GST Council on Tuesday approved its plan for implementation of new tax structure for housing. According to a Press Information Bureau statement, the GST council meeting gave nod to recommendation made by the council in its 33rd meeting for lower effective GST rate of 1 percent in case of affordable houses and 5 percent on construction of houses other than affordable house.
The council also agreed to provide time for the transition to developers from the old tax structure.
Promoters will be given a one -time option to continue to pay tax at the old rates on ongoing projects. The effective tax rate for that is 8 percent or 12 percent with ITC for buildings where construction and actual booking have both started before April 1, 2019 and which have not been completed by March 31, 2019.
“The option shall be exercised once within a prescribed time frame and where the option is not exercised within the prescribed time limit, new rates shall apply,” said the statement.
The new tax rates which shall be applicable to new projects is 1 percent without input tax credit (ITC) on construction of affordable houses shall be available for, (a) all houses which meet the definition of affordable houses as decided by GSTC (area 60 sqm in non- metros / 90 sqm in metros and value uptoRs 45 lakhs), an (b) affordable houses being constructed in ongoing projects under the existing central and state housing schemes presently eligible for concessional rate of 8 percent GST
The new rate of 5 percent without ITC shall be applicable on construction of all houses other than affordable houses in ongoing projects whether booked prior to or after April 1. In case of houses booked prior to April 1, new rate shall be available on instalments payable on or after April 1.
Commercial apartments such as shops, offices etc. in a residential real estate project (RREP) in which the carpet area of commercial apartments is not more than 15 percent of total carpet area of all apartments, will have have the same rate applicable.
The new tax rates of 1 percent on construction of affordable and 5 percent on other than affordable houses will be applicable while the input tax credit shall not be available, while 80 percent of inputs and input services other than capital goods, TDR/ JDA, FSI, long term lease shall be purchased from registered persons.
“On shortfall of purchases from 80 percent, tax shall be paid by the builder at the rate of 18 percent on RCM basis. However, tax on cement purchased from unregistered person shall be paid at the rate of 28 percent under RCM, and on capital goods under RCM at applicable rates,” it said.
The transition formula approved by the GST Council, for residential projects extrapolates ITC taken for percentage completion of construction as on April 1 to arrive at ITC for the entire project. Then based on percentage booking of flats and percentage invoicing, ITC eligibility is determined. Thus, transition would be on pro-rata basis based on a simple formula such that credit in proportion to booking of the flat and invoicing done for the booked flat is available subject to a few safeguards, it said.
“For a mixed project transition shall also allow ITC on pro-rata basis in proportion to carpet area of the commercial portion in the ongoing projects to the total carpet area of the project.”