Since the GST was collected, the GST Council has been meeting from time to time to discuss and review the GST rates for various goods and services. These considerations are based on recommendations from various sectors and from the state government to simplify the tax structure and reduce the tax burden on taxpayers.
As we know, luxury goods and services are held in the highest tax bracket of 18-28%. However, further investigations have shown that some of these goods and services can be considered basic needs and should therefore not be subject to a high tax rate under the GST. Likewise, some goods and services have been moved between lower tax bands to provide some relief to taxpayers.
Real estate sector – decisions taken at the 34th session of the GST Council:
The main decisions taken at the 34th meeting and their impact on the real estate sector are summarized below:
1. W.e.f. 01-04-2019, GST Rates for Construction of residential complex has been specified as follows: –
(i) Affordable housing which will attract 1% tax without ITC
(ii) Other than affordable housing which will attract 5% tax without ITC
2. Criteria and conditions for levy of Concessional GST for Affordable housing:
i) Definition of Affordable Housing:
A residential house/flat of carpet area of upto 90 sqm in non-metropolitan cities/towns and 60 sqm in metropolitan cities having value upto Rs. 45 lacs (both for metropolitan and non-metropolitan cities).
Metropolitan Cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR).
ii) How to compute Rs. 45 lakhs:
The purchaser is required to pay the amount towards purchase of premises at the time of possession and other charges namely maintenance, electricity, society maintenance charges are also required to be paid. Generally, the builders have been paying tax at the rate of 12% or 8% on amount indicated towards construction and 18% for other charges. Therefore, it appears that in computing the amount of Rs. 45 lacs, the builders shall consider the amount indicated towards sale of flat only & not other charges. For example, maintenance charges will not form part of Rs. 45 lakhs.
It must be noted that presently a flat may qualify for concessional rate as “affordable housing”, however the concessional rate may not be applicable w.e.f. 1st April 2019 owing to the condition of Rs. 45 lakhs.
iii) New rate of 1% (without ITC) on construction of affordable housing will also be applicable to the affordable houses being constructed in ongoing projects under the existing the Central and State housing schemes i.e. projects which are presently eligible for concessional rate of 8%.
3. In case of sale of flat, demand notices are raised as per milestones specified in the agreement. As per section 31(5) demand notices are to be raised on or before the milestone specified in the agreement. Thus, if any milestones are achieved in March 2019, then tax is payable at old rate irrespective of the fact that payment from customer may be received on or after 1st April 2019.
Other important updates pertaining to GST Council Meetings:
32nd GST Council Meeting: Threshold limit for GST Registration raised to Rs. 40 lakh
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