Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Monday, March 25, 2019

GST on Real Estate Sector w.e.f. 1st April, 2019

The following is a summary of decisions taken by the GST Council in its 34th Meeting held on 19th March, 2019 regarding GST on the real estate sector.

To reduce the burden of GST on home buyers, GST council has reduced the rate of tax to 5% without ITC for non-affordable houses and 1% without ITC for affordable house. Here, affordable house/flat is one of carpet area up to 90 sq.m. in non-metropolitan cities and 60 sq.m. in metropolitan cities, having value up to Rs.45 lakhs only, in both cases.

The proposed rates shall apply from 1st April, 2019.

Conditions for Availing the New Tax Rates

1. Input Tax Credit shall not be available on adoption of new rates. However, ITC shall be available to those who continue to pay tax under the old rate.

2. 80% of inputs and input services (other than capital goods, TDR/JDA, FSI, long term lease) shall be purchased from registered persons. On shortfall of purchase from 80%, tax shall be paid by builder @18% on RCM basis. However, tax on cement purchased from unregistered person shall be paid @28% under RCM basis.

Taxing Options for Ongoing Projects

1. Under construction projects shall be given a one-time option to continue to pay tax at old rates (effective rates of 8% or 12% with ITC) on ongoing projects (building where construction and actual booking have both started before 01.04.2019) which have not been completed by 31.03.2019.

2. The option shall be exercised once within the prescribed time, and where the option is not exercised, new rates shall apply.

Transition for Ongoing Projects

1. Ongoing projects not completed by 31.03.2019 shall transition the ITC in proportion to booking of the flat and invoicing done for the booked flat, subject to a few safeguards.

2. For a mixed project, transition shall also allow ITC on pro-rata basis in proportion to carpet area of the commercial portion in the ongoing projects (on which tax will be payable @12% with ITC even after 01.04.019) to the total carpet area of the project.

Transfer of Development Rights (TDR) & Floor Space Index (FSI)

The following treatment shall apply to TDR/FSI and long-term lease for projects commencing after 01.04.2019

1. Supply of TDR, FSI, long term lease (premium) of land by a land owner to a builder shall be exempted from GST if 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.

2. Builder has to pay GST on RCM basis. It means liability to pay tax on TDR, FSI, long term lease has been shifted from land owner to builder.

3. The builder has to pay tax under RCM basis, in respect of flats sold after completion certificate, on the date of issue of completion certificate.


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