GST for real estate

Honestly, after the Government introduced GST into the system it's been something that everybody has to know about because with the introduction of GST everything changed. Certain products prices sky-rocketed and certain prices remained the same or maybe slightly reduced after tax that is. This system was introduced to standardize all tax applied for the Government’s revenue generation. Before the new financial year had begun the builders had an option of either settling for the higher tax rate with input credit or the flat rate that will be effective in the financial year 2019 also there were certain conditions that we shall discuss further. 

 So, going into details about the specifications of GST on projects that have received RERA before 31st March’19 have an option of either opting for the 12% rate with Input credit or going for 5% which was implied from the New Financial Year that would be 1st April’19. Although, all the projects that have come up or have got approved by RERA after 1st April’19 have no other option but to give the benefit of the 5% GST that the Government has mandated. This rate is in case of properties that exceed 60Square meter of area... These properties can also be called the luxury housing segment.

The one question that everybody has while dealing with projects that have started their construction before 31st March’19 is that: The input credit benefit that is basically 7% that is refunded to the builder for the reason being that when the builder purchases so many raw materials that is liable pay taxes for as well as on the final product. Hence, the government gives the liberty of subtracting all taxes paid by the builder through purchase of raw materials from the taxes on the finished goods he delivers. A little complicated yet simple. So, Coming to answer... Are you entitled to get the refunds that the builder enjoys? No, the builder has the choice of either keeping it or returning it back. But, the builders because of this benefit reduce their prices while making the sale. Hence, it is safe to say that in one way or the other we do enjoy the benefit. 

 Now, coming to the Affordable housing segment... Before, the new financial year started that is before 1st April’19 the tax rates on houses under 60Square meters was at 8%. As discussed before the rates will remain 8% for the projects that got their RERA Approval before the new financial year began. Now, the new rate that is applicable is a shocking 1% for houses whose carpet area does not exceed 60Square meters. There are many up and coming projects that offer you this benefit at this given time. There are many new projects coming up this year in Tier-A and Tier-B segments that offer these benefits with both 1% and 5% GST rates.

There is another benefit that a buyer can benefit off is discussed below... It is not entirely related to GST but anyways can be considered as a benefit in a way.

Now, there is something called the occupancy certificate which is something issued only after the completion of property. This certificate certifies that the property is in suitable condition to be occupied. Speaking legally... It is not advisable to move-in without this certificate. The benefits this can give you is when you are dealing with properties that are ready-to-move. In case of purchase of a ready to move-in apartment with Occupancy Certificate are exempted from GST. In any case it is not such a simple task to calculate the taxes under the new regime. 

Also, if other builders do not give you the benefits of the new rates you are completely eligible to approach the National Anti-Profiteering Authority, which pursues cases of non-passage of GST benefits to the consumers.

Summarizing all these factors the picture we get is that the consumers are in the upper hand in this economy which makes investing in real estate a very good decision. With these rates it is very much possible to make a reasonable profit if investments are done wisely. 

Let’s put down all the summarized factors in pointers for better understanding them. 

The new scheme is compulsory for projects commenced on or after 1-4-2019.

The revised scheme applies to residential apartments in Real Estate Project (REP) and Residential Real Estate Project (RREP) and commercial apartments in RREP which are covered under RERA [Real Estate (Regulation and Development) Act, 2016]. 

These rates apply where the supply of services involves transfer of land or undivided share of land and its charges are included in the amount charged to customers.

In respect of new projects, the tax (CGST, SGST/UTGST or IGST as applicable) shall be paid in cash by debiting the electronic cash ledger only [No Input Tax Credit allowed].

In respect of new projects, the tax (CGST, SGST/UTGST or IGST as applicable) shall be paid in cash by debiting the electronic cash ledger only [No Input Tax Credit allowed].

No GST is payable where the entire consideration has been received after issuance of the completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier

All cement for the project must be purchased from a registered supplier only. If not so received, the promoter is required to pay GST @ 28% under reverse charge by the promoter (even if total value of supplies received from unregistered suppliers is less than 80%).

In case of capital goods procured from an unregistered person, the promoter is liable to pay GST at its respective rate under reverse charge.

Author- Mohammed Nadeem