Decisions taken by the GST Council in the 34thmeeting
held on 19thMarch, 2019 regarding GST rate on real estate sector
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.
Option in
respect of ongoing projects:
2.
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.
3.
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.
New tax rates:
4.
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,
(a) all houses
which meet the definition of affordable houses as decided by GSTC (area 60 sqm
in non- metros / 90 sqm in metros and value upto RS. 45 lakhs), and
(b)
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).
(ii)
New rate of 5% without input tax creditshall be applicable on construction of,-
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 instalments payable on or after 01.04.2019.
all houses other
than affordable houses in new projects.
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.
Conditions for
the new tax rates:
5.
The new tax rates of 1% (on construction of affordable) and 5% (on other than
affordable houses) shall be available subject to following conditions,-
Input tax credit
shall not be available,
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.
Transition for
ongoing projects opting for the new tax rate:
6.1
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.
6.2
The transition formula approved by the GST Council, for residential projects
(refer to para 4(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.
6.3
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.
Treatment of
TDR/ FSI and Long term lease for projects commencing after 01.04.2019
7.
The following treatment shall apply to TDR/ FSI and Long term lease for
projects commencing after 01.04.2019.
7.1
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.
7.2
The liability to pay tax on TDR, FSI, long term lease (premium) shall be
shifted from land owner to builder underthe reverse charge mechanism (RCM).
7.3
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.
7.4
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.
Amendment to ITC
rules:
8.
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 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.
9.
The decisions of the GST Council have been presented in this note in simple
language for easy understanding. The same would be given effect to
through Gazette notifications/ circulars which alone shall have force of law.
Advance Ruling :
Question(s) on which Advance Ruling Sought: Whether the
Applicant can avail the Input Tax Credit of the full GST charged on the
supply of invoice or a proportionate reversal of the same is required in case
of post purchase discount given by the supplier of the goods or services.
State/UT: Tamil Nadu
Name of Applicant: MRF Limited
Order No. & Date: TN/05/AAR/2019 dated 22.01.2019
Category as per Section 97(2) of SGST Act: 97(2)(d)
RULING As per the Provisions of Section 16 of the CGST Act 2O|7/TNGST
Act 2OI7, the Applicant can avail Input Tax Credit only to the extent of the
invoice value raised by the suppliers less the discounts as per C2FO software
which is paid by him to the suppliers.
State:
Haryana
Name of the applicants : YKK India Pvt. Ltd
Question:
i. Whether the
Applicant is eligible to take input tax credit on:
a.
GST charged by the Contractor for hiring of buses for transportation of
employees?
b.
GST charged by the Contractor for hiring of cars for transportation of
employees?
ii. Whether the
restriction on ‘Rent a Cab’ service specified in Section 17(5)(b)(iii) is
applicable to input tax credit on:-
a.
GST charged by the Contractor for hiring of buses for transportation of
employees?
b.
GST charged by the Contractor for hiring of cars for transportation of
employees?
Order No. & Date: HAR/HAAR/R/2018-19/04 Dated 11.07.18
Category as per Section 97(2) of SGST Act : 97(2) (d)
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