New Provisions relating to Real Estate Sector under GST

New Provisions relating to Real Estate Sector under GST

Recently certain amendments have been made under section 9(4) of the CGST Act, 2017 which deals which reverse charge mechanism in case of inward supplies from unregistered persons. The following new points in this regard have been inserted which relates to the real estate sector, whereby the promoter i.e. the builder/ developer is required to pay tax under the reverse charge mechanism :-

• Where the value of input and input service purchased by a promoter (builder/developer) is less than 80% of the total value of input and input services, then the promoter is liable to pay GST under the reverse charge mechanism for the purchases made from the unregistered person.

• In case of purchase of cement from an unregistered person by a promoter (builder/developer), reverse charge will be attracted, (irrespective of the percentage of purchases as mentioned in the above case). Hence, promoter will be liable to pay GST under the reverse charge mechanism.

Important points to be noted :-

1. The promoter has to pay GST under section 9(4) of the CGST act, 2017 at the rate of 18% on all such inward supplies, to the extent short of 80% of the inward supplies from the registered supplier.

2. Where cement is received from an unregistered person, the promoter shall pay tax on supply of such cement under section 9(4) of the CGST Act, 2017 at the applicable rate i.e. 28%.

3. GST on capital goods shall be paid by the promoter on reverse charge basis, under section 9(4) of the CGST Act, 2017 at the applicable rate.

4. Earlier, the effective rate of GST on real estate sector was 8% or 12% with ITC. Now, the effective rate of GST has been brought down to a great extent. However, the promoters/ builders have been given a one-time option to continue to pay tax at the old rates on on-going projects (buildings where construction and actual booking both have started before 01.04.2019) which have not been completed by 31.03.2019.

5. Now, the effective rates of GST for the new projects by promoters are as follows:-

(i) New rate of 1% without ITC on construction of affordable houses (area 60 sqm in metros/90 sqm in non-metros and value upto ₹45 lakhs).

(ii) New rate of 5% without ITC shall be applicable on construction of:-

(a) All houses other than affordable houses, and

(b) Commercial apartments such as shops, offices, etc. in a residential real estate project in which the carpet area of commercial apartments is not more than 15% of the total carpet area of all the apartments.

6. The above tax rates shall be available subject to the following conditions:-

(i) ITC shall not be available.

(ii) 80% of the inputs 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 supply of service shall be purchased from a registered person.

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