Western India Regional Council of
The Institute of Chartered Accountants of India

Law Update Details

 
May 2019 CA. Rajiv Luthia
 

CBIC vide Notification No. 3/2019-CT( RATE) dated 29th March, 2019 has amended Notification 11/2017-CT (Rate) dated 28th June, 2017, whereby new rates of GST have been prescribed for real estate sector subject to specific condition. The brief amendments are stated here below


For Ongoing Projects


Ongoing project is a project which satisfies all the following conditions:


» Commencement certificate received on or before 31st March,2019


» Construction of the project i.e. earthwork has been completed & excavation for foundation is started on or before 31st March,2019


» Completion certificate/first occupation has not taken place on or before 31st March,2019


» Apartments under the project have been booked partly/fully on or before 31st March,2019


Builder has One Time Option to pay GST at old rates effectively at 8% / 12% or at new rates effectively of 1% / 5%. These rates are after 1/3rd deduction for land value. If no option is exercised or intimated before 10th May,2019, then new rates of GST shall be applicable for such project.


The above option is to be exercised separately for each project (as per RERA) and shall not be allowed to reverse or discontinued once exercised. The option to continue with old rates has to be specifically intimated by submitting Form Annexure IV to jurisdictional GST office on or before 10th May, 2019.


Reversal of accumulated ITC attributable to construction of residential apartments whose time of supply is on or after 1st April,2019 is required in case New rate of GST is opted for on-going projects. Such reversal shall be made as per formula prescribed and for each project separately.


For New projects


New projects commencing on or after 1st April,2019 to attract new rates of GST (effectively 1% or 5%) depending on project type.


Every project needs to be classified as “Residential Real Estate Project (RREP)” or “Real Estate Project (REP)”. RREP means where carpet area for commercial apartments is not more than 15% of total carpet area of project. A REP is a project other than RREP.


For affordable residential apartments (i.e. in metro cities : less than 60sq. metres of area and agreement value less than Rs.45 Lakhs, in case of non-metro cities : less than 90sq.metres of area and agreement value less than Rs.45 Lakhs) , effective GST rate shall be 1% of agreement value.


In case of non- affordable residential apartments, the effective GST rate shall be 5% of agreement value.


In case of commercial apartments, the effective GST rate is 5% in RREP project and 12% of agreement value in REP projects.


No ITC can be availed/utilised by builder for New Project, except for commercial premises in REP project.


Conditions for New rate of GST


Payment of GST is in cash only for RREP projects as well for residential unit in REP. However, ITC can be used for payment of GST on commercial premises in REP project.


Builder who is required to allot flats to landowner for purchase of development rights shall pay GST on said flat allotted to land owner. The Registered landowner promotor shall be eligible for ITC of GST paid on flats allotted by builder if he sells flats to independent buyers before issue of completion certificate and pays GST on the same.


80% of value of input and input services (other than purchase of TDR, long term lease, electricity, high speed diesel, motor spirit, natural gas) is from registered suppliers. The shortfall if any of the minimum value of 80% shall be determined at the end of each financial year & liability on shortfall to be discharged by Builder under reverse charge mechanism @ 18% GST, not later than the month of June of subsequent year.


If Cement is purchased by builder from URD, than GST shall be paid under reverse charge on monthly basis @ 28%.


ITC not availed by builder shall be reported in GSTR-3B as “Ineligible credit”.


CBIC vide Notification No. 4/2019-CT dated 29th March, 2019 grants exemption to following services subject to conditions.


Entry 41A – Service by way of transfer of development rights (herein refer TDR) or Floor Space Index (FSI) (including additional FSI) on or after 1st April, 2019 for construction of residential apartments by a promoter in a project, 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.


Entry 41B – Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years, or more, on or after 01.04.2019, for construction of residential apartments by a promoter in a project, 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.


Condition for both the Entry:


Exemption is granted if all Flats/units are booked / sold before receipt of completion certificate and chargeable to GST


If flats/units remained un-booked/unsold on date of issue of completion certificate/first occupation certificate, then proportionate amount for purchase of TDR/FSI/ Upfront amount pertaining to un-booked flats shall be liable to GST at applicable rates, payable by Builder under reverse charge on the date of issue of completion certificate.


The above amount payable by Builder under RCM, if any, shall not exceed 1% in case of affordable residential apartments or 5% in case of non-affordable residential apartments.


Value of TDR shall be equal to the value of similar apartments charged by the promoter from the independent buyers nearest to the date on which such TDR or FSI is transferred to the builder.


CBIC vide Notification No. 5/2019-CT (Rate) dated 29th March, 2019, Notification 6/2019-CT (Rate), Notification 7/2019-CT (Rate) dated 29th March, 2019 & Notification 8/2019-CT dated 29th March, 2019 provides following supply made by person shall be liable to RCM under section 9(3) & section 9(4)


Nature of supply


Supplier of Service


Person liable to Pay GST on RCM


Percentage of Tax to be paid


Supply by way of TDR / FSI by any person for construction of a project by a Builder


Any person


Promoter


18%


Long Term lease (30 years or more) / or periodic rent for construction of a project by a builder


Any Person


Promoter


18%


Capital goods falling under any chapter in the first schedule to the Customs Tariff Act,1975 supplied to a Builder who has opted for new Scheme


Unregistered person


Promoter


Rates as applicable to that capital goods


Cement falling in Chapter heading 2535 supplied to builder who has opted for new scheme


Unregistered person


Promoter


28%


Supply of any goods / services which falls short of 80% of the value of input / input services during financial year for builder who has opted for new scheme


Unregistered person


Promoter


18%


CBIC vide Notification No. 15/2019-CT dated 28th March, 2019 extended due date for filing FORM GST ITC – 04 (return by manufacturer for sending goods/capital goods to job worker) for July, 2017 to March, 2019 till 30th June, 2019.


CBIC vide Notification No. 16/2019-CT dated 29th March, 2019 amended rule 42 & Rule 43 w.e.f. 1st April, 2019 to provide reversal of ITC by builder based on “Area”. The said rule is also amended to provide reversal of proportionate ITC for sales made post OC as per formula prescribed therein.


CBIC vide order No. 4/2019-CT dated 29th March, 2019 has issued removal of difficulties order wherein it is clarified that in case of supply of services covered by clause (b) of paragraph 5 of Schedule II of the said Act, the amount of credit attributable to the taxable supplies including zero rated supplies and exempt supplies shall be determined on the basis of the area of the construction of the complex, building, civil structure or a part thereof, which is taxable and the area which is exempt. The said order shall come into force from 1st Feb, 2019

 

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