Homebuyers will have to pay 12 percent GST on balance amount due to
the builder if the housing project has been granted completion
certificate by 31 March, 2019, the CBIC has said.
Builders who have received a completion certificate for an ongoing project before 1 April, 2019, will
have to charge 12 percent GST from buyers on the balance amount due towards the purchase of the flat.
Issuing the second set of FAQs for real estate sector, the Central Board of Indirect Taxes and Customs (CBIC) said that builders will not be able to adjust the accumulated credits in ongoing projects in case they opt for lower new GST rate of 5 percent for normal and 1 percent for affordable housing.
The first set of FAQs for real estate sector was issued last week to clarify doubts with regard to migration of real estate developers to new GST rates for the sector which has come into force from 1 April, 2019.
The GST Council, headed by Finance Minister Arun Jaitley and comprising state counterparts, had in March allowed real estate players to shift to 5 percent GST rate for residential units and 1 percent for affordable housing without the benefit of input tax credit (ITC) from 1 April, 2019.
For the ongoing projects, builders have been given the option to
either continue in 12 percent Goods and Services Tax (GST) slab with ITC
(8 percent for affordable housing), or opt for 5 percent GST rate (1
percent for affordable housing) without ITC and communicate to their
respective jurisdictional officers the same by May 20.
To a query on what shall be the rate of GST applicable on projects in respect of which occupation certificate has been issued prior to 1 April, 2019, but the balance demands are pending, the FAQ said: "Time of supply of the service by way of construction of apartments in such projects falls prior to 1 April, 2019, and accordingly the rates as existed prior to 1 April, 2019, would apply to such balance demands."
AMRG & Associates Partner Rajat Mohan said, "This clarification has tightened the grip on taxpayers who intended to take benefit of lower taxes rates with the aid of deferred invoicing."
On whether accumulated ITC can be adjusted against new tax liability of 5 percent and 1 percent, the FAQ said: "No. GST on services of construction of an apartment by a promoter at the rate of 1 percent/ 5 percent is to be discharged in cash only. ITC, if any, may be used for discharging any other supply of service."
"Developers opting for new tax regime for ongoing projects now has another reason to refrain from new scheme," Mohan said.
The CBIC further clarified that exempted goods procured by a builder under the new tax regime would not be counted within the 80 percent limit set for procurement from registered dealers.
"This could entail an additional tax of 18 percent on value of exempt supplies, credit of which would not be available to developers," Mohan added.
While deciding on lower GST rates for real estate sector, the Council had said that at least 80 percent of the inputs should be procured from a registered dealer.
The CBIC has also clarified that developer and not the landowner will have the right to decide whether to opt for new GST rates or stick to old rates for ongoing projects.
EY Tax Partner Abhishek Jain said: "Clarifications on some technical ambiguities like non-applicability of new rates for projects completed before April, 2019, valuation of TDR, etc should help resolve some involved issues for this sector."
Builders who have received a completion certificate for an ongoing project before 1 April, 2019, will
have to charge 12 percent GST from buyers on the balance amount due towards the purchase of the flat.
Issuing the second set of FAQs for real estate sector, the Central Board of Indirect Taxes and Customs (CBIC) said that builders will not be able to adjust the accumulated credits in ongoing projects in case they opt for lower new GST rate of 5 percent for normal and 1 percent for affordable housing.
The first set of FAQs for real estate sector was issued last week to clarify doubts with regard to migration of real estate developers to new GST rates for the sector which has come into force from 1 April, 2019.
The GST Council, headed by Finance Minister Arun Jaitley and comprising state counterparts, had in March allowed real estate players to shift to 5 percent GST rate for residential units and 1 percent for affordable housing without the benefit of input tax credit (ITC) from 1 April, 2019.
Representational image. Reuters.
To a query on what shall be the rate of GST applicable on projects in respect of which occupation certificate has been issued prior to 1 April, 2019, but the balance demands are pending, the FAQ said: "Time of supply of the service by way of construction of apartments in such projects falls prior to 1 April, 2019, and accordingly the rates as existed prior to 1 April, 2019, would apply to such balance demands."
AMRG & Associates Partner Rajat Mohan said, "This clarification has tightened the grip on taxpayers who intended to take benefit of lower taxes rates with the aid of deferred invoicing."
On whether accumulated ITC can be adjusted against new tax liability of 5 percent and 1 percent, the FAQ said: "No. GST on services of construction of an apartment by a promoter at the rate of 1 percent/ 5 percent is to be discharged in cash only. ITC, if any, may be used for discharging any other supply of service."
"Developers opting for new tax regime for ongoing projects now has another reason to refrain from new scheme," Mohan said.
The CBIC further clarified that exempted goods procured by a builder under the new tax regime would not be counted within the 80 percent limit set for procurement from registered dealers.
"This could entail an additional tax of 18 percent on value of exempt supplies, credit of which would not be available to developers," Mohan added.
While deciding on lower GST rates for real estate sector, the Council had said that at least 80 percent of the inputs should be procured from a registered dealer.
The CBIC has also clarified that developer and not the landowner will have the right to decide whether to opt for new GST rates or stick to old rates for ongoing projects.
EY Tax Partner Abhishek Jain said: "Clarifications on some technical ambiguities like non-applicability of new rates for projects completed before April, 2019, valuation of TDR, etc should help resolve some involved issues for this sector."
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