Goods & Service tax Rate for Real Estate Sector

New GST Rate structure Applicable on Real Estate Sector

  • Real estate sector is one of the most important economic sectors in any country, Particularly in India, where it has gotten a lot of attention in recent years.
  • Impact of GST on the real estate sector particularly the residential housing sector, will be discussed in this article.

Below are the activities which is treated as supply for charging GST in real estate sector 

  • Renting of residential property
  • Construction of a residential complex, building, including a complex or building intended for sale to a buyer, in whole or in part, until the complete consideration has been obtained after issuance of a completion certificate by a competent authority or after the first occupation
  • A Works Contract is a contract for the construction, erection, installation, fitting out, fabrication, completion, improvement, modification, renovation, alteration, repair, maintenance or commissioning of any residential property that involves the transfer of property in goods.

Goods and Services tax Rate on Plot Sale

  • Goods and Services tax will not be levied on Plot sale. But a plot with any sort construction on it would attract Goods & Services tax.

Application of Goods and Services tax on Income from Rental property

  • Goods & Services Tax is not levied on Income from Rental property as long as residential property is rented out. But, 18 percentage
  • GST is applicable if such property is on rent for business purposes or rent amount per year exceeds INR Twenty lakhs.
  • 18 % Goods & Services tax is apply on commercial properties rent received.

The Application of Goods and Services tax on Properties/Flats

  • Goods and Services tax is not leviable on sale to house property which is ready-to-move-in.
  • On completion of its construction and after receiving the occupancy certificate, a property is class as to ready-to-move-in. Such kind of house property does not come under the ambit of Goods and Services tax.
  • GST would be applied only of under-construction properties on sale that have yet to receive the occupancy certificate.
  • When an arrangement is made with the development/builder for construction of Flats/ Floors, (other than approved read eastate home projects) & where the some of the flats/floors are given to the development & builder as consideration for the construction then Goods and Services tax shall not be apply on undivided share of Paces of land but Goods & Services tax shall be taxability at rate of 18 Percentage on transfer of flats/ floors by development/builder to land owner.

Application of GST on works contract & sub-contract

  • Works contract is a composite supply as it is a construction where Services as well as goods are provided.
  • For the aim of levying Goods and Services tax, principal supply is to be taken to be a supply of service. Construction service is only a part of works contract. So,
  • construction of a residential apartments in different housing projects & other than read estate housing projects shall be Goods and Services Tax rate @ 12 percentage. In case any contract which is further sub-contracted then Goods and Services tax will be levied at 12 percentage

RCM apply If Builder Purchase >20% from unregistered

  • Section 9(4) CGST Act applicable when real estate company or builder purchase >20% from unregistered delar Flowchart applicable for all the builder or real estate transactions mention here under

  • In case the Inputs  services & input on which GST is paid by promoter under RCM u/s 9(3) shall be deemed to have been purchase from GST registered person.

Application of GST Rate on apartments construction in a real estate project Housing Project

New GST Rate apply With effect from 01.04.2019 on supply of construction service which involving property in land transfer shall be as Bellow –

Kind of Apartment Rate of GST which is after deduction of value of land
Residential Apartments
·         Non affordable Residential Apartment 5 Percentage without Input tax Credit on whole consideration
·         Residential Apartment which is affordable 1 Percentage without Input tax Credit on whole consideration
Shops, offices, godowns etc kind of Commercial Apartments
Other than Residential Real Estate Project (RREP) 12 Percentage without Input tax Credit on whole consideration
Residential Real Estate Project (RREP) 5% Percentage without Input tax Credit on whole consideration

What is meaning of Affordable Residential Apartment :

Basic means of affordable residential apartment is a kind of apartment for residential in a project which

  • Started on or after 01-04-2019, or
  • Which is in an ongoing project in respect of which the promoter has opted for new rate of 1 percentage (that is w.e.f. 01-04-2019)
  • That comprised carpet area – upto 60 sq mtr in metropolitan cities & upto 90 sq mtr in cities or towns other than metropolitan cities
  • Total amount charged for which, by builder is not more than INR 45 lakhs.

Residential Real Estate Project (RREP) Meaning

Definition of Residential Real Estate Project means a real estate housing project which

  • commences on or after 01 April 2019 or
  • In ongoing project in respect of which the owner/promoter has taken an option for new GST Rate of 1 percentage (effective from 01 April 2019)
  • In which apartments commercial is not exceeds than 15% of complete carpet area of all apartments in project

To be Notes:

  1. Value of Land – 1/3 of total contract value will be considered to be value of land & same will be exempt from Goods and Services tax.
  2. Object of determining the current threshold of Amount Rs forty five lakhs all amounts charged by the developer from the purchaser shall form part of total amount charged. But Value shall not include – Stamp duty payable to deposits for maintenance of apartment or the common infrastructure or the statutory authority maintenance charges.
  3. The objective of availing above GST Rates at least 80 percentage of Gross value of inputs & input services should be purchased from registered suppliers.

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