Option for under construction projects:
Under-Construction projects as on 31st March, 2019 shall have an option to choose old rates (effective rate of 8% or 12% with ITC) with input tax credit or new rates without input tax
The option shall be exercised once within a prescribed time frame (which shall be decided after discussing with State Governments) and where the option is not exercised within the prescribed time limit, new rates shall
Conditions for the new tax rates:
At least 80% of the inputs and input services [other than TDR-Transfer of Development Rights/ JDA – Joint Development Agreement, FSI– Floor Space Index, long term lease (premiums)] to be procured from registered dealers. Further, on shortfall of purchases from 80% ,tax shall be paid by the builder @ 18% on RCM basis for the transactions with unregistered
- Even if the above condition (80%) is satisfied, GST shall be paid on RCM basis for Cement (@28%) and Capital Goods (@ respective rates) purchased from unregistered dealers.
- Input tax credit shall not be
Applicability of new tax rates:
The new tax rates which 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.
(i) New rate of 1% without input tax credit (ITC) on construction of affordable houses shall be available for :
Affordable houses (area of 60 sqm in case of metros / 90 sqm in case of non- metros and value up to RS. 45 lakhs) and
Affordable houses being constructed under the existing housing schemes presently
(ii) New rate of 5% without input tax credit shall be applicable on construction of,-
All houses other than affordable houses in ongoing projects whether booked prior to or after 04.2019.
In case of houses booked prior to 01.04.2019, new rate shall be available on installments payable on or after 04.2019.
- All houses other than affordable houses in new
- Commercial apartments such as shops, offices etc. in a residential real estate project in which the carpet area of commercial apartments is not more than 15% of total carpet area of all
(Comment: The new rates are generally applicable only for residential houses. However it shall also be extended to Commercial Apartments (Shops, Offices) constructed vide residential real estate project subject to the above-mentioned criteria.)
Transition for ongoing projects opting for the new tax rate:
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 deal with the ITC as follows:
- ITC eligibility shall be determined based on percentage (%) of flats booked, % of construction completed, and % of
- In case of mixed project (residential and commercial), ITC eligibility shall be determined based on the 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.
The government has announced that ITC rules shall be amended to bring greater clarity on monthly and final determination of ITC and reversal thereof in real estate projects.
The change would also clearly provide procedure for availing input tax credit in relation to commercial units as such units would continue to be eligible for input tax credit in a mixed project.
Treatment of TDR/ FSI and Long term lease for projects commencing after 01.04.2019
- Supply of TDR, FSI, long term lease (premium) of land by a landowner to a developer shall be exempted with the condition that constructed flats are sold before issuance of completion certificate and tax is paid on
- Exemption can be withdrawn (limited to 1% of value in case of affordable houses and 5% of value in case of other than affordable houses) if flats sold are after issue of completion
- If exemption is withdrawn, builder shall be liable to pay tax (RCM) on TDR, FSI, long term lease (premium) on the date of issue of completion
Summary
| S.No | Scenario | Particulars | GST Rate | ITC |
| Outward Supplies | ||||
| 1 | Ongoing project – Construction and booking started on or before 31/03/2019 | Opted for old rate. | Effective Rate – 12% or 8 % as the case maybe. | Eligible |
| Opted for new rate. | 5 % or 1 % as the case maybe. | Proportionate credit available | ||
| 2 | New Project commencing on or after 01/04/2019 | No option. New rate is applicable | 5 % or 1 % as the case maybe. | Ineligible |
| Inward Supplies | ||||
|
3 |
Purchases from Unregistered Dealers | Cement and Capital Goods | RCM @ 28 % (For Cements) – To be paid by builder. In case of Capital Goods, GST @ respective rates. |
Ineligible |
| Others (excluding TDR,FSI,JDA,Long Term Lease). | If more than 20 % of total purchases are from URD – RCM shall be paid @ respective rates by builder. | |||
|
4 |
TDR, JDA,FSI, Long term lease premiums. | Building is sold before receiving certificate of completion. | GST is payable @ respective rates on the outward supply. However inward supply of TDR,JDA etc. is exempt. |
Ineligible |
