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GST on Affordable Housing

Last updated : December 17th, 2019 06:58 pm

GST on Affordable Housing

To boost the real estate sector and also taking a step forward towards achieving the housing for all target, recently Government has reduced the GST rates as applicable on the affordable housing. The present article provides a complete understanding with regard to the GST applicable to affordable housing.

Coverage of the term ‘Affordable Housing’

Before understanding the GST applicability, it is important to understand the coverage of the term ‘Affordable Housing. The term Affordable Housing is explained in the below table:

Particulars	Conditions
Affordable Housing for metropolitan cities	1. A residential house/flat having carpet area up to 60 sqm. 2. The gross amount charged cannot be more than INR 45 Lakhs.
Affordable Housing for non-metropolitan cities	1. A residential house/flat having carpet area up to 90 sqm. 2. The gross amount charged cannot be more than INR 45 Lakhs.

It should be noted here that Chennai, Bengaluru, Delhi NCR (restricted to Noida, Delhi, Greater Noida, Gurgaon, Ghaziabad, Faridabad), Kolkata, Hyderabad and Mumbai are metropolitan cities.

GST Rates for Affordable Housing as applicable from 1^st April 2019

With effect from 1^st April 2019, the new effective GST rate is 1% (without input tax credit) on the construction of the affordable housing. The GST rate of 1% is applicable to all the projects commencing on or after 1^st April 2019.

Option available for the ongoing projects

The projects, wherein, the construction and actual booking both have been started before 1^st April 2019 and not been completed by 31^st March 2019 has been given an option either to continue with the old GST rate of 8% or convert into 1%.

The builder of such ongoing projects can avail the option only once. It should be noted here that ‘ongoing projects’ means the projects which have received a commencement certificate; however, a certificate for completion of the project has not been received.

Conditions to be satisfied for the new GST rate of 1%

The promoters/builder is required to fulfill the following conditions in order to avail the benefit of lower GST rate of 1%:

1. Input tax credit (ITC) cannot be availed.
2. 80% of the value of the inputs and input services should be purchased from the registered persons. 80% value cap doesn’t include capital goods; service by way of grant of development rights; long term lease of land; FSI; high-speed diesel; natural gas; electricity; motor spirit.
3. In the case of a shortfall in the value of 80%, the promoter/builder is required to pay tax @ 18% on reverse charge basis (RCM).
4. The promoters/builders are required to purchase cement only from the registered person. In case the cement is purchased from the unregistered person, the promoters/builder is required to pay tax @ 28% on reverse charge basis (RCM).
5. The promoters/builders are required to purchase capital goods only from the registered person. In case the capital goods are purchased from the unregistered person, the promoters/builder is required to pay tax as applicable on the capital goods on reverse charge basis (RCM).
6. In case there is a supply of development rights or supply of FSI against the construction of apartments, the tax shall be paid by the promoters/developers towards the supply of construction service to the landlord.
7. The GST tax shall be paid only by debiting the ‘electronic cash ledger’.