexure Notification. IT involves complex calculation. I have simplified the calculation and converted the formula in easy to understand Excel Tables which are attached with this article.

  8. PARAS CHHAJED says:

    What is the position of GST applicability if the RERA registered builder develops plots and then constructs house and sales the house only after receipt of building construction certificate. Kindly guide. Thanks

  9. CA Lalit Munoyat says:

    At item q the multiplier of 5 shall be calculated as (1/20%)= 5 and not (1/5)=5. The typo error be ignored please.

  10. vswami says:

    OFFHAND

    Pending a detailed study of the contents of this write-up, these could be of relevance; and if so, might have to be examned in-depth in the context of the ongoing discussion and debate wrt the recent Notifcation of a new Formula ofor GST levy on ‘REALTY’ sector.
    See the posts and comments on the BOOKLET authored by a TEAM of CAs.

    vs
    courtesy

    1. CA Lalit Munoyat says:

      This study is based only on the formula given in the annexures to the Notification 11/2017 CGST (Rate) as amended. The excel tables take care of all the scenarios given in the annexures. In the attached tables just fill the variables for yellow marked cell and the amount of ITC to be reversed will be calculated instantly. You are welcome to take a detailed study of the contents of this write-up and inform me of any errors, if any

  11. Subrahmanya Sarma K says:

    Hi
    Project which was just started in March 2019 with ground leveling, but Developer wanted to retain the Old rate of GST i.e.12% and Booked all the flats and collected 10% as advance of flat cost and for balance payment fixed milestone wise work progress. It is RERA registered project and 50% of Flats sale agreement was done before March 31, 2019. Question is
    1. If developer wanted to opt old rate of GST i.e. 12% then ITC eligible for ongoing works ?

    2. If developer is subcontracted the work to Civil contractor in such case, is Developer is eligible for ITC?

    3. If ITC is not passed on to flat buyers is there any remedy available to flat buyers

    please suggest

    1. CA Lalit Munoyat says:

      1-This study is applicable only upon transition by developer from old regime to new regime and who has ITC available as on 31-03-19.

      2- In case of sub contract, the person who is taking ITC credit of inputs or input services, would be covered under it for ITC as on 31-03-19

      3- If ITC is not passed to the consumers then Anti Profiteering measures would apply to the developer.

  12. aman says:

    is there any need for the reversal of itc for the year 2017 till march 2019 if the builder chooses the old scheme in the case where completion certificate is expected in Aug 2019.

    1. CA Lalit Munoyat says:

      NO. Reversal is needed only when you wish to transit from old regime to new regime. This is actually Transitional Provisions.

    2. CA Lalit Munoyat says:

      At item q the multiplier of 5 shall be calculated as (1/20%)= 5 and not (1/5)=5. The typo error be ignored please.

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