8% GST on Affordable Housing
The Department of Revenue’s Tax Research Unit (TRU) has recently clarified certain issues raised by Confederation of Real Estate Developers’ Associations of India (CREDAI) to enable availing 8% Goods & Services Tax ( GST ) on affordable housing.
The CREDAI raised three issues before the Tax Research Unit.
The First issue was regarding the authenticated document to be relied upon by the developer to charge concessional rate of GST on Credit Linked Subsidy Scheme (CLSS) housing.
As per the TRU to avail the CLSS benefit, the interest subsidy will be credited to the loan account of beneficiaries through Primary Lending Institutions (PLIs), such as banks, etc. resulting in reduced effective housing loan and Equated Monthly Installments (EMI). According to the said guidelines, PLIs such as banks, housing finance corporations, NBFCs etc. are required to register with Central Nodal Agencies (CNAs). The CNAs are required to release subsidy under the scheme to the PLIs in respect of loans sanctioned by them to borrower/ beneficiaries. The PLIs are required to provide each borrower/ beneficiary a statement which will make him/ her understand the amount given as subsidy, how the subsidy has been adjusted and the impact of the subsidy on his/ her monthly installments (EMI). PLIs will also provide the utilization/end use certificate and also a certificate in relation to the physical progress of the construction of the housing unit financed under the scheme to the CNAs on a quarterly basis.
The Second issue was regarding the requirement of specific approval/ certificate for residential projects to qualify as infrastructure status.
The TRU clarified that no certificate from any authority was required.
The third issue was related to the mechanism for reversal of already charged GST to a customer who at a later date becomes eligible for CLSS.
The view taken by the CREDAI was found to be correct. The TRU commented that construction of houses is normally a continuous supply of service. It clarified that portion of continuous supply of service, time of supply of which is on 25th January 2018 (the date of issue of notification prescribing concessional GST for CLSS) or later shall be eligible for the concessional rate of GST applicable to houses acquired under CLSS irrespective of when the house is booked or approval for CLSS benefit is obtained.
Confederation of Real Estate Developers’ Associations of India (CREDAI) was established in 1999 with a mandate to pursue the cause of housing and habit providers. It has grown its membership base since then and has more than 11,940 members today spread across 23 state and 189 city chapters.
Download Circular No F.No 354/52/2018-TRU Dated 7th May 2018