34th GST Council Meeting was held on 19th March 2019 in which decisions relating to GST Rates for Real Estate Sector were taken. Summary of Rates effective from 01-04-19 are as follows:
New Tax Rates and its Conditions
New GST rate @ 1% on the construction of affordable houses is available for the following:
- In the case of new projects, houses which meet the definition of affordable houses as decided by GST Council (i.e. non-metros – area of 90 sqm and metros – area of 60 sqm and value up to INR 45 Lakhs); and
- In case of ongoing projects, affordable houses which are being constructed under the present central and state housing scheme and are eligible for 8% concessional GST rate are eligible for 1% GST rate.
New GST rate @ 5% will be available for the following: - In the case of new projects, all houses other than affordable houses;
- In case of ongoing projects, all houses other than affordable houses whether booked prior to or after 1st April 2019.
- If the houses are booked prior to 1st April 2019, the new GST rate 5% shall be available on instalments payable on or after 1st April 2019.
- In the case of commercial apartments like shops/offices in a residential real estate, wherein, carpet area of the commercial apartments is not more than 15% of the total carpet area of all the apartments.
Conditions for Availing Benefit of New GST Rates - Input Tax Credit shall not be available in case the new GST rate benefit is availed.
- It is mandatory for the builders to purchase 80% of inputs and input services from the registered person. If the target of 80% purchase is not achieved, the builder is required to pay the following taxes on reverse charge mechanism (RCM) –
The builder is required to pay 18% tax on RCM on a shortfall of purchases from 80%;
The builder is required to pay 28% tax on cement purchased from an unregistered person; and
The builder is required to pay applicable taxes on capital goods under RCM.
Options in Respect of the Ongoing Projects
In respect of the ongoing projects i.e. projects wherein construction and booking have started before 1st April 2019 and which has not been completed by 31st March 2019, the builders shall be given a one-time option to continue to pay tax at the old rates i.e. 8% or 12%.