GST on Real Estate Reduced

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In the meeting of 19th March 2019, the GST Council has given the new GST rate of 1%/5% on real estate sector. It is applicable to new projects or ongoing projects which have exercised the above option to pay tax in the new regime.

As per the decision taken by the GST Council, the developers of residential projects which are incomplete as on March 31, 2019, will have the option either to choose the old structure with ITC or to shift to the new 5% and 1% rates, without ITC. Builders will get a one-time option to continue paying tax at the old rates (effective rate of 8% or 12% with ITC) on ongoing projects (buildings where construction and actual booking have both started before April 1, 2019, but which will not be completed by March 31, 2019), Pandey explained. The new tax rate of 1% for affordable houses and 5% for others, without ITC, will apply on new projects.

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Rate: 1% without ITC

i. Affordable Houses [A residential house/flat of carpet area of upto 90 sqm in non-metropolitan / 60 sqm in metropolitan cities having value upto Rs. 45 lacs for both. Metropolitan Cities are Bengaluru, Chennai, Delhi NCR

ii. On going Afforable House Project under central and state housing schemes

Rate: 5% without ITC

i. all houses other than affordable houses in ongoing projects [In case of construction of houses other than the affordable house in ongoing projects, new rate shall be available on installments payable on or after 01.04.2019 in case of houses booked before 01.04.2019.]

ii. all houses other than affordable houses in new projects

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iii. commercial apartments such as shops, offices etc. in a residential real estate project (RREP) [only if the carpet area of all such commercial apartment in a RREP is not more than 15% of total carpet area of all apartments including residential apartments (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad, Hyderabad, Kolkata and Mumbai]

Conditions for the new tax rates

a. The Input Tax Credit shall not be available on the inward supplies.

b. 80% of inputs and input services (other than capital goods, TDR/ JDA, FSI, long term lease (premiums)) shall be purchased from registered persons.

c. In case of shortfall of purchases from 80%, tax shall be paid on the differential shortfall at 18% on RCM basis by the builder. However, Tax on cement purchased from the unregistered person shall be paid @ 28% under RCM, and on capital goods under RCM at applicable rates.

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GST Rate Comparison before and after 1st April 2019

As mentioned in an earlier section, GST on residential property has been slashed and the new rates will come into effect from the 1st of April 2019. The following is a comparison of the real estate GST rates as applicable before and after the 1st of April 2019:

Type of Real Estate PropertyGST Rate(in effect till 31st March 2019)GST Rate(from 1st April 2019 onwards)
Residential Property (affordable housing segment)8% with Input Tax Credit (ITC)1% without ITC
Residential Property (non-affordable housing segment)12% with ITC5% without ITC
Commercial Properties12% with ITC12% with ITC (unchanged)

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