GST on Affordable Housing Project & GST Rates for Real Estate Sector

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 apartments

1% without ITC on total consideration.

Construction of residential apartments other than affordable residential apartments

5% without ITC on total consideration.

 
Affordable Housing Project:

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 (646 Sq.Ft) in metropolitan cities and 90 square meter (969 Sq.Ft) in cities or towns other than metropolitan cities and the gross amount charged for which, by the builder is not more than 45 lakhs rupees.

[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.]

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.

 
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

 
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%)

Treatment of TDR (Transfer of Development Rights) / FSI (Floor Space Index) 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 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.