We all realize that in the previous GST council meeting that had occurred on the 24th February 2019, various relief measures were brought in for the buyers of residential property. With the end goal of enhancement of the affordable house segment in the real estate sector, huge GST rate slashes were given by the GST council in its last meeting. GST council had slashed GST rates for underdevelopment project from 12% to 5%, and in the affordable segment from 8% to 1%.
However, this will be effective from April 1, 2019.
Very recently, the 34th GST Council meeting was held at Delhi. The council has now approved finally, the new rules & regulations for the Real estate sector. The GST council has now given choice to the real estate developers having GST registration to choose from the old and new GST rates. However, there are some exceptions to it.
Let us understand this in detail.
#1. Which new conclusion has come out in Real estate sector?
The GST council has given support for the new GST tariff for the Realty projects that were introduced at the 33rd meeting.
- These will be mandatory from 1st April 2019.
- However, real estate developers having GST registration will be given a one-time alternative to opt one from the old and new GST rates.
#2. In what capacity would builders be able to select from old and new GST rates?
As per the decision of the 34th GST Council meeting-
- The promoter of the real estate site who have GST registration now has a one-time alternative to make choice on GST rule regarding the new & old GST rates.
- The old GST rate on real estate was 12% or 8% in the affordable segment, where Input Credit was additionally available.
- The above GST rate is applicable to continuous projects. This includes those structures where development and the booking have additionally started before April 1, 2019, but have not got the completion certificate till 31st March 2019.
- Hence, if the development and the booking have begun after first April 2019, new GST rates will apply (which are 5% and 1% respectively). Here, the Input Credit won’t be available.
- In this way, the alternative has been given for the prescribed time frame and where the same has not been exercised inside as far as possible, new GST rates will be applicable.
- The real estate developers and promoters of Real estate projects have to consider these focuses while dealing with their clients.
- Construction projects as on 31st March 2019 will have an alternative to choose an old rate with ITC or new rates without ITC.
- Up to 15% of commercial Spaces to be treated As Residential Properties for GST purpose.
- Time Limit for Transition to new rates to be discussed with the States.
- Reversal of Input Tax Credit (ITC) to be proportionate to the Area Space.
- 80% of procurement of Material should be from Dealers who are having GST registration.
- Affordable house to be taxed at 1% without ITC.
#3. What are the other decisions taken by the GST council?
Here are some other other decisions are taken by GST council-
- Sale of sweets, namkeens, cold beverages, and other edible items through restaurant will be treated as ‘composite supply’ with restaurant supply being the foremost service.
- Existing GST rates on restaurant service will likewise be applicable on every single such sale and no input credit will be allowed.
- Sale of sweets, namkeens, cold beverages and other edible items from sweet shop counter will be treated as a supply of goods with applicable GST rates of the items being sold and input credit will be allowed on such supply.
- The candidate ought to keep up separate records for restaurant and sweet shop with respect to input and output and billings just as other accounting records ought to likewise be separately maintained.