FAQ on GST on real estate to answer questions regarding new GST rate structure notified wef 01-04-2019. Compilation of 41 Frequently Asked Questions by CBIC
F. No. 354/32/2019-TRU
Government of India
Ministry of Finance
Department of Revenue
(Tax Research Unit)
Dated the 7th May, 2019, New Delhi
Subject: FAQs on real estate- reg.
A number of issues have been raised regarding the new GST rate structure notified for real estate sector effective from 01-04-2019. A compilation of Frequently Asked Questions (FAQs) is presented below. The answers to the FAQs have been given in simple language for guidance and easy understanding of all stakeholders in the real estate sector. They do not have force of law. In case of conflict, the gazette notifications, which have legal force, shall have precedence.
Question 1 What are the rates of GST applicable on construction of residential apartments?
With effect from 01-04-2019, effective rate of GST applicable on construction of residential apartments by promoters in a real estate project are as under:
|Description||Effective rate of GST (after deduction of value of land)|
|Construction of affordable residential
|1% without ITC on total consideration.|
|Construction of residential apartments other than affordable residential apartments||5% without ITC on total consideration.|
The above rates are effective from 01-04-2019 and are applicable to construction of residential apartments in a project which commences on or after 01-04-2019 as well as in on-going projects. However, in case of on-going project, the promoter has an option to pay GST at the old rates, i.e. at the effective rate of 8% on affordable residential apartments and effective rate of 12% on other than affordable residential apartments and, consequently, to avail permissible credit of inputs taxes; in such cases the promoter is also expected to pass the benefit of the credit availed by him to the buyers.
Question 2 What is an affordable residential apartment?
Affordable residential apartment 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 upto 60 square meter in metropolitan cities and 90 square meter 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. [Cities or towns in the notification shall include all areas other than metropolitan city as defined, such as villages.]
In an ongoing project in respect of which the promoter has opted for new rates, the term also includes apartments being constructed under the specified housing schemes of Central or State Governments.
[Metropolitan cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR) with their geographical limits prescribed by Government.]
Question 3 What is an on-going project?
A project which meets the following conditions shall be considered as an ongoing project.
(a) Commencement certificate for the project, where required, has been issued by the competent authority on or before 31stMarch, 2019, and it is certified by a registered architect, chartered engineer or a licensed surveyor that construction of the project has started (i.e. earthwork for site preparation for the project has been completed and excavation for foundation has started) on or before 31st March, 2019.
(b) Where commencement certificate in respect of the project, is not required to be issued by the competentauthority, it is to be certified by any of the authorities specified in (a) above that construction of theproject has started on or before the 31st March, 2019.
(c) Completion certificate has not been issued or first occupation of the project has not taken place on or before the 31st March, 2019.
(d) Apartments of the project have been, partly or wholly, booked on or before 31st March, 2019.
Question 4 Does a promoter or a builder has option to pay tax at old rates of 8% & 12% with ITC?
Yes, but such an option is available in the case of an ongoing project. In case of such a project, thepromoter or builder has option to pay GST at old effectiverate of 8% and 12% with ITC.
To continue with the old rates, the promoter/ builder has to exercise one time option in the prescribed form and submit the same manually to the jurisdictional Commissioner by the 10th of May, 2019.
However, in case where a promoter or builder does not exercise option in the prescribed form, it shall be deemed that he has opted for new rates in respect of ongoing projects and accordingly new rate of GST i.e. 5% / 1% shall be applicable and all the provisions of new scheme including transitional provisions shall be applied.
There is no such option available in case of projects which commence on or after 01.04.2019. Construction of residential apartments in projects commencing on or after 01.04.2019 shall compulsorily attract new rate of GST @ 1% or 5% without ITC.
Question 5 What is the rate of GST applicable on construction of commercial apartments [shops, godowns, offices etc.] in a real estate project?
With effect from 01-04-2019, effective rate of GST, after deduction of value of land or undivided share of land, on construction of commercial apartments [shops, godowns, offices etc.] by promoter in real estate project are as under:
|Description||Effective rate of GST (after deduction of value of land)|
|Construction of commercial apartments in a Residential Real Estate Project (RREP), as explained in question no. 6 below, which commences on or after 01-04-2019 or in an ongoing project in respect of which the promoter has opted for new rates effective from 01-04-2019||5% without ITC on total consideration.|
|Construction of commercial apartments in a Real Estate Project (REP) other than Residential Real Estate Project (RREP) or in an ongoing project in respect of which the promoter has opted for old rates||12% with ITC on total consideration|
Question 6 What is a Residential Real Estate Project?
A “Residential Real Estate Project” means a „Real Estate Project” in which the carpet area of the commercial apartments is not more than 15 per cent. of the total carpet area of all the apartments in the project.
Question 7 What is the criteria to be used by an architect, a chartered engineer or a licensed surveyor for certifying that construction of the project has started by 31st March, 2019
Construction of a project shall be considered tohave been started on or before 31stMarch, 2019, ifthe earthwork for site preparation for the project has been completed, and excavation for foundation has started on or before the 31st March, 2019
Question 8 Does a promoter/ builder have to purchase all goods and services from registered suppliers only?
A promoter shall purchase at least eighty percent. of the value of inputand input services, from registered suppliers. For calculating this threshold, the value of services by way of grant of development rights, long term lease ofland, floor space index, or the value of electricity, high speeddiesel, motor spirit and natural gas used in construction of residential apartments in a project shall be excluded.
Question 9 If value of purchases as prescribed above from registered supplier is less than 80%, what would be the applicable GST rate on such purchases ?
Promoter has to pay GST @ 18% on reverse charge basis on all such inward supplies (to the extent short of 80% of inward supplies from registered supplier) except cement on which tax has to be paid (by the promoter on reverse charge basis) at the applicable rate, which at present is 28% (CGST 14% + SGST 14%)
Question 10 In case of new rate of 5% / 1%, whether the conditions of payment of tax through Cash Ledger, payment of tax under RCM subject to 80% limit, non-availing of Input Tax Credit, reversal of credit, maintenance of project wise account, reporting of ITC not availed in corresponding GSTR-3B etc. are required to be complied mandatorily by the Developer ?
Yes. All the specified conditions against clause (i) to (id) of Sl. No 3 of Notification No. 11/2017-CTR are mandatory.
Question 11 What is the rate of GST applicable on transfer of development rights, FSI and long term lease of land?
Question 12 Who is liable to pay GST on TDR and floor space index?
Question 13 At what point of time, the promoter should discharge its tax liability on TDR?
14. At what point of time, the promoter should discharge its tax liability on FSI (including additional FSI).
15. At what point of time, the promoter should discharge its tax liability on supply of long term lease?
16. Land development corporation of Orissa has provided land on long term lease for 99 years, for construction of a real estate project. As per the lease agreement, promoter has to pay an upfront amount of Rs. 10 Crore and annual/ monthly licence fee of 5 lakhs. Does the promoter has to pay GST on these amounts?
17. Someone booked a flat from XYZ Developers in June, 2018. As of 31-03-2019, he had paid 40 % of the value of the flat. What shall be the GST rate applicable on the remaining portion of value of the flat?
18. am a beneficiary of PMAY- CLSS and carpet area of my house being constructed in an ongoing project is 150 sqm. Am I eligible for new rate of 1% on same?
19. am planning to purchase an apartment in a newly launched project. The project has been launched after 31.03.2019 by XYZ Developers at Noida. Price of the apartment having carpet area of 80 sqm is 48 lakhs. What is the rate of GST applicable on construction of this apartment?
20. I have already paid tax of 12% (effective) on instalments paid before 01.04.2019. I wish to get the benefit of new rate of 1% or 5%. Whether it is the builder or the buyer who has the option to pay tax at the new or old rates?
21. In respect of supply made in an ongoing Project covered by clauses (ie) and (if) of Entry 3 of Notification No. 3/2019, CT (R), an option is required to be exercised by the Promoter in Annexure IV by 10th May 2019. At the same time, it is permissible for him to issue invoices between 1st April 2019 to 9th May 2019 which shall, however, be in conformity with the option to be exercised. Whether it is permissible for the Promoter to revise the invoice as provided in Section 34 of CGST Act, 2017, including by way of issuance of Credit/Debit Notes so as to bring the transaction in conformity with the option exercised by the Promoter ultimately by 10th May 2019?
22. How to compute adjustment of tax in a Credit Note to be issued u/s 34 by Real Estate Developer in case unit was booked prior to 1st April, 2019 on which GST was paid on part consideration received at the time of booking, but cancelled after 1st April, 2019.
23. Whether the option to pay tax at the applicable effective rate of 12% or 8% (with ITC) is available to the Promoter in respect of the New Project, which has been commenced on or after 1st April 2019?
24. From the plain reading of the provisions and the definitions of the various terms as defined in the Notification No. 3/2019- CT(R), it appears that the one-time option is required to be exercised for the entire REP or RREP. Does this mean that a Promoter can opt for old rates or new rates, as the case may be, for different projects being undertaken by him under the same entity?
41. Whether the Form as per Annexure IV of the Notification No. 3/2019-CTR is to be filed with both the jurisdictional commissioner i.e. Central Tax, State Tax.