Kerala AAR Levies 1.5% GST on Inexpensive Residential Apartments

The Kerala Authority of Advance Ruling (AAR) ruled that affordable residential apartments draw 1.5% GST.

The bench, Sreeparvathi, and Abraham Renn ruled that a new GST tax structure for the real estate sector was being initiated which would come into force from the date 1/4/2019 with the revision of Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 by Notification No. 03/2019 – Central Tax (Rate) dated 29.03.2019. The petitioner has directed the construction services post 1.4.2019 and therefore the rate as specified under the latest tax structure would get applicable for the construction services which the petitioner directed.

The notification mentioned on 29.03.2019 permits the concessional rate of the tax for the affordable residential units despite the projects comprising commercial units which do not surpass 15% of the total units. Identical to that the residential units would be the real estate project which would not be the residential real estate project and is indeed provided with the concessional GST rate.

The petitioner comprises the partnership firm who have been involved in the development and construction of the residential apartments. Petitioner plans, to perform a joint development agreement for the development of the plot of the land into a multi-storied residential apartment project (residential real estate project).

The proposed residential project consists of 50 units, out of which 14 apartments are to be given to the landowner towards the landowner’s area under the Joint Development Project. All the 50 units in the apartment complex have a carpet area of less than 60 square meters and the total sale acknowledgement along with all the charges for 30 residential apartments would exceed Rs 45 lakhs for 20 residential apartments the total sale consideration shall exceed 45 lakhs.

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The 20 residential units in the project are entitled “Affordable Residential Apartments” as illustrated in Notification No. 11/2017 as revised via Notification No. 03/2019.

Petitioner seeks the advance ruling on the problem of whether the advantage under notification no 03/2019 could be claimed for the units that shall be entitled as affordable residential apartments in a residential Real Estate Project if the project comprises “Affordable Residential Apartments” along with the other apartments.

AAR, the construction services of the apartment furnished via petitioner in the residential real estate project comes in the definition of services as mentioned under Notification No. 03/2019 Central Tax (Rate) on 29.03.2019.

The council specified that the petitioner would be obligated to furnish the GST with a 1.5% rate for the services of the construction of affordable residential apartments. With a 7.5% rate for the construction services of the residential apartments excluding the affordable residential apartments in the project.