Real Estae Project (REP)

FAQs on the Real Estate Sector under
GST
Updated on Jun 04, 2020 - 07:35:02 PM
Real Estate is an important pillar of the Indian Economy. Under the earlier tax
regime, various taxes like VAT, service tax, stamp duty, and registration charges
were paid by the buyers. However, under GST a single rate of 12% is applicable on
under construction properties whereas no GST is applicable on completed or
ready to sale properties only if the Completion Certificate has been issued.
In recent policy, the GST Council has cut the tax rates to 5% from 12% on premium
houses and, 1% from 8% for affordable houses. However, ITC benefit will not be
available under the new tax rate policy.

FAQs on real estate sector as per CBIC

Release
1. What are the new GST rates on the construction of
residential apartments?
Below are the new tax rates without ITC for housing projects applicable w.e.f
1.4.2019
Rate Description
1% New affordable housing projects
Ongoing affordable housing projects opting for new rates
5% Ongoing other than affordable housing projects
New other than affordable housing projects
Projects with commercial space <15% of total carpet area
Conditions to be satisfied for availing the above rates:

(i) ITC: ITC cannot be claimed.
(ii) Purchase of inputs from registered persons: At Least 80% of the total value of
inputs and input services should be purchased from registered suppliers.
However, the value of the following services used in the construction of residential
apartments are excluded for this calculation:
 Grant of developmental rights

 Long term lease of land
 Floor space index
 Value of electricity
 Value of high-speed diesel
 Motor spirit and natural gas
The promoter should pay GST @18% on reverse charge basis on all such inward
supplies to the extent short of 80% of inward supplies from registered supplier
except cement on which tax has to be paid at 28% (if purchased from unregistered
persons).
2. What is a residential real estate project?

A Real Estate Project in which the carpet area of the commercial space is not more
than 15% of the total carpet area of all apartments in the project.
3. What is an affordable residential apartment?

An affordable residential apartment is one in which:
 Carpet area is up to 60 square meter for metropolitan cities;

 Carpet area is up to 90 square meter for cities and towns other than
metropolitan cities and;
 The gross amount charged by the builder is not more than Rs.45 Lacs.
For E.g. Mr. A is a beneficiary of PMAY CLSS and the carpet area of his house
being constructed is 150 square meter. Is he eligible for a new tax rate of 1%?
Yes, only if the developer has not exercised the option to pay tax at old rates. Here,
the area in the square meter is greater than the prescribed limits but it is still
considered as an affordable residential apartment because Mr. A is a beneficiary of
PMAY CLSS.
4. What is an ongoing project?

A project is considered as an ongoing project if the following conditions are satisfied:
1. Where Commencement Certificate is required and has been issued by the
competent authority on or before 31st March 2019 and the same is certified by a
registered architect, chartered engineer or a licensed surveyor that the construction
of the project started on or before 31st March 2019.
E.g In case of a single tower comprising of 50 floors and registered as a single
project, separate commencement certificates may be issued by the competent
authority. If one or two certificates are received on or before 31st March 2019 and
some later, the same is still considered as an ongoing project.
2. A Commencement Certificate where not required to be issued by the competent
authority, then the same shall be issued by a registered architect, chartered engineer
or a licensed surveyor that the construction of the project started on or before 31st
March 2019.
3. Completion Certificate is not issued on or before 31st March 2019.
For instance, if a project has three blocks and completion certificate is received for
one block prior to 1st April 2019 and the rest are received after this date. In such a
case, the project is considered as an ongoing project because as per Notification
issued by Government, a project is considered complete only if the Completion
Certificate is issued for the entire project and not a part thereof.
4. The first occupation of the project has not taken place before 31st March 2019.
For instance, if occupation certificate is received only for a part of the premises (up
to 31st March 2019) in a huge project and not the entire project, the same is
considered as an ongoing project.
5. Apartments are partly or wholly booked on or before 31st March 2019.
E.g 1. This condition is not applicable for redevelopment of slum rehabilitation
projects as the beneficiaries, in this case, are not required to pay any monetary
consideration for flats allotted to them.
Note: A project where bookings have not started but the construction has started
before 31st March 2019, the same will not be considered as ‘ongoing project’. It will
be treated as a new project and the new tax rates will apply.
5. What are the criteria for certifying that the construction

of a project has started by 31st March 2019?
If the earthwork for site preparation of the project has been completed and
excavation for the foundation has started on or before 31st March 2019, a
construction project shall be considered to have been started on or before
31st March 2019.
6. Does a promoter or a builder have the option to pay tax

at old rates of 8% & 12% with ITC?
Yes, in case of an ongoing project, a promoter or builder can exercise a one time
option to pay tax at old rates. This should be communicated to the Jurisdictional
Commissioner by 20th May 2019 in the prescribed form. If not communicated, it is
deemed that they have opted for making tax payments at new rates. Also,
modification of option is not allowed once submitted.
Note:
1. This option needs to be exercised for each ongoing project separately. Thus,
promoters may exercise different options for different ongoing projects undertaken
by him.
2. This option is also available for specific schemes like PMAY, Housing For All, RAY
or any other housing schemes of Central or State Government.
3. This option can be exercised by a promoter or a builder and not the buyer.
TDR MEANS TRANSFERABLE DEVELOPMENT RIGHTS
FIRST FLOOR SPACE
7. What is the rate of GST applicable w.e.f 1st April 2019

on the construction of commercial apartments [shops,
godowns, offices, etc.] in a real estate project?

Description Rate (after deduction of

the value of land)
Commercial Apartments in Residential Real estate Project 5% without ITC on the

(RREP) where the construction has commenced on or after 1st total consideration
April 2019 or;

An ongoing project where the promoter has opted for new
rates
Commercial Apartments in Real estate Project (REP) other 12% with ITC on the total
than RREP or; consideration

An ongoing project where the promoter has opted for old rates
8. What are the GST rates on TDR, FSI and long term
lease of land?
Transfer of development rights or FSI by way of an agreement on or before 31st
March 2019 is exempted from tax even if the consideration for the same is paid
(cash or kind) in part or full on or after 1st April 2019. Below are the tax rates:
a. If the supply of TDR, FSI or long term lease of land is used for the construction of
residential apartments, Tax on TDR is to be computed on the basis of the following
formula: GST is applicable on such value which is proportionate to the construction
of residential apartments that remain un-booked on the date of issue of Completion
Certificate/first occupation. The rate of tax is 18% subject to a tax amount which is
limited to 1% or 5% of the value of apartment depending upon whether the TDR/FSI
is used for an affordable residential apartment or other than an affordable residential
apartment.
b. If the supply of TDR, FSI or long term lease of land is used for the construction of
commercial space: GST at 18%.
9. Who is liable to pay GST on TDR and floor space

index?
The promoter is liable to pay GST on reverse charge basis on TDR or floor space
index supplied on or after 1st April 2019. Even if a landowner is not engaged in a
regular business of land-related activities, transfer of development rights by such an
individual to the promoter is liable to GST as it is considered as supply of service
under section 7 of CGST Act.
Also, in case of outward supply of TDR by one developer to another, GST is
applicable at 18% on reverse charge.
10. At what point of time, the promoter should discharge

its tax liability on the supply of TDR, FSI and long term
lease?
Description Point of taxation
TDR The liability to pay tax arises on the date of completion or first occupation
of the project whichever is earlier. Thus, GST would be applied on the
value which is proportionate to the construction of residential apartment
that remains unbooked on the date of issue of Completion Certificate/first
occupation.
FSI For FSI received after 1st April 2019:
If consideration for FSI is in the form of construction of commercial or

residential apartments – Liability arises on the date of issuance of
Completion Certificate.
If consideration for FSI is in monetary form–
 For Residential Apartment Construction: Liability arises on the date

of issuance of Completion Certificate.
 For Commercial Apartment Constructions: Liability to pay tax shall
arise immediately.
Long term For long term lease received after 1st April 2019:
lease Liability arises on the date of issuance of the Completion Certificate in case
of construction of residential apartments. However, liability to pay tax
shall arise immediately if such long term lease is related to commercial
space.
11. Is the option to pay tax at old rates of 12% or 8%

(with ITC) is available to the promoter in respect of the
New Project (commenced on or after 1st April 2019)?
No, there is no such option. This option is not available even for schemes like PMAY,
Housing for All, RAY or any other housing schemes of Central or State Government.
For projects which commence on or after 1st April 2019, the promoters need to
mandatorily pay tax at new rates.
12.
Can a promoter revise an invoice as per section 34 of
CGST Act by way of issuance of debit/credit notes?
In case of invoices issued by a promoter prior to 20th May 2019 are not in
accordance with the option of tax rates exercised by him, a debit/credit note can be
issued to bring the transaction in conformity with the final option exercised by him.
13.What is the classification and rate of tax on works

contract service provided by a contractor to a developer
or promoter under the new scheme?
 Affordable Housing Project – 12%, provided affordable housing space is more
than 50% of the total carpet area.
 Residential housing project Other than Affordable housing – 18%
 Commercial Housing -18%
14.How to compute tax adjustment of a credit note where

a unit was booked prior to 1st April 2019 but cancelled at
a later date?
Suppose the buyer paid a gross booking amount of Rs.10 lacs before 1st April 2019.
The developer paid GST of Rs.1.2 lakhs (12% of Rs.10 lacs) on the booking amount.
In this case, a developer can make a tax adjustment of Rs.1.2 lakhs at the time of
cancellation provided the entire amount is refunded to the buyer on are before Sept
2019.

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FAQs on the Real Estate Sector under

FAQs on real estate sector as per CBIC

1% New affordable housing projects

Ongoing affordable housing projects opting for new rates

5% Ongoing other than affordable housing projects

New other than affordable housing projects

Projects with commercial space <15% of total carpet area

Conditions to be satisfied for availing the above rates:

 Grant of developmental rights

2. What is a residential real estate project?

3. What is an affordable residential apartment?

 Carpet area is up to 60 square meter for metropolitan cities;

4. What is an ongoing project?

5. What are the criteria for certifying that the construction

6. Does a promoter or a builder have the option to pay tax

7. What is the rate of GST applicable w.e.f 1st April 2019

Description Rate (after deduction of

Commercial Apartments in Residential Real estate Project 5% without ITC on the

9. Who is liable to pay GST on TDR and floor space

10. At what point of time, the promoter should discharge

FSI For FSI received after 1st April 2019:

If consideration for FSI is in the form of construction of commercial or

 For Residential Apartment Construction: Liability arises on the date

11. Is the option to pay tax at old rates of 12% or 8%

13.What is the classification and rate of tax on works

 Residential housing project Other than Affordable housing – 18%

 Commercial Housing -18%

14.How to compute tax adjustment of a credit note where

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