GST for Real Estate Sector

GST and Real Estate Sector

Highlights of Revised Scheme from 1st April 2019

• The revised scheme applies to residential and commercial apartments.
• The new scheme is compulsory for projects commenced on or after 1-4-2019. In respect of ongoing projects as on 31-3-2019, the promoter has the option to shift to a new scheme w.e.f. 1-4-2019 (without ITC) or continue under the earlier scheme (with ITC)
• Under the new scheme, the GST rates for residential apartments are as follows – (a) CGST 0.5% plus SGST/UTGST 0.5% (total 1%) (without ITC) for affordable residential apartments (b) CGST 2.5% plus SGST/UTGST 2.5% (total 5%) (without ITC) for other residential apartments.
• In respect of commercial apartments (shops, offices, godowns, etc.) in RREP, the GST rate is CGST 2.5% plus SGST/UTGST 2.5% (total 5%) (without ITC). In respect of the construction of commercial apartments (other than RREP), the GST rate is CGST 6% plus SGST/UTGST 6% (total 12%) (with ITC).
• In case of ongoing projects, if the promoter intends to shift to the new scheme (of 1%/5%) w.e.f. 1-4-2019, he is required to reverse excess ITC availed as on 31-3-2019 or get a credit of ITC less claimed as on 31-3-2019.
• RREP (Residential Real Estate Project) means Real Estate Project (REP) of residential apartments with commercial apartments not more than 15% of the total carpet area of REP. 
• Affordable Residential Apartment means apartment having carpet area not exceeding 60 square meters in metropolitan cities or 90 square meters in cities or towns other than metropolitan cities and for which the gross amount charged is not more than Rs. 45 lakhs.
• These rates apply where the supply of services involves the transfer of land or undivided share of land and its charges are included in the amount charged to the customer.
• In respect of new projects, the tax (CGST, SGST/UTGST as applicable) shall be paid in cash by debiting the electronic cash ledger only [without utilizing Input Tax Credit].
• In case of ongoing projects as on 1-4-2019, the promoter has the option to opt for earlier provisions of tax i.e. with the utilization of ITC. If the promoter intends to continue under the old scheme, he has to submit a declaration in the specified form to the jurisdictional Commissioner before 20-5-2019.
• If the promoter does not submit such a declaration, he is deemed to have opted for the new scheme.
• If landowner- promoter transfers development right or FSI (including additional FSI) to a promoter (developer- promoter) against consideration, wholly or partly, in the form of construction of apartments, the developer- promoter shall pay tax on supply of construction of apartments to the landowner-promoter. The landowner – promoter can take credit of taxes charged from him by the developer promoter if the landowner-promoter further supplies such apartments to his buyers.
• No GST is payable where the entire consideration has been received after issuance of the completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.
• All cement for the project must be purchased from a registered supplier only. If not so received, the promoter is required to pay GST @ 28% under reverse charge by the promoter (even if the total value of supplies received from unregistered suppliers is less than 80%).
• After considering payment of GST on the cement under reverse charge, at least 80% of the procurement of inputs and input 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], used in supplying the real estate project service shall be received from registered suppliers only. [In case of interest received, it can be considered as received from a registered supplier, if the Bank/FI/company giving loan are registered under GST].
• If there is a shortfall in procurement from registered suppliers, i.e. if still the requirement of procurement of 80% from registered suppliers is not achieved, GST @18% is payable on value to the extent of the shortfall. This adjustment is to be done financial year wise and not project-wise.
  

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