In a recent decision based on concern for the real estate sector, the government has now extended the time limit to finally opt for the new rate applicable on under construction house till 20th May 2019
The government has applied new GST rates for the under-construction flats and the home buyers do not have any rights to choose it. The new GST rates were rolled out on 1st April 2019. Instead of the home-buyers, the builders have rights to choose between the old rates and new rates and this decision have to be made till 20th May 2019.
The Finance Ministry has given answers to the FAQs (Frequently Asked Questions) on the new GST rates which has been applied on the real estate sector and by this FAQs, the FinMin has cleared 41 issues.
Who can Choose the GST Rates Builder or Buyer?
To this question, FinMin clarified that the builder has the rights to choose the tax he has to pay on apartments constructions. He can either choose the old rates i.e. 12 per cent or the new rates i.e. 5 per cent. But this has to be done till 20th May 2019.
It said “If the builder does not exercises his option to continue to pay tax at the old rate…the effective GST rate applicable on all your (buyer) instalments payable to the builder on or after April 1, 2019, shall be either 1 per cent or 5 per cent, depending on whether the apartment is an affordable or other-than-affordable residential apartment”.
If the old rates are chosen by the builder, then 8 per cent for an affordable apartment or 12 per cent for others have to be paid by the buyer. The builder will get the ITC (Input Tax Credit) which should further be given to the buyer.
Two-rate Structure Under the New Rates
The GST Council proposed a two-rate structure for the ready-to-move-in flats or under-construction flats in which the certificate of completion has not been provided during the sale (buyers should not have to pay the GST on the finished projects). The two-rate structure includes-
- 1 per cent GST for the affordable apartments
- 5 per cent GST for other
ITC is not levied on it. The new rates will be applied after 1st April 2019 on the current projects and new projects.
The FinMin in the FAQs has given criteria for the projects that must come under ongoing and for this, the builder can choose a one-time option of old rates. These include-
- The project starting before 31st March 2019,
- The completion certificate not issued yet, or
- First occupation of the project not taking place till 31st March,
- Apartments that have been, partly or wholly, booked till 31st March and
- Projects that got occupation certificates just for a part.
If the builder does not choose anything between the old rates and new rates till 10th May then it will be considered that he has chosen the new rates.
Grab the ITC Benefits
MS Mani, Partner with Deloitte India said that projects that started after declaring the dates of the low rates can take the advantages of ITC before 31st March and can also have the 12 per cent that can be applied to the home buyers.
He said “It is also now clear that the RERA (Real Estate Regulation and Development Act) registration of a project would be relevant for GST as well, since buildings in the same project can be separately registered in RERA and the builder can exercise the ITC option for one building and forego the same for another building”.
