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Shushma

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Published on: Jun 24, 2026

34th GST Council Meeting

34

th GST Council meeting was held on 19th March 2019 and decision with regard to the implementation of lower 1 on real estate has been taken. Let us first recall that in the 33rd GST Council Meeting, it was recommended for lower GST rate @ 1% in case of affordable housing and GST rate @ 5% on the construction of houses other than affordable house and the modalities of transition of the same is decided in the 34th GST Council Meeting. Following points are decided in the 34th GST Council Meeting

New Tax Rates and its Conditions

  • New GST rate @ 1% on the construction of affordable houses is available for the following
    • In the case of new projects, houses which meet the definition of affordable houses as decided by GSTC (i.e. non-metros - area of 60 sqm and metros - area of 90 sqm and value up to INR 45 Lakhs); and
    • In case of ongoing projects, affordable houses which are being constructed under the present central and state housing scheme and are eligible for 8% concessional GST rate.
  • New GST rate 5% is available for the following
    • In the case of new projects, all houses other than affordable houses;
    • In case of ongoing projects, all houses other than affordable houses whether booked prior to or after 1st April 2019.

If the houses are booked prior to 1

st April 2019, the new GST rate 5% shall be available on instalments payable on or after 1st April 2019.
  • In the case of commercial apartments like shops/offices in a residential real estate, wherein, carpet area of the commercial apartments is not more than 15% of the total carpet area of all the apartments.

Conditions for Availing Benefit of New GST Rates

  • Input Tax Credit shall not be available in case the new GST rate benefit is availed;
  • It is mandatory for the builders to purchase 80% of inputs and input services from the registered person. If the target of 80% purchase is not achieved, the builder is required to pay the following taxes on reverse charge mechanism (RCM) ā€“
    • The builder is required to pay 18% tax on RCM on a shortfall of purchases from 80%;
    • The builder is required to pay 28% tax on cement purchased from an unregistered person; and
    • The builder is required to pay applicable taxes on capital goods under RCM.

Options in Respect of the Ongoing Projects

In respect of the ongoing projects i.e. projects wherein construction and booking have started before 1

st April 2019 and which has not been completed by 31st March 2019, the promoters shall be given a one-time option to continue to pay tax at the old rates i.e. 8% or 12%. However, the promoters are required to opt for the option within the prescribed time and if the promoters have not opted for the option, new GST rates will apply.

Transition for Ongoing Projects in Case Opting for New Tax Rates

Ongoing projects that are opting for new GST rates have required a transition of the

input tax credit (ITC) as per the prescribed method. Transition formula for the residential projects wherein new GST rate is 5% extrapolates ITC availed for the % completion of construction as on 1st April 2019 to arrive at ITC for the entire project. After that based on the % booking of flats and % invoicing, ITC eligibility can be determined. In short, the transition would be on a pro-rata basis. In case of mixed projects, transition shall allow the input tax credit on a pro-rata basis in proportion to the carpet area of the commercial portion in the ongoing projects to the total carpet area of the project.

Treatment of TDR, FSI and Long Term Lease for the Projects Commencing after 1st April 2019

Supply of TDR, FSI and long term lease of land by a landowner to the developer shall be exempt from tax provided the constructed flats are sold before issuance of the completion certificate and applicable tax is paid on the same. In case the flat is sold after issuance of the completion certificate, the exemption shall be withdrawn and tax @1% in case of affordable house and @5% in cases other than affordable houses shall be payable. In such a case, the builder shall be liable to pay tax under RCM on the date of the issue of the completion certificate. Applying the reverse charge mechanism, the liability to pay tax has been shifted from landowner to the builder in case of TDR, FSI and long term lease premium.
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Frequently Asked Questions

Common questions about GST Council Meeting Tax Changes for Real Estate.

The new GST rate for affordable housing is 1% for both new and ongoing projects that meet the criteria set by the GST Council, such as area and value limits.
For non-metro cities, an affordable house is defined as having an area of up to 60 square meters and a value of up to INR 45 lakhs. For metro cities, an affordable house is defined as having an area of up to 90 square meters and a value of up to INR 45 lakhs.
The new GST rate for non-affordable housing is 5%, applicable to both new projects and ongoing projects that do not fall under the affordable housing category.
No, builders cannot claim input tax credit if they opt for the new lower GST rates of 1% or 5%. This condition applies to both new and ongoing projects.
To avail the new GST rates, builders must purchase at least 80% of their inputs and input services from registered persons. If they fail to meet this requirement, they must pay taxes on the shortfall under the reverse charge mechanism (RCM).
Yes, for ongoing projects where construction and booking started before April 1, 2019, and which were not completed by March 31, 2019, promoters have a one-time option to continue paying tax at the old rates of 8% or 12%.
For ongoing residential projects opting for the new 5% GST rate, the transition formula extrapolates the ITC availed for the percentage completion of construction as of April 1, 2019, to arrive at the ITC for the entire project. The ITC eligibility is then determined based on the percentage booking of flats and percentage invoicing.
The supply of Transferable Development Rights (TDR), Floor Space Index (FSI), and long-term land leases by landowners to developers is exempt from GST if the constructed flats are sold before the completion certificate is issued, and applicable tax is paid. If sold after the completion certificate, the exemption is withdrawn, and the builder must pay tax under RCM.
Under RCM, builders must pay 18% tax on the shortfall of purchases from the 80% requirement, 28% tax on cement purchased from unregistered persons, and applicable taxes on capital goods.
Yes, the new 5% GST rate can be applied to commercial apartments like shops or offices within a residential real estate project, provided the carpet area of the commercial apartments does not exceed 15% of the total carpet area of all apartments.