Reduced GST Rate for Residential Real Estate projects - Summary of all related Notifications.

GST On Residential Real Estate Projects

To implement the decisions made during the various GST Council meeting on issues related to GST rate for real estate Sector, The CBIC has issued notification multiple notifications. This article explains the effect of these notifications in simple language.

 (Notification 3-2019 CGST Rate)

Particulars	Effective Rate of GST	Applicable rate after abatement for value of land
Construction of Affordable Houses (See Note 1)	1.50% (Without ITC)	1% (Without ITC)
Construction of other than Affordable Houses	7.50% (Without ITC)	5% (Without ITC)

General Notes:

1.    Meaning of Affordable Houses shall be:

For Metro cities	a.     Value Should be Rs. 45 Lakhs or less And b.     Carpet Area of the house should not be more than 60 meters
For other than Metro Cities	a. Value Should be Rs. 45 Lakhs or less And b. Carpet Area of the house should not be more than 90 meters

Note: Metropolitan cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (the whole of MMR) with their respective geographical limits

2.    No Input tax credit shall be available.

3.    This is compulsive scheme for any projects starting from 1^st April 2019.

4.    Gross amount for this purpose shall include following:

a.     Cost of Construction

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.

5.    Issues related to Input tax credit has been explained in details with illustrations in the notification itself.

Notes about the ongoing projects:

6.   For ongoing projects the Promoter may opt for the above scheme or continue to pay the tax as per the old scheme with ITC. i.e. At 12% or 18% as the case may be.

7.     For Ongoing project, the Promoter will have to exercise one time option to pay tax as per the old scheme. If Promoter does not exercise the option, it will be deemed that the Promoter has opted for new scheme.

8.     Invoices for supply of the service can be issued during the period from 1st April 2019 to 10th May 2019 before exercising the option, but such invoices shall be in accordance with the option to be exercised.

Notes about the Purchase from Un-registered Dealer:

9.     Person falling under this scheme, i.e. Without ITC Scheme, 80% of the Inputs and Input Service have to be obtained from registered supplier only.

Exception:

a.     Development Rights

b.     Lease of Land

c.      FSI Including additional FSI

d.     Electricity

e.     Petrol

f.       Diesel

g.     Natural Gas

For this purpose Supply on which tax is paid on RCM is considered as purchase from registered supplier only.

10. Cement has to be purchased, in all cases, from Registered Supplier. If Cement is Purchased from un registered supplier, Tax at applicable rate will have to be paid by the Promoter on RCM Basis.

11. In case there is a shortfall of 80% of purchase of goods or service from registered supplier, On such shortfall the Promoter will have to pay tax at 18% on Reverse charge basis.

e.g.

Total Purchase	Rs. 100,000/-
80% of the total Purchase	Rs. 80,000/-
Actual Purchase from Registered supplier	Rs. 70,000/-
Short fall of Purchase from Registered Supplier	Rs. 10,000/-
Tax to be paid at 18% on RCM basis (10000 x 18%)	Rs.1,800/-

12. The Promoter shall have to maintain project wise account of Inward supplies from registered person and unregistered person. The shortfall shall be calculated at the year end.

The Promoter shall have to file a Form in which details of such shortfall will have to disclose.

13.Development rights, long term lease of land, or FSI sold by un-registered person to promoter shall be liable for tax under RCM. Promoter shall be liable to pay tax at 18% on such charges under RCM.

Notes Related to Sale of FSI or Transfer of Development Right or Lease:

14. GST shall be exempt on FSI or transfer of Development right or long term lease of more than 30 years Provided :

The promoter shall be liable to pay tax at applicable rate on RCM basis on such proportion of value of:

a.     Transfer of Development Right

b.     FSI

c.      Long term lease

In respect of unsold units on the date of completion certificate or first occupancy. The rate of RCM is 1% for affordable housing and 5% for other than affordable housing. Notification No. 04/2019- Central (Rate)

15.       GST on FSI or Transfer of development rights or long term lease other than mentioned in point no. 14 shall be payable by promoter on RCM basis.(Notification No. 5/2019 – Central Rate)

16.  Liability to pay GST on FSI or Transfer of Development Rights or long ter lease other than mentioned in point no. 14 shall arise on the date  of issuance of completion Certificate or on its first occupation, whichever is earlier. (Notification No. 6/2019 – Central Rate)

17.  For following cases GST shall be payable by promoter in case of purchase from unregistered supplier (Notification No. 7/2019 – Central Rate)

a.     Shortfall from 80% of purchase from registered supplier

b.     Cement

c.      Capital Goods used for the Project

18. GST rate shall be 18% for shortfall of purchase from registered person from 80% other than cement and capital goods. (Notification No. 8/2019 – Central Rate)

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