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GST on Real Estate Project

Clarification by (TRU) GST F. No. 354/32/2019-TRU

Tax Research Unit of MoF issued FAQs on Real Estate on 7th May, 2019, gist of these FAQs is decoded as under:

  1. Projects are defined as REP or RREP Projects. RREP stand for Residential Real Estate in which commercial developments are not more that 15% of the total carpet area of the project while all other projects are REP i.e. Real Estate Projects.
  2. Significance of REP and RREP is only i) Commercial Developments which are part of RREP project qualify for new rate of tax while other commercial developments are not; ii) The rate of tax on Commercial Developments which are part of RREP in new regime is 5%.
  3. All projects which are ‘On-going Projects’ can have the option to remain in existing tax rates all other projects except commercial developments have no choice but to go for new rates.
  4. The New definition of affordable residential i.e. 60 or 90 sq mtr with a cap of gross vale of Rs. 45 lakh is applicable for all projects commenced on or after 1.4.2019 while on on-going projects both new definition and old definitions of affordable housing is applicable.
  5. The Project shall be understood as it is defined in RERA and if entire project will not get occupation or completion before 1.4.2019, it shall be considered as on-going project subject to other conditions.
  6. The new GST Regime on Real estate will apply only if a project is ‘intended for sale’ even if there have not been any sale as long as that intend exists and RERA is applicable to such projects i.e. RERA does not applicable for projects which are not meant for intended sale.
  7. In no case, modification/amendments shall be allowed in the form once submitted i.e. option once availed cannot be modified.
  8. The evaluation of 12% / 18% with ITC or 1.5%  / 7.5% without ITC must be considered on project by project basis as defined in RERA. So, the option to opt-in or not, is to be decided project-wise.
  9. The new rate-regime notification made it very clear that promoter do not have any option to deduct actual cost of land component from the value of the apartments but to follow deemed deduction of 1/3rd  of Total Gross sale price for land deduction.
  10. Last but not the least, new rate-regime is subject to so many conditions which makes it inevitable for promoter to prepare project-wise record and new rate-regime is made it quite clear, development of plots intended for sale is a taxable project based on the external developments works carried out by on immovable property.

This FAQs consist of 41 FAQs, in the present post we have covered only those projects intended for sale by promoters on their own land. In the next post we are covering project which are or to be developed on JDA projects. 

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