GST on Real Estate from 01.04.2019

GST on Real Estate from 01.04.2019

GST structure on real estate services relating to residential and commercial apartments has been Changed w.e.f. 1-4-2019.

This service falls under service code 9954.

Commentary on GST on Real Estate from 01.04.2019

• The revised scheme applies to residential and commercial apartments which are covered under RERA [Real Estate (Regulation and Development) Act, 2016] . RERA applies only if a project is ‘intended for sale’ . RERA does not require registration where the ‘real estate developed’ is ‘intended’ to be let-out. And ‘apartment’ isn’t just a residential dwelling unit, but it includes shops, offices, showrooms, chambers, unit or godown, etc. that are intended-for sale as well as ‘plots for sale’
• The provisions do not apply to construction of single houses or works contracts not covered under RERA
• The new GST scheme is compulsory for projects commenced on or after 1-4-2019
  • New GST Rates where supply of services involves transfer of land or undivided share of land and its charges are included in the amount charged to customer. : Under new scheme, the GST rates are as follows –
    • (a) CGST 0.5% plus SGST/UTGST 0.5% (total 1%) or IGST 1% (without ITC) for affordable residential apartments
    • (b) CGST 2.5% plus SGST/UTGST 2.5% (total 5%) or IGST 5% (without ITC) for other residential apartments and commercial apartments.
    • [ Note : you need to reduce Value of transfer of land or undivided share of land is treated as 1/3 rd of total Amount Charged for supply , hence CGST Rate = 0.75*2/3 = .50% and SGST Rate 0.75*2/3 = 0.50% for affordable residentail apartments or CGST Rate 3.75*2/3= 2.5% and SGST Rate 3.75% for other residential apartments and commercial apartments. ]
  • New GST Rates where supply of services DOES NOT involves transfer of land or undivided share of land and its charges are NOT included in the amount charged to customer:
    Under new scheme, the GST rates are as follows –
    • (a) CGST 0.75% plus SGST/UTGST 0.75% (total 1.5%) or IGST 1.5% (without ITC) for affordable residential apartments
      (b) CGST 3.75% plus SGST/UTGST 3.75% (total 7.5%) or IGST 7.5% (without ITC) for other residential apartments and commercial apartments.
  • Affordable Residential Apartment means apartment having carpet area not exceeding
    • 60 square meter in metropolitan cities or
    • 90 square meter in cities or towns other than metropolitan cities and
    • for which the gross amount charged is not more than Rs. 45 lakhs.
    • 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 respective geographical limits prescribed by an order issued by the Central or State Government in this regard;
  • In respect of new projects from 01.04.2019, the tax (CGST, SGST/UTGST or IGST as applicable) shall be paid in cash by debiting the electronic cash ledger only [without utilising Input Tax Credit].
  • Tax on cement received from unregistered person shall be paid in the month in which cement is received.
  • If 80% of value of Inward Supply of Goods and Services is not received from registered person than , shortfall has to be paid at the end of Financial year .Tax liability on the shortfall of inward supplies from unregistered person so determined shall be added to his output tax liability in the month not later than the month of June following the end of the financial year.
  • Special HSN is introduced with rate of 18% for payment of this shortfall-tax. Goods are listed in #452Q in schedule III of 01/2017 and services in #39 in 11/2017. Shortfall-tax on cement is to be paid monthly, while tax on all others to be paid by June 20XX.
• In case of ongoing projects as on 1-4-2019, the promoter has option to opt for earlier provisions of tax i.e. with utilization of ITC. If promoter intends to continue under old scheme, he has to submit declaration in specified form to jurisdictional Commissioner before 10-5-2019. If the promoter does not submit such declaration, he is deemed to have opted for the new scheme.
• Each Phase in a single Project could be a ‘project’ for GST. Therefore Project-wise intimation has to be filed with the jurisdictional Commissioner in Annexure IV by 20 May, 2019 [ Refer Date Extended to Choose GST Rates for Real Estate Project ]. Section 3 of RERA Act :
  Explanation.-For the purpose of this section, where the real estate project is to be developed in phases, every such phase shall be considered a stand alone real estate project, and the promoter shall obtain registration under this Act for each phase separately.
• Invoices for Period from 01.04.2019 to 20.05.2019 has to be issued as per the option exercised by the promoter.
• If landowner- promoter transfers development right or FSI (including additional FSI) to a promoter (developer- promoter) against consideration, wholly or partly, in the form of construction of apartments, the developer- promoter shall pay tax on supply of construction of apartments to the landowner-promoter. The landowner – promoter can take credit of taxes charged from him by the developer promoter, if the landowner-promoter further supplies such apartments to his buyers.
• No GST is payable where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier
• 80% of value of input and input services, [other than services by way of grant of development rights, long term lease of land (against upfront payment in the form of premium, salami, development charges etc.) or FSI (including additional FSI), electricity, high speed diesel, motor spirit, natural gas], used in supplying the service shall be received from registered supplier only.
• If not so received, the promoter is required to pay GST under reverse charge to the extent of difference. The tax rate is
  • 28% in case of purchase of cement and
  • 18% for other goods and services.
• GST is not payable on TDR, FSI or upfront amount for long term lease of land if apartment is sold before completion. However, if some apartments remain unsold on date of completion, proportionate GST is payable on TDR, FSI or long term lease of land by promoter under reverse charge.
• GST on Real Estate Sector : 41 FAQs by CBIC on 7th May 2019
• FAQS Part II for GST on Real Estate Sector by CBIC on 14th May 2019

GST Act Provisions for Contruction of Complex or building

Following is ‘supply of service’ as per para 5(b) of Schedule II of CGST Act.

Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

Explanation.– For the purposes of this clause- (1) the expression “competent authority” means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely – (i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or (ii) a chartered engineer registered with the Institution of Engineers (India); or (iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority.

(2) the expression “construction” includes additions, alterations, replacements or remodeling of any existing civil structure.

Residential Complex – “Residential complex” means any complex comprising of a building or buildings, having more than one single residential unit -[ para 2 of Notification No. 12/2017-Central Tax (Rate) and No. 9/2017-Integrates Tax (Rate) both dated 28-6-2017, effective from 1-7-2017]

Single Residential Unit – “Single residential unit” means a self-contained residential unit which is designed for use, wholly or principally, for residential purposes for one family -[para 2 of Notification No. 12/2017-Central Tax (Rate) and No. 9/2017-Integrated Tax (Rate) both dated 28-6-2017, effective from 1-7-2017]

Affordable Residential Apartment

As per para 4 clause (xvi) to Notification No. 11/2017-Central Tax (Rate) and 8/2017-Integrated Tax (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019, the term “affordable residential apartment” shall mean, –

Apartment booked on or before 31-3-2019

An apartment booked on or before the 31st March, 2019 shall mean an apartment which meets all the following three conditions, namely-

(a) part of supply of construction of which has time of supply on or before the 31st March, 2019 and

(b) at least one instalment has been credited to the bank account of the registered person on or before the 31st March, 2019 and

(c) an allotment letter or sale agreement or any other similar document evidencing booking of the apartment has been issued on or before the 31st March, 2019

[ clause (xii) of paragraph 4 of Notification No. 11/2017-Central Tax (Rate) and 8/2017-Integrated Tax (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019. ]

Apartment

“Apartment” shall have the same meaning as assigned to it in section 2(e) of the Real Estate (Regulation and Development) Act, 2016 [RERA] –

[ clause (xiv) of paragraph 4 of Notification No. 11/2017-Central Tax (Rate) and 8/2017-Integrated Tax (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019]

As per section 2(e) of the Real Estate (Regulation and Development) Act, 2016 [RERA], “Apartment” whether called block, chamber, dwelling unit, flat, office, show room, shop, godown, premises, suit, tenement, unit or by any other name, means a separate and self-contained part of any immovable property, including one or more rooms or enclosed spaces, located on one or more floors or any part thereof, in a building or on a plot of land, used or intended to be used for any residential or commercial use such as residence, office, shop, showroom or godown or for carrying on any business, occupation, profession or trade, or for any other type of use ancillary to the purpose specified.

Project

The term “project” shall mean a Real Estate Project or a Residential Real Estate Project [RERA]

[clause (xv) of paragraph 4 of Notification No. 11/2017-Central Tx (Rate) and 8/2017-Integrated Tax (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019]

Promoter

“Promoter” shall have the same meaning as assigned to it in section 2(zk) of the Real Estate (Regulation and Development) Act, 2016 [RERA] – clause (xvii) of paragraph 4 of Notification No. 11/2017-Central Tax (Rate) and 8/2017-Integrated Tax (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019.

RERA defines ‘promoter’ as follows –

“Promoter” means,—

Real Estate Project

The term “Real Estate Project (REP)” shall have the same meaning as assigned to it in section 2(zn) of the Real Estate (Regulation and Development) Act, 2016 [RERA] –

[ clause (xviii) of paragraph 4 of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019]

As per section 2(zn) of the Real Estate (Regulation and Development) Act, 2016 [RERA], “Real estate project” means the development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of land into plots or apartments, as the case may be, for the purpose of selling all or some of the said apartments or plots or building, as the case may be, and includes the common areas, the development works, all improvements and structures thereon, and all easement, rights and appurtenances belonging thereto.

Residential Real Estate Project (RREP)

The term “Residential Real Estate Project (RREP)” shall mean a REP in which the carpet area of the commercial apartments is not more than 15% of the total carpet area of all the apartments in the REP

[ clause (xix) of paragraph 4 of Notification No. 11/2017-Central Tax (Rate) and 8/2017-Integrated Tax (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019]

Ongoing Project

As per clause (xx) of paragraph 4 of Notification No. 11/2017-Central Tax (Rate) and 8/2017-Integrated Tax (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019, the term “ongoing project” shall mean a project which meets all the following conditions, namely-

Commence Certificate

“Commencement certificate” means the commencement certificate or the building permit or the construction permit, by whatever name called issued by the competent authority to allow or permit the promoter to begin development works on an immovable property, as per the sanctioned plan – clause (xxi) of paragraph 4 of Notification No. 11/2017-Central Tax (Rate) and 8/2017-Integrated Tax (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019.

The definition is same as contained in section 2(m) of the Real Estate (Regulation and Development) Act, 2016 [RERA].

Development Works

“Development works” means the external development works and internal development works on immovable property – clause (xxii) of paragraph 4 of Notification No. 11/2017-Central Tax (Rate) and 8/2017-Integrated Tax (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019.

The definition is same as contained in section 2(t) of the Real Estate (Regulation and Development) Act, 2016 [RERA].

External Development Works

“External development works” includes roads and road systems landscaping, water supply, sewerage and drainage systems, electricity supply transformer, sub-station, solid waste management and disposal or any other work which may have to be executed in the periphery of, or outside, a project for its benefit, as may be provided under the local laws – clause (xxiii) of paragraph 4 of Notification No. 11/2017-Central Tax (Rate) and 8/2017-Integrated Tax (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019.

The definition is same as contained in section 2(w) of the Real Estate (Regulation and Development) Act, 2016 [RERA].

 Internal Development Works

“Internal development works” means roads, footpaths, water supply, sewers, drains, parks, tree planting, street lighting, provision for community buildings and for treatment and disposal of sewage and sullage water, solid waste management and disposal, water conservation, energy management, fire protection and fire safety requirements, social infrastructure such as educational health and other public amenities or any other work in a project for its benefit, as per sanctioned plans – [clause (xxiv) of paragraph 4 of Notification No. 11/2017-Central Tax (Rate) and 8/2017-Integrated Tax (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019.]

The definition is same as contained in section 2(zb) of the Real Estate (Regulation and Development) Act, 2016 [RERA].

Competent Authority

The term “competent authority” as mentioned in definition of “commencement certificate” and “residential apartment”, means the local authority or any authority created or established under any law for the time being in force by the Central Government or State Government or Union Territory Government, which exercises authority over land under its jurisdiction, and has powers to give permission for development of such immovable property – clause (xxv) of paragraph 4 of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019.

The definition is practically same as contained in section 2(p) of the Real Estate (Regulation and Development) Act, 2016 [RERA].

Carpet Area

The term “carpet area” shall have the same meaning assigned to it in section 2(k) of the Real Estate (Regulation and Development) Act, 2016 [RERA] – clause (xxvi) of paragraph 4 of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019.

As per section 2(k) of the Real Estate (Regulation and Development) Act, 2016 [RERA], “Carpet area” means the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.

Explanation.—For the purpose of this clause, the expression “exclusive balcony or verandah area” means the area of the balcony or verandah, as the case may be, which is appurtenant to the net usable floor area of an apartment, meant for the exclusive use of the allottee; and “exclusive open terrace area” means the area of open terrace which is appurtenant to the net usable floor area of an apartment, meant for the exclusive use of the allottee.

Real Estate Regulatory Authority

The term “Real Estate Regulatory Authority” shall mean the Authority established under section 20(1) of the Real Estate (Regulation and Development) Act, 2016 [RERA] by the Central Government or State Government – clause (xxvii) of paragraph 4 of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019.

 Project which commences after 1-4-2019

“Project which commences on or after 1st April, 2019” shall mean a project other than an ongoing project – clause (xxviii) of paragraph 4 of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019.

Residential Apartment

“Residential apartment” shall mean an apartment intended for residential use as declared to the Real Estate Regulatory Authority or to competent authority – clause (xxix) of paragraph 4 of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019.

Commercial Apartment

“Commercial apartment” shall mean an apartment other than a residential apartment – clause (xxx) of paragraph 4 of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019.

Floor Space Index

“Floor space index (FSI)” shall mean the ratio of a building’s total floor area (gross floor area) to the size of the piece of land upon which it is built – clause (xxxi) of paragraph 4 of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019.

GST Rate w.e.f. 1-4-2019 on various types of real estate projects

Construction of affordable residential apartments

In respect of construction of affordable residential apartments, the GST rate
where supply of services involves transfer of land or undivided share of land , is

• CGST 0.5% plus SGST/UTGST 0.5% (total 1%)

• or IGST 1% (without ITC),

[ you need to reduce Value of transfer of land or undivided share of land is treated as 1/3 rd of total Amount Charged for supply , hence CGST Rate = 0.75*2/3 = .50% and SGST Rate 0.75*2/3 = 0.50% ]

[ Sr. No. 3(i) and 3(ic) of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both dated 28-6-2017 as amended w.e.f. 1-4-2019.]

where supply of services does not involve transfer of land or undivided share of land ,The GST rate will be

• CGST 0.75% plus SGST/UTGST 0.75% (total 1.50%) or
• IGST 1.50%

This rate applies to Construction of affordable residential apartments by a promoter in

 (a) a Residential Real Estate Project (termed as RREP) Sr. No. 3(i) and

 (b) Real Estate Project (termed as REP) other than RREP Sr. No. 3(ic).

This rate applies to RREP or REP commenced on or after 1-4-2019.

This rate also applies to an ongoing RREP or Real Estate Project in respect of which the promoter has not exercised option to pay central tax on construction of apartments at full rate (after availing ITC) as specified in item 3(ie) or 3(if) of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both dated 28-6-2017 as amended w.e.f. 1-4-2019.

No GST is payable where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

In respect of new projects, the tax (CGST, SGST/UTGST or IGST as applicable) shall be paid in cash by debiting the electronic cash ledger only [without utilising Input Tax Credit].

In respect of ongoing projects as on 31-3-2019, Input Tax Credit can be availed to the extent as prescribed in Annexure I in the case of REP (other than RREP) and in Annexure II in the case of RREP to Notification No. 03/2019-Central Tax (Rate) dated 29-3-2019.

Construction of residential apartments (other than affordable residential apartments)

In respect of construction of residential apartments (other than affordable residential apartments) , where supply of services involves transfer of land or undivided share of land , the GST rate is

• CGST 2.5% plus SGST/UTGST 2.5% (total 5%) or
• IGST 5% (without ITC),

[ Sr. No. 3(ia) and 3(id) of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both dated 28-6-2017 as amended w.e.f. 1-4-2019.]

where supply of services does not involve transfer of land or undivided share of land, The GST rate will be

• CGST 3.75% plus SGST/UTGST 3.75% (total 7.50%) or

• IGST 7.50%

This rate applies to Construction of residential apartments (other than affordable residential apartments) by a promoter in

(a) a Residential Real Estate Project (termed as RREP) or

(b) Real Estate Project (other than RREP).

This rate applies to projects which commence on or after 1-4-2019. This rate also applies to an ongoing RREP and REP in respect of which the promoter has not exercised option to pay central tax on construction of apartments at full rate (after availing ITC) as specified in item 3(ie) or 3(if) of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both dated 28-6-2017 as amended w.e.f. 1-4-2019.

No GST is payable where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

In respect of new projects, the tax (CGST, SGST/UTGST or IGST as applicable) shall be paid in cash by debiting the electronic cash ledger only [without utilising Input Tax Credit].

In respect of ongoing projects as on 1-4-2019, Input Tax Credit can be availed to the extent as prescribed in Annexure I in the case of REP (other than RREP) and in Annexure II in the case of RREP to Notification No. 03/2019-C.T. (Rate) dated 29-3-2019.

Construction of commercial apartments (shops, offices, godowns etc.)

In respect of construction of commercial apartments (shops, offices, godowns etc.), where supply of services involves transfer of land or undivided share of land , the GST rate is

• CGST 2.5% plus SGST/UTGST 2.5% (total 5%) or

• IGST 5% (without ITC),

Sr. No. 3(ib) of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both dated 28-6-2017 as amended w.e.f. 1-4-2019.

The GST rate will be CGST 3.75% plus SGST/UTGST 3.75% (total 7.50%) or IGST 7.50% where supply of services does not involve transfer of land or undivided share of land.

This rate applies to Construction of commercial apartments which commences on or after 1-4-2019. This rate also applies to an ongoing commercial project  in respect of which the promoter has not exercised option to pay central tax on construction of commercial apartments at full rate (after availing ITC) as specified in item 3(ie) or 3(if) of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both dated 28-6-2017 as amended w.e.f. 1-4-2019.

No GST is payable where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

In respect of new projects, the tax (CGST, SGST/UTGST or IGST as applicable) shall be paid in cash by debiting the electronic cash ledger only [without utilising Input Tax Credit].

In respect of ongoing projects as on 1-4-2019, Input Tax Credit can be availed to the extent as prescribed in Annexure I in the case of REP (other than RREP) and in Annexure II in the case of RREP to Notification No. 03/2019-C.T. (Rate) dated 29-3-2019.

Value for GST when total amount charged includes value of land

When the total amount charges for sale of residential or commercial apartment includes value of land, the tax is payable on total amount charged less value of land. The value of land will be taken as one third of total amount charged.

The statutory wording is as follows –

In case of supply of service specified in column (3), it item (i); (ia), (ib), (ic), (id), (ie) and (if) against Serial No. 3, involving transfer of land or undivided share of land, as the case may be, the value of such supply shall be equivalent to the total amount charged for such supply less the value of transfer of land or undivided share of land, as the case may be, and the value of such transfer of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply – para 2 of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both dated 28-6-2017 as amended w.e.f. 1-4-2019.

For the purpose of paragraph 2 and 2A, ‘total amount’ means the sum total of

(a) Consideration charged for such service and

(b) amount charged for transfer of land or undivided share of land, as the case may be, including by way of lease/sub-lease – explanation to para 2 of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both dated 28-6-2017 as amended w.e.f. 1-4-2019.

No separate tax for supply of land or undivided share of land as part of composite supply of apartments

When a promoter sales apartment to buyer, he also transfers to him undivided share of land by way of lease or sub-lease. The service falls under heading 9972.

In such cases, the value of service for GST is Nil, if the amount charged for such lease or sub-lease is one-third of total amount charged for composite supply – Sr. No. 16(ii) of Notification No. 11/2017-C.T. (Rates) and 8/2017-I.T. (Rates) dated 28-6-2017.

Even otherwise, since supply of apartment is a composite contract, there should not be any separate tax on lease of land.