The CBIC (Central Board of Indirect Taxes and Customs) has said that 12 per cent of GST must be paid by the home buyers compulsorily and this is only for those who have to give the amount to the builder and whose housing project got the completion certificate before 1st April 2019.
The CBIC issued FAQs second set and said that if the builder chooses the lower new GST rate i.e. the 1 per cent for affordable housing and 5 per cent for others then he does not have any rights to adjust the collected credits.
The CBIC issued the first set of FAQs last week for the real estate sectors in order to clarify the confusion that was in the mind of people about the rollout of the new GST rates regarding the migration of real estate developers which came into effect from 1st April 2019.
Arun Jaitley, head of GST Council said in March to the interested real estate players to shift to the new GST rates i.e. 1 per cent for affordable housing and 5 per cent for the others but this new GST rates will not give the benefits of the ITC (input tax credit). This could only be done after 31st March 2019.
What Benefit did the Government Give to the Builders for the Ongoing Projects?
The government gave an option to the builders for the ongoing projects that they can choose between the 12 per cent GST slab along with the benefit of Input Tax Credit (8 per cent for affordable housing) or the 5 per cent rate (1 per cent for affordable housing) but without ITC. Choose anyone among the two and then communicate with the jurisdictional officers till 20th May.
What GST rate must be applied on projects who received the occupation certificate before 1st April 2019 but the balance is still due?
To this question, the FAQ said: “Time of supply of the service by way of construction of apartments in such projects falls prior to April 1, 2019, and accordingly the rates as existed prior to April 1, 2019, would apply to such balance demands.”
Rajat Mohan, AMRG & Associates Partner said, “This clarification has tightened the grip on taxpayers who intended to take benefit of lower taxes rates with the aid of deferred invoicing.”
Can ITC be adjusted against the new GST rates– 5 per cent and 1 per cent?
To this, the FAQ said “No. GST on services of construction of an apartment by a promoter at the rate of 1 per cent/ 5 per cent is to be discharged in cash only. ITC, if any, may be used for discharging any other supply of service.”
Mohan said “Developers opting for new tax regime for ongoing projects now has another reason to refrain from the new scheme”.
How Much Input Must be Taken from the Registered Dealer?
The CBIC said that under the new tax reign, the discounted goods purchased by a builder will not be counted within the prescribed 80 per cent limit for purchase from the registered dealers. This was said when the Council was deciding about the lower GST rates for the real estate sector.
While deciding on lower GST rates for real estate sector, the Council had said that at least 80 per cent of the inputs should be procured from a registered dealer.
Who has the Right to Choose the New GST Rates?
The CBIC said that the manufacturer has the right to choose whether he wants to stick to the new GST rates or to the old rates for the ongoing projects instead of the landowner.
Abhishek Jain, EY Tax Partner 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.”
