{"id":1209,"date":"2019-08-08T13:20:38","date_gmt":"2019-08-08T07:50:38","guid":{"rendered":"https:\/\/aktassociates.com\/blog\/?p=1209"},"modified":"2019-08-16T13:28:31","modified_gmt":"2019-08-16T07:58:31","slug":"gst-on-real-estate","status":"publish","type":"post","link":"https:\/\/aktassociates.com\/blog\/gst-on-real-estate\/","title":{"rendered":"Implication of GST on Real Estate"},"content":{"rendered":"

In recent times, we have seen a significant transformation in the Indian Real Estate Sector. <\/span>Recently Real Estate (Regulation and Development) Act (Maha RERA<\/a> in Maharashtra) has also issued to address the accountability of builders and real estate Agents\/Brokers. <\/span>Consequent to decisions taken in the 33<\/span>rd<\/span> and 34<\/span>th<\/span> GST council meeting, Government has brought out transformational changes in GST law and tax rates for real estate sector w.e.f\u00a0 01.04.2019. <\/span>As we already know, Under GST, Goods means any Movable property. That means the sale of the completed property is not a good nor the services hence, <\/span>GST shall not be applicable in sale of completed property\/ flats or ready to move property<\/b>. This also mentioned in para 5 of schedule III.<\/span><\/p>\n

Although GST is not charged on the sale of the completed property however Stamp duty and registrations are not included in those sale value. In simple words, GST shall be levied on registration charges and stamp duty value irrespective of whether the sold building is constructed or under constructed. <\/span>Before going to the deep of the impact of GST on Real Estate, Let’s understand certain concepts relating to the real estate sector\u00a0<\/span><\/p>\n

\"GST<\/p>\n

Firstly, we will understand the tax rate applicable from 01<\/span>st<\/span> April 2019 on real estate for the purchase of the under-construction property.<\/span><\/p>\n\n\n\n\n\n\n
S.No.<\/b><\/td>\nType of Service<\/b><\/td>\nBefore 01.04.2019<\/b><\/td>\nOn or After 01.04.2019<\/b><\/td>\n<\/tr>\n
Rates of Tax<\/b><\/td>\nWhether Eligible for ITC<\/b><\/td>\nRates of Tax<\/b><\/td>\nWhether Eligible for ITC<\/b><\/td>\n<\/tr>\n
1<\/span><\/td>\nConstruction of Normal Apartment<\/span><\/td>\n12%<\/span><\/td>\nYes<\/span><\/td>\n5%<\/span><\/td>\nNo<\/span><\/td>\n<\/tr>\n
2<\/span><\/td>\nConstruction of Affordable Apartment<\/span><\/td>\n8%<\/span><\/td>\nYes<\/span><\/td>\n1%<\/span><\/td>\nNo<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

If the builder provides the service of construction of commercial Property then GST shall be levied @ 12% and builder shall be eligible for ITC.<\/span><\/p>\n

From the above, it can be easily understood that each tax structure has its own advantages and disadvantages. New tax structure, for instance, provides reduced tax rate where old tax structure allows the builder to avail ITC.<\/span><\/p>\n

The facility to choose the old tax structure is still available to the builders for ongoing projects. However, if the projects have started on or after 01.04.2019, then the builder has to use new tax structure mandatorily.<\/span><\/p>\n

If all the following 9 points have been fulfilled then it will be considered that the project is an ongoing project, otherwise it will be a new project and consequently, new rates will be applicable to them.<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
S.No.<\/b><\/td>\nThe activity has taken place on or before 31st March 2019<\/b><\/td>\n<\/tr>\n
1<\/span><\/td>\nCommencement certificate\/building permission has been granted<\/span><\/td>\n<\/tr>\n
2<\/span><\/td>\nThe same is certified by architect\/chartered engineer \/Licenced surveyor<\/span><\/td>\n<\/tr>\n
3<\/span><\/td>\nSite preparation for construction was completed<\/span><\/td>\n<\/tr>\n
4<\/span><\/td>\nExcavation for the foundation has started<\/span><\/td>\n<\/tr>\n
5<\/span><\/td>\nAt least a flat has been booked<\/span><\/td>\n<\/tr>\n
6<\/span><\/td>\nA builder has entered into an agreement with the buyer<\/span><\/td>\n<\/tr>\n
7<\/span><\/td>\nThe builder has received some advance into his bank account<\/span><\/td>\n<\/tr>\n
8<\/span><\/td>\nThe builder has tax liability\/ Time of supply<\/span><\/td>\n<\/tr>\n
9<\/span><\/td>\nCompletion Certificate has not yet been issued<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Example: M\/s. ABC Builders are constructing residential apartments in Maharashtra. They have received necessary Registration Under MAHA RERA from RERA authorities in Maharashtra before 31st March 2019 to construct the said Project. Earthwork has been completed and excavation has commenced before 31st March 2019. A flat was booked before 31st March 2019 in respect of which M\/s. ABC Builders have entered into an agreement and the buyer has paid some advance to the bank account of the builder and thus, the builder has the tax liability before 31<\/span>st<\/span> March 2019. Since the construction has not yet completed, no completion certificate was issued by the competent authority. <\/span>Since all the conditions have been met, the above project is an ongoing project.<\/span><\/p>\n

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