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GST Rate Structure for Real Estate Sector

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Real estate sector is one of the major economic sector for any country, especially India where this sector is getting the attention in the recent years. In this article we are going to discuss about GST implication in Real estate sector more predominantly real estate residential housing sector.

Following are some of the activities which are treated as supply for charging GST in Real Estate –

  • Renting of residential property
  • Construction of a residential complex, building including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate by the competent authority or after its first occupation
  • Works Contract i.e. a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any residential property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract

Applicability of GST on construction of apartments in a real estate project
With effect from 01.04.2019, rate of GST applicable on supply of construction service involving transfer of property in land shall be as follows –

Type of ApartmentRate of GST (after deduction of value of land)
Residential Apartments
Affordable Residential Apartment1% without ITC on total consideration
Other than Affordable Residential Apartment5% without ITC on total consideration
Commercial Apartments (shops, godowns, offices etc.)
Residential Real Estate Project (RREP)5% without ITC on total consideration
Other than Residential Real Estate Project (RREP)12% without ITC on total consideration

Meaning of Affordable Residential Apartment
Affordable residential apartment is a residential apartment in a project which

  • commences on or after 01-04-2019, or
  • in an ongoing project in respect of which the promoter has opted for new rate of 1% (effective from 01-04-2019)
  • having carpet area – upto 60 square meter in metropolitan cities and upto 90 square meter in cities or towns other than metropolitan cities
  • the gross amount charged for which, by the builder is not more than forty-five lakhs rupees

Notes:
a. For the purpose of determining the threshold of the gross amount of Rs. 45 lakhs, all the charges or amounts charged by the developer from the buyer shall form part of the gross amount charged. However, the value shall not include – Stamp duty payable to the statutory authority Maintenance charges/ deposits for maintenance of apartment/ common infrastructure

b. Value of Land – 1/3rd of the total contract value shall be considered to be the value of land and will be exempt from GST.

c. For the purpose of availing above GST rates, atleast 80% of the total value of inputs and input services should be purchased from registered suppliers.

Meaning of Residential Real Estate Project (RREP)

Residential Real Estate Project means a real estate project which

  • commences on or after 01-04-2019, or
  • in an ongoing project in respect of which the promoter has opted for new rate of 1% (effective from 01-04-2019)
  • in which commercial apartments is not more than 15 percent of the total carpet area of all the apartments in the project

Applicability of GST on Works contract and sub-contract
Works contract is a composite supply as it is a construction where goods as well as services are given. For the purpose of levying GST, principal supply is considered to be supply of service. Construction service is just a part of works contract. Therefore, construction of a residential unit in various housing projects and other than housing projects shall be taxed at 12%. When any contract is further sub-contracted then the GST shall also be levied at 12%.

Applicability of GST on Flats/ Properties
GST is not leviable on sale to ready-to-move-in homes. On completion of its construction and after receiving the occupancy certificate, a property is categorised as to ready-to-move-in. Such kind of property does not come under the ambit of GST. GST would be applicable only of the sale of under-construction properties that have yet to receive the occupancy certificate.
When an arrangement is made with the builder for construction of Floors/Flats, (other than approved housing projects) and where the some of the floors/flats are given to the builder as consideration for the construction then GST shall not be applicable on undivided share of land but GST shall be taxable at the rate of 18% on the transfer of the floors/flats by the builder to the land owner.

Applicability of GST on Rental Income
No GST is levied on rental income as long as residential property is rented out. However, 18% GST is applicable if such property is on rent for business purposes or rent amount per year exceeds Rs. 20 lakhs. 18% GST is applicable on renting commercial properties.

Non-Applicability of GST on Sale of Land
As per Schedule III of the CGST Act sale of land shall be treated neither as a supply of goods nor a supply of services. Since, sale of land is not a supply under GST and hence falls outside its purview.

GST on sale of Plot
No GST will be levied on sale of Plot. However, a plot with any sort construction on it would attract GST.

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