Recently on 33rd and 34th meeting of GST council has brought a paradigm shift into the GST application on Real estate sector. As per the revised rates effective from 01.04.2019 GST would be applicable at the rate of 5% on residential properties and 1% on affordable segments of Residential properties WITHOUT ITC after 1/3rd abatement on total value for land cost. Otherwise it would be 1.5% and 7.5% on gross value.
Condition for revised rate of 1% or 5%:-
1. Input tax credit would not be available
2. 80% of input goods and services should be purchased from registered dealer. In case of any shortfall of purchase of 80% from registered dealer Tax to be paid by the builder on reverse charge at the rate of 18%. In case of cement purchased from unregistered dealer tax shall be paid @ 28% under RCM. Similarly on capital goods RCM is applicable.
Needless to say that the 80% criteria to buy from registered dealer has curb a lot of compliance issue into the real estate sector and will make it more formalise in coming days.
Also,Read gst on real estate.
Affordable Housing properties
Residential house or Flat having carpet area of 90 Sqm in Metropolitan cities and 60 Sqm in non-metropolitan cities and cost up to 45 lakhs would be considered into the affordable segments.
There is one time transition option given to real estate firms that they can continue to pay tax as per earlier rate 8% & 12% with the benefits of ITC on the on-going project which has not been completed till 31.03.2019 and where construction and booking both started before these new changes which is 01.04.2019. These options has to be chosen (Choice for the assess) by the assess and same has to be informed in writing to the Jurisdiction officers. If same has not been informed or chosen within the time frame then new rate would be applicable even to old on-going project.
(Writer is a Member of ICAI and based in Varanasi can be contacted further through mail email@example.com or 9560341460.)