Speed Post News Network
New Delhi : The GST Council at its 34th meeting held on March 19, 2019, in New Delhi discussed the operational details for implementation of the recommendations made by the council in its 33rd meeting for lower effective GST rate of 1% in case of affordable houses and 5% on construction of houses other than affordable house.
The GST council decided the modalities of the transition. The promoters shall be given a one-time option to continue to pay 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) which have not been completed by March 31, 2019. The option shall be exercised once within a prescribed timeframe and where the option is not exercised within the prescribed time limit, new rates shall apply.
The new tax rates, which shall be applicable to new projects or ongoing projects which have exercised the above option to pay tax in the new regime, are : (i) New rate of 1% without input tax credit (ITC) on construction of affordable houses shall be available for (a) all houses which meet the definition of affordable houses as decided by GSTC (area 60 sqm in non- metros / 90 sqm in metros and value up to Rs 45 lakh), and (b) affordable houses being constructed in ongoing projects under the existing central and state housing schemes presently eligible for concessional rate of 8% GST (after 1/3rd land abatement).
(ii) New rate of 5% without input tax credit shall be applicable on construction of all houses other than affordable houses in ongoing projects whether booked prior to or after April 1, 2019. In case of houses booked prior to April 1, 2019, new rate shall be available on instalments payable on or after April 1, 2019. It will also be applicable on all houses other than affordable houses in new projects and commercial apartments such as shops, offices etc. in a residential real estate project (RREP) in which the carpet area of commercial apartments is not more than 15% of total carpet area of all apartments.
The new tax rates of 1% (on construction of affordable) and 5% (on other than affordable houses) shall be available subject to following conditions : Input tax credit shall not be available, 80% of inputs and input services (other than capital goods, TDR/ JDA, FSI, long term lease (premiums)) shall be purchased from registered persons. On shortfall of purchases from 80%, tax shall be paid by the builder @ 18% on reverse charge mechanism (RCM) basis. However, Tax on cement purchased from unregistered person shall be paid @ 28% under RCM, and on capital goods under RCM at applicable rates.
The ITC rules shall be amended to bring greater clarity on monthly and final determination of ITC and reversal thereof in real estate projects. The change would clearly provide procedure for availing input tax credit in relation to commercial units as such units would continue to be eligible for input tax credit in a mixed project, according to a PIB release.