21 May 2019Posted By: Mudit Handa


5 Things to Remember on New GST Rates for Real Estate Sector

Recently the government has introduced the new GST rates on the housing sector, which have been made effective from 1st April 2019.

In this context, the realtors, as well as the developers who have GST registration, were granted a one-time option to choose between either of the old and the revised GST rates on real estate. It also said a real-estate project that started before April 1 but had not received any booking would be classified as ‘new project’ and subjected to revised GST rates.

However, the Central Board of Indirect Taxes and Customs (CBIC) has recently clarified in this regard that homebuyers shall not have any such option regarding old & new GST rates on housing.

Here are some of the Frequently Asked Questions regarding the implication of GST on Real Estate Projects.

 

1. What are the GST rates on the construction of residential property?

GST rate on under-construction residential properties have been explained below in tabular form-

Particulars

Previous

GST rate (%)

Revised

GST rate (%)

Affordable housing segment

8

1

Other housing projects

12

5

Input Tax Credit

Allowed

Not allowed

 

2. Which type of residential projects is eligible for the new GST rate?

The new GST rates are applicable to the construction of those residential project that has begun on or after 1st April 2019, as well as in on-going projects. However, in this case, the Input Credit shall not be available to the builder GST registration.

 

3. What is meant by the on-going project?

As per the GST law, an on-going project is the one that fulfills the following criteria:

  1. The Commencement certificate for the project has been issued on or before 31st March 2019, through a registered architect, chartered engineer or a licensed surveyor. Once Commencement certificate is issued, it implies that construction has begun, i.e. excavation for site preparation for the project has begun and the foundation has been laid on or before 31st March 2019.
  2. Completion certificate has not been issued as yet, or the first occupation in a project has not yet been done on or before the 31st March 2019.
  3. Where commencement certificate is not required, it must be verified by the authorities specified above that the construction has begun on or before the 31st March 2019.
  4. Booking of the Apartment has been done partially or fully on or before 31st March 2019.


4. Whether the buyer can choose to pay tax at the new or old rates?

No, the buyer cannot exercise the option to pay tax at the new or old rates. It is the builder, who has to exercise the option to pay tax on construction of apartments at the old rate of 12% latest by 10th May 2019. If the builder doesn't exercise his option to continue to pay tax at the old rate by the said date, then the effective GST rate applicable on all your instalments payable to the builder on or after 01.04.2019 as per the contract shall be either 1% or 5%, depending on whether the apartment is an affordable or other than affordable residential apartment.

 

5. How to decide whether a real estate project has started on/before 31st Mar 2019?

The Construction of a real estate project shall be deemed to have been started on or before 31st March 2019, only if the earthwork for the preparation of the site for the project had been completed, and the excavation for the foundation has begun on or before the due date 31st March 2019.

 

If you require any sort of assistance related to GST registration, please feel free to contact our business advisor at 8881-069-069.

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