GST on Real Estate Transactions w.e.f 01.04.2019

GST on Real Estate Transactions/ Affordable Housing

The GST council has extended the final date of embracing the rate of GST on Real Estate from 10.05.2019 to 20.05.2019. The Developers/ Promoters are given a one-time choice to opt to continue with the present slab of GST on Real Estate or the brand new rates applicable w.e.f 01.04.2019.

On its 34th meeting held on 19.03.2019, the GST council has recommended implementing GST on Real estate transactions w.e.f 01.04.2019 @1% for affordable housing and @5% for non-affordable housing. If no option is exercised by the developers within 20th May 2019, by default the new rates would be applicable with no input tax credit. However, if the builder opts the new rates of GST, he must then refund the GST on the advanced amount received from the buyer in terms of passing on the ITC benefit to the customer.

GST on Real Estate Transactions-Affordable & Non-Affordable Housing

Table of Contents

GST Council in its 34th meeting held on 19th March 2019 at New Delhi recommended lowering the GST rates on residential properties @1% for affordable housing and @5% on non-affordable housing w.e.f 01.04.2019. Also, for the ongoing projects, the real estate developer will be given a one time option until 20.05.2019 to choose the tax rate with which they want to continue with their ongoing projects.
However, if no option is exercised by the promoter within the scheduled time, it will be deemed as the promoter has agreed to the new rates.
After several GST council meet on GST on real estate the council vide Notification  F. No. 354/32/2019-TRU Government of India Ministry of Finance Department of Revenue (Tax Research Unit),  came up with various FAQs on GST rates applicable from April 1, 2019.
The new effective lower rates of GST would make the home buyer very much happy. This will boost the GoI notion Housing For All.

Key points on GST on Real Estate Transactions w.e.f 01.04.2019

⇒Some relevant questions on GST on real estate transactions with examples:

Affordable Housing meaning:
Affordable housing is a residential apartment in a project which commences on or after 01-04-2019 or in an ongoing project in respect of which the promoter has opted for new rate of 1% (effective from 01-04-2019) having carpet area up to 60 square meters (645.835 Sq Ft.) in metropolitan cities and 90 square meters (968.752 Sq Ft.) in cities or towns other than metropolitan cities and the gross amount charged for which, by the builder is not more than forty five lakhs rupees.

#2. Does a promoter or a builder has the option to pay tax at old rates of 8% & 12% with ITC?

Yes, the promoter or builder has the one-time option(to be exercised within 20.05.2019) to follow the old rates of GST on real estate of 8% or 12% with ITC only for ongoing projects. Ongoing project means a project for which commencement certificate has been issued but the completion certificate has not been issued within March 31 2019.
However, projects which commence on or after 01.04.2019 there is no such option left but to follow the new rate of GST on real estate @1% and @5% respectively without ITC.

#3. What is the rate of GST applicable on the construction of commercial apartments such as shops, godowns, offices, etc. ?

From 01.04.2019 after deducting the value of land or undivided share of land the effective rate of GST on real estate would be as follows:
Types of ApartmentsNew Rate of GST applicable from 01.04.2019
Construction of commercial apartments in a Residential real estate project commenced on or after 01.04.20195% on total consideration without ITC
Construction of commercial apartments in other than Residential real estate project commenced on or after 01.04.201912% on total consideration with ITC

A Residential Real Estate Project means a Real Estate Project in which the carpet area of the commercial apartments is not more than 15% of the total carpet area of all the apartments in that project.

#4. Does the promoter have an option to pay GST @8% or rate of 12% with ITC for projects which commenced on or after 01.04.2019?

The answer is NO. For projects which commenced on or after 01.04.2019, the promoter has to comply with the new rates @1% or 5% without input tax credit /ITC depending upon the affordable housing condition.

#5. I booked a flat from ABC Developers in Jan 2019. As of 31-03-2019, I paid 30% of the value of the flat. What shall be the GST rate applicable on the remaining portion of the value of the flat?

GST to be paid on the remaining 70% of the value of the flat will depend on the rates of GST to be followed by the developer for that ongoing projects after 01.04.2019. The developer is to choose this one time option within 20.05.2019 whether he would go with the old rates or new rates.
If he fails to exercise an option it would be deemed as he has opted for new rates of 1% or 5% without ITC.
Thus, the buyer does not have an option to choose the rates of GST on real estate ongoing projects. The GST on the remaining 70% value would be determined by the one-time option exercised by the promoter. If he chooses the old rate of 8% or 12% with ITC, you have to pay it compulsorily. Or else, if no option is chosen by the promoter, you will be in a beneficiary position to pay GST at new rates of 1% or 5%.

#6. I have already paid a tax of 12% (effective) on installments paid before 01.04.2019. I wish to get the benefit of new rates of GST on real estate @1% or 5%. Whether it is the builder or the buyer who has the option to pay tax at the new or old rates? 

This would have been a great deal for the customers of the real estate sector had they have an option to choose the GST rates for ongoing projects after 31.03.2019. But as of now, it is not possible and the law does not allow it.
Thus, the buyer does not have an option to choose the rates of GST on real estate ongoing projects. However, for projects after 1st April 2019, the developer itself does not have any option but to follow compulsorily the new rate of GST of 1% or 5% without ITC. The new effective GST rate is indeed pocket-friendly move taken by the GST council and would help the buyers of real estate to save(7%) a substantial amount for both affordable and non-affordable housing properties.

#7. I have booked a residential property as on 31.01.2019 with an amount of Rs. 20 Lakhs. After, 01.04.2019 I decided to cancel the booking. How the GST on real estate paid would be adjusted after 01.04.19?

In this case, if you decide to cancel the booking after 01.04.2019, the GST paid by the developer before 31.03.2019 @12% i.e. 2.40 Lakh would be adjusted by the developer within September from the end of the financial year by issuing a Credit Note. Also, the GST so paid on the cancel booking would be adjusted against GST liability to be paid @1% or 5% after 01.04.2019 provided the developer refunded the full amount to the customer. This decision of GST refund is really very helpful for the middle-class section.

#8. I booked a residential property before 01.04.2019 at old rates. Now to save GST, I decided to cancel the booking and rebooked after 01.04.2019 at new rates. What will happen?

If any residential property is booked prior to 01.04.219 by paying GST at the old rates of 8% or 12% up to 31.03.2019 with ITC and is cancelled later on and rebooked at new rates of GST @1% or 5% without ITC or sold after issuance of the completion certificate, the input tax credit on supply of input services taken up to 31.03.2019 is to be reversed accordingly.

#9. I bought an apartment at Kolkata after 01.04.2019  having a carpet area of 70 sqm (753.47 Sq. Ft)and is priced 46 lakhs. What is the rate of GST applicable on the construction of this apartment?

The tax rate applicable on the construction of the apartments for a project that commences on or after 01.04.2019 would be 5%. Since it, hax exceeded the affordable housing threshold limit of both 60 Sqm and 45 Lakhs, GST on real estate transaction is levied @5% and not 1%.

⇒Final words on GST on real estate transactions

Now let’s have a quick view on the important points to remember regarding this GST on real estate transactions applicable from 01.04.2019.
GST on Real Estate Transactions w.e.f 01.04.2019 at a glance
  • New effective rates of GST @1% or 5% is applicable for projects commencing on and from 01.04.2019;
  • No ITC or input tax credit is allowed for new rates @1% or 5% w.e.f 01.04.2019;
  • For ongoing projects which have not been completed till 01.04.2019, the developer has to choose the one time option for old or new GST rates within the extended scheduled time of 20.05.2019;
  • For affordable housing with a carpet area of 60 & 90 Sqm for metropolitan and Non-metropolitan cities respectively and consideration up to 45 Lakhs, the applicable GST rate is 1% without ITC;
  • The buyer does not have any option or authority to choose the GST rates i.e. old or new for any projects;
  • Construction of commercial apartments in a Residential real estate project commenced on or after 01.04.2019, applicable GST is 5% on total consideration without ITC;
  • Construction of commercial apartments in other than Residential real estate project commenced on or after 01.04.2019, applicable GST is 12% on total consideration with ITC.
  • The residential apartment booked before 01.04.2019 and GST paid at the old rate of 8% or 12% but cancelled after 01.04.2019- GST paid can be adjusted provided the promoter refunded the amount to the customer.

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