Handbook GST Real Estate

Introductory Edition -December 2019
Published by
The President
The Institute of Cost Accountants of India
CMA Bhawan
12, Sudder Street, Kolkata - 700016
Delhi Ofce
CMA Bhawan
3, Institutional Area, Lodhi Road, New Delhi – 110003
The Institute of Cost Accountants of India

(Statutory body under an Act of Parliament)
© All rights reserved
Disclaimer:
This Publication does not constitute professional advice. The information
in this publication has been obtained or derived from sources believed by
the Institute of Cost Accountants of India (ICAI) to be reliable. Any
opinions or estimates contained in this publication represent the
judgment of ICAI at this time. Readers of his publication are advised to
seek their own professional advice before taking any course of action or
decision, for which they are entirely responsible, based on the contents of
this publication. ICAI neither accepts nor assumes any responsibility or
liability to any reader for this publication in respect of the information
contained within it or for any decisions reader may take or decide not to
or fail to take.
President's Message
GST is India's biggest tax reform in the post-independence era. Prior to the
introduction of GST, a heterogeneous indirect tax structure existed in India
which included levy of taxes by the centre and states under different tax laws.
The earlier indirect tax framework had challenges of multiplicity and
cascading of taxes, apart from other issues and complexities, both technical
as well as from the perspective of ground-level practices.
The highlight of the GST regime for the Real estate sector is the availability of
Input Tax Credits (ITC) paid on inputs, capital goods and input services. Under
the erstwhile regime, developers would be liable to pay a multitude of taxes
such as VAT, Central Excise, Entry Tax, LBT, Octroi, Service Tax, etc., the credits
of which were not freely available against the output tax liability. However,
the GST regime provides for ITC eligibility on construction and other services
procured, thereby eliminating the inefciency ushered in by the cascading
effect of taxes.
Policy reforms such as the GST, registration of commercial and residential

projects with Real Estate Regulatory Authority ('RERA'), and easing of Foreign
Direct Investment norms have started impacting investment scenario
positively by bringing much-needed transparency, compliance and
corporate governance into the system. The real estate sector is likely to ourish
well in the coming years, with ofce and residential sectors to further
strengthen and new sectors such as logistics and warehousing sector to
witness increased traction.
'Impact of GST on Real Estate' is a publication of the Tax Research

Department which aims to highlight the intricacies of the subject. I
appreciate the efforts of Team – Tax Research and the Taxation Committee
and the Resource Contributors. Keep soaring high. Best Wishes.
CMA Balwinder Singh

President
Date: 21.12.2019
Chairman's Message
At the time of GST implementation on real estate in July 2017, the industry as a
whole was witnessing a slump attributed mainly to demonetization and RERA
(Real Estate Regulation and Development Act, 2016) implementation.
However, early in 2018, demand and supply for real estate witnessed an
increase primarily driven by strong growth in affordable and mid-income
housing. However, housing prices were either stagnant or witnessed a
marginal rise across the country while in larger cities such as Delhi NCR prices
were reported to have witnessed a 2% decline as of Q3 2018 (as per report by
Liases Foras). But such price declines were mainly a result of oversupply rather
than the impact GST, as in most cases, input tax credit (ITC) benets were not
passed on to the home buyer by developers. Even in cases where ITC benets
were passed on to homebuyers, the change in prices was negligible.
The resale market was also severely hit with prices reportedly plummeting by
15% to 20% in Delhi NCR as per the Liases Foras report. This, even though, GST is
not applicable to resale properties. Thus one might conclude that the impact
of GST cannot be accurately be gauged as of yet and only with more time
can a clearer picture emerge regarding the impact of GST on real estate.
On a brighter note, as per leading industry players and analysts, 2019

promises to be a better year for the Indian real estate industry as demand for
both commercial and residential real estate is expected to pick up. As per
estimates provided by Anarock Property Consultants, home sales are
expected to increase by 16% to 245,500 units in 2019 over 2018 levels. During
the same period, the demand for commercial ofce space is also set to rise
by 19% to 39 million sq. ft. while fresh supply during the same period is not
expected to exceed 32 million sq. ft. in India's top 7 cities. Detail
understanding of the implications of GST is required for having an
understanding of its impact on Real Estate and hence this publication.
Congratulations Team – Tax Research, the Resource Pool and the mentors for
their invaluable contributions in the publication of this handbook. Kudos..!!
CMA Niranjan Mishra

Chairman – Indirect Taxation Committee
Date: 21.12.2019
Chairman's Message
At the onset, I would like to congratulate Team – Tax Research for

bringing out this publication on 'Impact of GST on Real Estate'. It is a
publication to look out for. Best wishes to the Team and the resource
contributors.
At the 33rd GST Council Meeting held on 24th February 2019, new GST
rates have been introduced for residential real estate which will come
into effect from the 1st of April 2019. The new GST rates on residential real
estate transactions have been proposed as; GST to be charged at 5%
without Input Tax Credit (ITC) on residential properties that are not part of
the affordable housing segment and GST to be charged at 1% without
ITC on residential properties that are included in the affordable housing
segment.
GST on real estate in case of under construction properties is 12%. GST
does not apply to sale of completed properties (where completion
certicate has been issued) or to the resale of old properties. Builders
receive input tax credit on the materials purchased from
suppliers/contractors and under the current GST structure, were
expected to pass it on to home buyers. However this has not happened
so far. As a result there may be changes in the GST regime with respect to
real estate in the future.
Real Estate has historically been a preferred investment choice for many
Indians and the sector has been driven to a large extent through
investments made in the residential property segment. It is estimated that
housing sector investments in India since 2014 amounted to Rs. 59,000
crore and accounted for approximately 47% of the total investments in
the sector with projections indicating further increase in the coming
years. Understanding implications of GST in Real Estate is the need of the
hour.
Jai Hind.
CMA Rakesh Bhalla

Chairman – Direct Taxation Committee
Date: 21.12.2019
Preface
The issue of GST on the Real Estate is always on debatable issue. The
government issued a series of notications from Notication No. 3/2019-
CT(R) to 9/2019-CT(R) all dated 29/3/2019 with an attempt to reduce the
GST impact on the Real Estate Sector. Although the notications has
been issued but the confusion persisted and therefore government
came with two FAQs No. 354/32/2019. The rst FAQs were issued 1st
dated 7th May2019 whereas the 2nd was issued on 14th may 2019.
These notications are the outcome of the GST Council 33rd and 34th
meeting. The object of the notication is to fulll the commitment of the
government “Housing for all by 2022”. The highlights of the above said
notication are as under-
1. With effect from 1st April 2019 GST shall be levied at the rate of 5%
without ITC on the residential house properties outside the
affordable residential apartments and 1% without ITC on affordable
residential apartments.
2. The affordable house apartments has been dened as a residential
apartment in the project which commences on or after 01-04-2019,
or in an ongoing project in respect of which the promoter has opted
for new rate of 1% having carpet area upto 60 square meter in
metropolitan cities and 90 square meter in cities other than
metropolitan cities and the gross amount charged for which, by the
builder is not more than forty ve lakhs rupees.
3. Intermediate tax on the development rights such as TDR, JDA, lease
(premium), FSI shall be exempted only for such residential house
property on which GST has been payable.
The complicacies of 'Impact of GST' needs to be understood, hence this
publication. We, at Tax Research Department are thankful to CMA
Balwinder Singh, President for his insights. We are also grateful to CMA
Niranjan Mishra Sir, Chairman – Indirect Taxation Committee and CMA
Rakesh Bhalla Chairman – Direct Taxation Committee and all the
members of Taxation Committee, who has mentored us in this
opportunity to work on this handbook. We are also grateful Advocate
Tapas Majumder and Ms. Debjani Mukherjee without whose
contributions this publication would not be so enriching.
Thank You.
Tax Research Department
Date: 21.12.2019
Content
BASIC UNDERSTANDING OF
REAL ESTATE SECTOR 1 to 6
WORK FLOW OF GOODS AND

SERVICES TAX IN THE REAL ESTATE SECTOR 7 to 22
RULINGS ON REAL ESTATE BY

ADVANCE AUTHORITIES 23 to 34
KEY PRESS RELEASES, NOTIFICATIONS AND

FAQS OF GST FOR THE REAL ESTATE SECTOR 35 to 79
TAX RESEARCH DEPARTMENT, THE INSTITUTE OF COST ACCOUNTANTS OF INDIA
CHAPTER 01
BASIC UNDERSTANDING OF
REAL ESTATE SECTOR
Real Estate. We all have heard the term Real Estate, now we will go
in detail of this term and will understand the different perspectives of
Goods and Services Tax associated with this term.
In the past couple of months there has been a lot of changes in Goods
and Services Tax for the sector of Real Estate. Several Notifications
has been issued by the Government along with the FAQs. As a result
of the occurrence of multiple changes, several speculations are going
on in decoding the exact implication of such changes.
This Comprehensive note is an attempt to clarify the intricate points
of this subject matter.
Firstly let’s understand the Real Estate Sector

The real estate sector is one of the most globally recognized
sectors. Real estate sector comprises four sub sectors - housing,
retail, hospitality, and commercial. The growth of this sector is
well complemented by the growth of the corporate environment
and the demand for office space as well as urban and semi-urban
accommodations.
The Indian real estate sector has witnessed high growth in recent
times with the rise in demand for office as well as residential spaces.
Between 2009-18*, Indian real estate sector attracted institutional
investments worth US$ 30 billion. Private Equity and Venture Capital
investments in the sector reached US$ 4.47 billion in 2018 and US$
546 million in Jan-Feb 2019.
According to data released by Department of Industrial Policy and
Promotion (DIPP), the construction development sector in India has
received Foreign Direct Investment (FDI) equity inflows to the tune
of US$ 24.91 billion in the period April 2000-December 2018.
Real estate is a property made up of land and the buildings on it, as
well as the natural resources of the land, including uncultivated flora
and fauna, farmed crops and livestock, water and mineral deposits.
Real Estate can be categorised into:
• Residential real estate - includes undeveloped land, houses,
HANDBOOK ON IMPACT OF GST ON REAL ESTATE 1

condominiums, and townhouses. The structures may be single-

family or multi-family dwellings and may be owner occupied or
rental properties.
• Commercial real estate - includes non-residential structures
such as office buildings, warehouses, and retail buildings. These
buildings may be free standing or in shopping malls.
• Industrial real estate - includes factories, business parks, mines,
and farms. These properties are usually larger in size and locations
may include access to transportation hubs such as rail lines and
harbours.
Now, let’s know how the Real Estate Market work

In the current market scenario, the Real Estate market has mainly
two participants,
1- The Developers
2 - The Land owners
The Land Owners and The Developers comes in collaboration to
construct a building. There are multiple steps that needs to be
covered, before a building gets constructed. Let’s take that route and
understand the fundamentals in a practical way.
Mr. X has a land of 100 Acres in South Kolkata and he wants to make
some money out of it. So, he decided to use the land for construction
of building. Since, the construction of a building is a time taking and
expensive affair, Mr. X decides to share the project with a developer
(Company Y).
Mr. X and Company Y discussed on the terms and finally the project
was taken by Company Y. The term was Company Y will pay 35% of
Revenue out of the Total Revenue earned from selling of Flats.
Once the percentage of revenue sharing is finalized, a Joint
Development Agreement is made between the two parties which
gives development rights to Company Y, along with this a Power of
Attorney is also given to the developer. Power of Attorney is required
as a reason of authority to be given by the landowner for signing the
relevant documents.
Another lookout is the funding required for construction of Buildings.
The Real Estate business requires huge fund and the funding is
acquired from Financial Institutions, mostly Banks. For acquiring
such fund, the Budgeted Expenditure and the Budgeted Income are
calculated and are reported and submitted to the Financial Institution,
based on the submitted report funds are released.
Since, we have developed a basic understanding of the structure of
Real Estate Business, now we can go for some technical terms.
2 HANDBOOK ON IMPACT OF GST ON REAL ESTATE

- After the process of Joint Development Agreement and Power of

r Attorney is done, several approvals are to be taken from various
Departments of the Government.
s
e Approvals for obtaining License
S. Type of approval Approving Authority

, No.
s
1. Land use conversion (if the BLRO
d
land is not a Vastu land)
2. Sanction of Building Plan Development Authority/ Mu-
nicipality
3. Non Encumbrance Registration Department
y
4. Certificate of Clearance Forest Department
5. NOC from Pollution Control State Pollution Control Board
Board/ Environment Clear- & Ministry of Environment,
ance GoI.
6. Approval from State/Central Department of Urban Devel-
e Development Authority opment Authority or Metrpoli-
d tan development Authority
7. NOC for CRZ (if near coastal Coastal Zone Management
e area) Authority
n
8. Development License Development Authority/Mu-
d
nicipality
r
Approval of Building Plans and other Clearances before Start of Work
t at site
f
No.
t 1. Ancient Monument distance Archeological Survey of
h Clearance (if required) before India
f building plan approval
d
e 2. Road Access Clearance before NHAI/PWD
building plan approval
3. AAI Height NOC (before building Civil Aviation Deptt.
plan approval)
s
g 4. Building Layout Approval Development Authority /
e Municipality
, 5. Intimation of Disapproval (IOD) Development Authority
(wherever applicable)
f

6. Infrastructure Layout Approval Development Authority/

Municipality
7. Other Common facilities Ap- Development
proval Authority/Municipality
8. Commencement Certificate Development Authority/
Municipality
Approvals before construction – independent of Building Plan

approval.

No.
1. Tree cutting Forest Deptt.
2. Environment Clearance (for 125 Ministry of Environment
acres project with built up area
above 20,000 sq.metres)
3. NOC from Labour Cess Depart- Office of labour Commis-
ment sioner
4. Borewell Registration Certificate Central Groundwater
Authority
Approvals During Construction

No.
1. Electrical Load/Electric connection, Electricity Distribution
Company
2. Permission for Sewer connection Municipal Authority
3. Permission for Water Connection Municipal Authority
4. Consent to Establish work at site Pollution Control Board
Occupation Certificate
First building should be complete in all respects including internal /
external works, drive ways, street lights, aviation lights, installation
of STP, water tank, harvesting pit, installation of lifts and their
operation, common area & common toilet, external fire hydrants,
firefighting system etc before applying for Occupation Certificate with
following documents:

1. Approved Building Plans,

2. Approved Service Estimate/ Plans
3. N.O.C. of Airport authority,
4. N.O.C. From Pollution Board & M.O.E.,
5. The application for Swimming Pool License is submitted
to competent authority after occupation certificate is
obtained.
n
6. Fire, Lifts, Gen sets, S.T.P.
All the above mentioned approvals depends upon the nature of

construction and requirement of registration under the act of Real
Estate Regulatory Authority. RERA was established to enhance
accountability and transparency with respect to housing transactions
and real estate.
Lets, get to know some of the relevant terms definitions/ meanings:

What is Real Estate?
Real estate is the property, land, buildings, air rights above the land
and underground rights below the land. The term real estate means
real, or physical, property. “Real” comes from the Latin root res, or
things. Others say it’s from the Latin word rex, meaning “royal,” since
kings used to own all land in their kingdoms. The U.S. Constitution
initially restricted voting rights to only owners of real estate.
What is the meaning of Joint Development Agreement?

An agreement between a landowner and a real estate developer to
construct new projects is called a Joint Development Agreement. In
a joint development the capital, the builder carries out construction
and legal work whereas the landowner provides the land. There are
two common types of JDA. They are as follows:
• Area Sharing JDA
• Revenue Sharing JDA
/
The key feature of JDA is that the landowner contributes land and
r developer undertakes the responsibility of obtaining approvals,
, property development, launching and marketing the project with his
financial resource. Hence, Joint Development Agreements are very
common in the real estate industry in India. In this article, we look
at the applicability of GST on Joint Development Agreement in detail.

Who are the Real Estate Developers?

A person who involves in construction of building and selling them to
the customers.

CHAPTER 02
WORKFLW OF GOODS AND SERVICES
TAX IN THE REAL ESTATE SECTOR
From the introduction of GST in our economy till date, there has been
a lot of speculations going on around the execution of provisions of
Goods and Services Tax in the Real Estate Sector, the sector has also
witnessed multiple changes in GST provisions. Through this booklet
we will try to get into the theoretical as well as practical segments.
In the month of March, 2019 Real Estate Sector witnessed a
revolutionary change in the GST Rate Structure.
GST Rate Comparison before and after 1st April 2019
Type of Project GST Rate (Upto GST Rate (From 1st

31st March, 2019) April, 2019 onwards)
Affordable Housing 8% (With ITC) 1% (Without ITC)
Project
Non Affordable 12% (With ITC) 12% (With ITC)
Housing Project 5% (Without ITC)
Commercial Project 12% (With ITC) 12% (With ITC)
The Rates for the Housing Projects given above are the effective
rates of GST i.e. GST Rates after giving 1/3rd Abatement on
the Land Value.
The changes of the GST Rates came under the Notification No.
03/2019 (Central Tax Rate) Dated: 29th March, 2019.
GST Council Definition of Affordable Housing Segment
The GST Council has announced the applicable criteria for
eligibility of a residential property in the affordable housing
segment as part of the 33rd GST Council Meeting press
release. The following are the key affordable housing segment
qualifying criteria for a residential property in India:
• Total carpet area of the residential property cannot exceed
60 square meters in metropolitan areas.
• Total carpet area of residential property cannot exceed 90
square meters in non-metropolitan cities and towns.

• Total value of property cannot exceed Rs.45 lakh in either

metropolitan or non-metropolitan areas.
For purposes of this definition, metropolitan areas in India
include Delhi NCR (limited to Delhi, Noida, Gurgaon, Faridabad,
Ghaziabad and Greater Noida), Kolkata, Chennai, Hyderabad,
Bengaluru and Mumbai (entire Mumbai Metropolitan Region).
GST Rates for Construction Materials

There are two key aspects of GST applicability in real estate.
The first is the goods aspect i.e. applicable GST on various
construction material and the second is the services aspect
i.e. the service of construction itself. Both of these contribute
to the final cost of the property for the end user (owner) and
different rates are applicable at different stages. The following
is a snapshot of how GST rates on real estate construction
materials is applicable:
GST on Key Construction Material*

Building bricks 5%
Crude Granite/Marble Rubble 5%
Fly Ash blocks 5%
Roof tiles 5%
Natural Sand 5%
Marble/Granite blocks 12%
Refractory bricks/tiles 18%
Glass for construction purposes 18%
Prefabricated structural components for building 18%
Marble/Granite (other than blocks) 18%
Portland/Slag Cement 28%
*The list is indicative. Rates are correct as of 2nd July, 2019
subject to periodic change.
GST on Construction Services
GST on Key Construction Services*

Labour Supply Services 12%
Rent of DC Generator Services 18%
Goods Transport Agency Services 5%/ 12%

r GST is not applicable to the following construction-related

transactions/activities:
a • Sale of ready to move in flats

, • Resale of property
,
• Sale/purchase of land
In all the above cases, the sale-purchase activity does not include
the supply of goods or services as per the GST Act, Practically its
not covered under the definition of ‘Goods’ as per Sale of Goods Act,
. hence no GST is applicable to these transactions.
s As of now, we have developed a basic knowledge on the prevailing
t GST Rates in the Real Estate Sector.
e
Let’s put some lights on the workings as well.
d
• When Demand is raised
n After construction of a project is initiated, booking of the apartments
are also made open. Hence, the Real Estate Company start collecting
Booking Amounts and Advances from the customers. Demands
are raised after completion of certain segments and this process
continues, till the Construction Process gets completed and the
Complete Consideration of sold unit is received.
On raising of each demand, an Invoice is sent to the customer stating
the amount payable.
Once the demand is raised, customer pays the stated amount and
Real Estate Company deposits the GST Collected through GSTR 3B.
Sometimes Customer pays excess amount i.e. advance is received.
GST is deposited on such advance amount as well in the month of
receiving.
Below mentioned is an illustrative example:
Suppose an Unit was booked in the month of April, 2019 and booking
amount of Rs. 21,00,000.00 was demanded.
Assessable Value = 21,00,000.00
9 Taxable Value = 14,00,000.00 (2/3 of Assessable Value)
CGST @ 3.75% = 52,500.00
SGST @ 3.75% = 52,500.00
Total payable = 22,05,000.00
The Total amount received at the time of booking was 24,35,500.00.
This amount includes advance of Rs. 2,30,500.00
After completion of flooring of the unit another demand was raised.

Copy of Demand is as follows:
Plotting in GST Returns:

1. GSTR 3B – April, 2019:–
Taxable Value = 16,23,667.00 (2/3 of 24,35,500.00)
CGST @3.75% = 60,887.00
SGST @3.75% = 60,887.00
2. GSTR 1 :– Amount of Rs. 16,23,667.00 (Taxable Value) and Tax
Amount – 1,21,774.00 Shown in B2C Column.
In the Month of May, 2019, when another demand was raised.
3. Taxable Value = 12,89,819.00 (2/3 of 19,34,729.00)

CGST @3.75% = 48,368.00

SGST @3.75% = 48,368.00
4. GSTR 1:– B2C Column - Amount of Rs.13,74,607.00 (Taxable
Value) and Tax Amount – 1,23,288.00 Shown in B2C Column.
5. Advance Adjustment Col. - Amount of Rs. 1,53,413.00(Taxable
Value) and Tax Amount – 17,258.00 (The amount excess paid in
previous demand now, being adjusted with the current demand)
• When a booked flat gets cancelled
This is a very common phenomenon, where a flat sold earlier gets
cancelled. This is a scenario of mere a Sales Return. However, this
sales return gets complicated if the transactions hits in the transition
phase of GST.
This part has been resolved in the FAQs on Real Estate released by
CBIC:
How to com- Developer shall be able to issue a Credit Note to

pute adjust- the buyer as per provisions of section 34 in case
ment of tax of change in price or cancellation of booking pro-
in a Credit vided that the amount received in excess if any,
Note to be is- consequent to issuance of Credit Note, is refunded
sued u/s 34 to the Buyer by the Developer before September
by Real Estate following the end of the financial year. Developer
Developer in shall be able to take adjustment of tax paid in re-
case unit was spect of the amount of such Credit Note. For exam-
booked prior ple, a Developer who paid GST of Rs. 1,20,000 at
to 1st April, the rate of 12% (effectively) in respect of a gross
2019 on which amount of booking of Rs. 10,00,000 before 1st
GST was paid April, 2019 shall be entitled to take adjustment of
on part con- tax of Rs. 1,20,000 upon cancellation of the said
sideration re- booking on or after 1st April, 2019 against oth-
ceived at the er liability of GST including liability arising at the
time of book- rate of 5% / 1% provided that the entire amount
ing, but can- received from the buyer is refunded by the Devel-
celled after 1st oper.
April, 2019.
Further, in case apartments booked prior to
1.04.2019 on which GST has been paid till
31.03.2019 at the old rates of 8%/ 12% with ITC,
are cancelled and rebooked at the new rates of 1%
/ 5% without ITC or sold after issuance of comple-
tion certificate, the credit taken in respect of such
apartments for supply of service till 31.03.2019
on which tax was paid @ 8%/ 12% with ITC shall
be required to be reversed.

In case a flat is booked after 01.04.2019 and gets cancelled, the

amount collected by the customer is returned after deducting the
cancellation charges as per the Agreement. The portion of GST
Collected by the Customer also needs to be returned to the Customer
and a Credit note needs to be raised of such amount which is returned
to customer.
• Input Tax Credit claims.
For the amount of purchases that are made by paying Goods and
Services Tax, Input Tax Credit can be taken within a period of 1 year
from the date of purchase.
The following points needs to be taken into consideration, before
claiming Input Tax Credit in the Real Estate Industry:
1. In case the construction of the project is completed and Completion
Certificate has been received by the Competent Authority, neither
GST can be charged on the selling of flats of flats nor Input Tax
Credit can be claimed any further. Also, the remaining balance of
Input Tax in the Credit Ledger has to be reversed
2. 1st, April, 2019 and onwards, where it has been decided to
charge GST @ 5% /1 %, no Input Tax Credit can be charged on
the purchases or receiving of services.
GST Provisions under Real Estate

1. Indirect taxation and the Real Estate Sector have an unusual
bond right from the earlier days when the tax on the said sector
was imposed for the first time. The bond is unusual due to the
fact that it involves the supply of goods, services as well as
immovable property. Carving out the taxable event and carrying
out the valuation thereof has always been debatable. Miserly is
further increased when one considers the extent of the input tax
credit (“ITC”) which can or cannot be availed/utilized by the said
sector.
2. Come 1st July, 2017 with the implementation of GST, it was
thought that the misery of the sector would be reduced to a
greater extent given the fact that now goods as well as services
shall be taxed under a single legislation. Hence the expectation
was that the earlier disputes related to the identification of the
taxable event as well as valuation thereof would be done away
with. Grant of ITC to the sector was also expected to keep the
prices of the property unchanged even if the rate of tax was much
higher than the cumulative rate in the earlier regime.
3. The uncertainty towards the ITC which would be allowable coupled
with the outward tax on the total value less 1/3rdland deduction
(which was highly inadequate especially in metro cities) did not

lead to the situation which the Government expected. With regard

to the ongoing projects, a one-time option has been granted to
either continue to pay the tax under the old scheme or to shift to
the new scheme w.e.f. 01.04.2019 and pay the tax at the lower
rates (i.e. 1%/5%). If option to continue to pay the tax under the
old scheme for the ongoing projects was not exercised by 10th
May, 2019 it was deemed that the new scheme has been opted.
For the new projects it is mandatory to pay the tax as per the
new scheme. Number of conditions have been imposed for the
tax payer desired (for ongoing project) or mandated (for new
project) to pay the tax as per the new scheme.
CONDITIONS RELATED TO ITC

4. Notification No. 03/2019 – Central Tax (Rate) dt. 29.03.2019 has
substituted certain entries in the parent rate notification No. 11/2017
– Central Tax (Rate) dt. 28.06.2017 dealing with the applicable rates
on supply of various services. Against Sr. No. 3 of the said parent
notification, entry no. (i), (ia), (ib), (ic) & (id) has been inserted
which provides for the reduced effective rate of 1%/5% in case of
residential apartments in any Real Estate Project (“REP”) as well as
commercial apartments in case of Residential Real Estate Project
(“RREP”). Said lower rates shall be mandatory for any new project
on or after 01.04.2019. For ongoing projects, an option has been
granted to either continue to pay the tax under the old scheme or
to shift to the new scheme w.e.f. 01.04.2019 and pay the tax at the
lower rates (i.e. 1%/5%). Thus if the promoter exercises the option
to pay the tax as per the new scheme, then the conditions stipulated
against the referred entries providing for the lower rates have to be
abided. Two such conditions, to be analysed in the present article,
dealing with ITC reads as under:
“Provided also that credit of input tax charged on goods and services
used in supplying the service has not been taken except to the extent
as prescribed in Annexure I in the case of REP other than RREP and
in Annexure II in the case of RREP;
Provided also that the registered person shall pay, by debit in
the electronic credit ledger or electronic cash ledger, an amount
equivalent to the input tax credit attributable to construction in a
project, time of supply of which is on or after 1st April, 2019, which
shall be calculated in the manner as prescribed in the Annexure I in
the case of REP other than RREP and in Annexure II in the case of
RREP;”
5. The first proviso referred above thus provides that the ITC in
respect of goods and services used in supplying the services (taxed
at the effective rates of 1%/5%) has not been taken except to the

extent permissible. Hence the promoter shall be required to calculate

the ITC which shall be permissible. Said permissible amount shall be
calculated as per Annexure I (in case of REP other than RREP) and
Annexure II (in case of RREP).
6. Second proviso referred above further provides that the amount of
ITC attributable to construction in a project time of supply of which
is on or after 1st April, 2019 (referred as ineligible ITC) shall also be
calculated as per the referred Annexure’s and the said amount needs
to be debited in the electronic credit ledger (if credit is available to
the said extent) or to electronic cash ledger (i.e. the balance amount
to be paid by cash). It must also be noted that the calculations shall
be done separately for each tax type (i.e. separate calculations for
CGST, SGST & IGST). Further the working shall be done project-wise.
7. With the above background let us now understand the calculations
provided in both the Annexures. It must also be noted that the below
referred calculations shall also aid in deciding whether to continue
under the old scheme or shift to the new scheme for the ongoing
projects. We shall first deal with Annexure I and then shall go to
Annexure II.
ANNEXURE I
8. Said annexure applies to a Real Estate Project which is not a
Residential Real Estate Project. As per clause (xix) of the NN 03/2019
– CT (R) a REP wherein the carpet area of the commercial apartments
is not more than 15% of the total carpet area of all the apartments
shall be construed as a RREP. Annexure I applies to only such projects
which are not RREP. In other words, it applies to projects wherein
the carpet area of commercial apartments exceeds 15% of the total
carpet area of all the apartments. Further the said annexure applies
only in the context of the construction of residential portion in the
said non-RREP project. Hence a fully commercial project shall not
be covered by the said annexure. This is because such project shall
be continue to be taxed as per the normal rates (i.e. 12%) with ITC
(subject to reversal as per Rule 42 & 43).
9. Said Annexure is further sub-divided into two parts. Hence we
shall deal with each part separately.
ANNEXURE I – PART 1
10. Methodology prescribed in the Part 1 applies only when the %
completion as on 31st March 2019 is not zero or where there is
inventory in stock. In other words said part applies to such non-RREP
projects wherein some % of work has already been done as on 31st
March 2019 or there is inventory in stock (i.e. procurements have
happened on or before 31st March).

11. Essentially the objective of the working is to arrive at the ITC in

respect of the construction of residential portion which has time of
supply on or before 31st March, 2019. This is because only the said
amount of ITC attributable to residential apartments shall be eligible
as the corresponding supply has been taxed at the earlier higher
rates (8%/12%). Further since the project is a non-RREP, the under-
constructed commercial apartments supplied even on or after 01st
April, 2019 shall continue to be taxed at the higher effective rate of
12%. Hence even ITC in respect of commercial area shall be eligible.
Thus eligible ITC (Te) shall be as under:
Te = Tc (ITC attributable to the construction of the commercial portion)
+ Tr (ITC attributable to the construction of residential portion which
has time of supply on or before 31st March, 2019)
12. Hence the ineligible ITC denoted by Tx shall the be derived as
under:
Tx = T – Te
WHAT SHALL “T” INCLUDE
13. In the above equation T is the total ITC availed (utilized or
not) on inputs and input services used in construction of the non-
RREP from 1st July, 2017 to 31st March 2019 including transitional
credit taken on 1st July, 2017. Following observations can be made
while computing the amount of T:
a) ITC to be considered shall be the ITC availed irrespective of the
fact as to whether the same has been utilized or not.
b) Said ITC has to be calculated project-wise and not entity-wise.
c) Only ITC in respect of inputs and input services is to be considered.
Hence ITC in respect of capital goods are not to be considered.
d) Even transitional credit availed for the project in question needs
to be considered.
14. Above observations will surely lead to the difficulty of the
identification of the availed ITC (including transitional credit)
attributable to the particular project. This is because Sec. 35(1) of
the CGST Act, 2017 read with Rule 56 of the CGST Rules, 2017 do
not provide for maintaining records project-wise of the ITC availed.
Further in cases where the transactional credit has been claimed
of the balance available in the last return, such balance is of the
amount remaining after the utilization thereof and not of the credit
availed. Hence bifurcating the said balance project-wise would be
very difficult especially considering the fact that the FIFO rule (Rule
14(2)) for CENVAT utilization was abolished. Hence unless such rule
is applied, the attribution of such transitional credit to a particular
project shall be a challenge.

15. Now Te, which is eligible ITC, is the sum total of the (a) ITC
attributable to the construction of the commercial portion (Tc) and
(b) ITC attributable to the construction of residential portion which
has time of supply on or before 31st March, 2019 (Tr).
CALCULATION OF “Tc”
16. Tc as stated above is the ITC attributable to the construction
of the commercial portion. Said ITC is calculated by applying the
proportion of the carpet area of commercial apartment to total carpet
area of the commercial and residential apartment. Same can be
illustrated as under:
No. of apartments in the project 100 units

No. of residential apartments in the project 75 units
Carpet area of the residential apartment 70 sqm
Total carpet area of the residential apartments 5250 sqm
No. of commercial apartments in the project 25 units
Carpet area of the commercial apartment 30 sqm
Total carpet area of the commercial apartments 750 sqm
Total carpet area of the project (Resi + Com) 6000 sqm
ITC Availed (T) 1 crore
Tc = T x (carpet area of commercial apartments 0.125 crore
in the REP/ total carpet area of commercial and
residential apartments in the REP)
17. Hence as seen above, ITC attributable to the commercial

apartment shall be INR 0.125 crore. Said ITC shall be eligible because
in the case of a non-RREP, the applicable effective rate on commercial
apartments shall continue to be 12% and hence ITC attributable to
such units shall be admissible. It remains to be seen as to how Rule
42 can come into play on completion of the said project to the extent
of the un-booked commercial apartments.
CALCULATION OF “Tr”
18. Tr stands for the ITC attributable to the construction of the
residential portion which has time of supply on or before 31st March,
2019. Similar to Tc, even Tr shall be eligible since the same relates
to construction of residential portion which has time of supply on or
before 31st March, 2019 and hence tax has been paid at the earlier
higher rates (12%/8%). Tr shall be calculated as under for the
above referred example:

Value of each residential 0.60 crore –

apartment
Percentage completion as 20% As declared to RERA
on 31.03.2019 or determined by reg-
istered architect or a
chartered engineer
No of residential apart- 40 units –
ments booked before
transition
Total carpet area of the 2800 sqm 40 (apartments) * 70
residential apartments sqm
booked before transition
Total carpet area of the 2800 sqm 40 (apartments) * 0.6
residential apartments (value of each apart-
booked before transition ment) – It may be not-
ed that value of each
apartment may not
be same and hence
total of the value of
all booked apartment
shall be considered.
Percentage invoicing 20% Figure to be derived
of booked residential by dividing the value
apartments on or before of invoicing done on
31.03.2019 or before 31st March
from the total booked
value.
Total value of supply of 4.8 crore As the percentage
residential apartments invoicing is 20%, TOS
having t.o.s. prior to shall be 20% of the
transition total booked value i.e.
24*0.2.
ITC Availed (T) 1 crore It shall include transi-
tional credit.
Tr = TxF1xF2xF3xF4
F1 0.875 Carpet area of resi-
dential apartments/
total carpet area of
commercial + residen-
tial apartments.

F2 0.533 Total carpet area of

residential apartments
booked on or before
31st March, 2019/To-
tal carpet area of resi-
dential apartments.
F3 0.200 Such value of supply
of construction of res-
idential apartments
booked on or before
31st March, 2019
which has time of sup-
ply on or before 31st
March, 2019/Total val-
ue of supply of con-
struction apartments
booked on or before
31st March, 2019
F4 5 1/% completion of
construction as on
31st March, 2019.
Tr= T x F1 x F2 x F3 x F4 0.467 crore Amount of eligible
ITC.
19. Above working can be easily understood as under:
1st Step: Gross up the ITC for determining the eligible amount for
the entire project. In the above case, ITC availed is INR 1 crore and
the work completed is 20%. Hence if the entire project is completed,
pro-rata ITC would have been INR 5 crores (i.e. 1*5 (1/20%)). This
is F4.
2nd Step: From the grossed up ITC, the amount attributable to
the residential apartment needs to be worked out. This is because
the ITC attributable to the commercial apartment shall continue
to remain available. In the above case, 87.5% of the area in the
project is for residential apartment. This is F1. Hence the ITC of INR
4.375 crore out of the total grossed up ITC of INR 5 crores shall be
now considered for further steps as the said amount relates to the
residential apartments.
3rd Step: From the grossed up ITC attributable to the residential
apartments, ITC attributable only to the booked apartments shall be
available. This is because the un-booked apartments shall now suffer
tax at the lower rates of 1%/5% or no tax when booked on or after
01.04.2019. In the above case the area of the booked residential
apartments to the total area of residential apartments is 53.3%.
This is F2. Hence of the grossed up ITC of residential apartments,

only 53.3% shall be admissible. Hence only INR 2.33 crore (4.375 *
53.3%) shall be admissible.
4th Step: Even in respect of booked residential apartments, ITC shall
be available only in respect of that construction which has time of
supply on or before 31st Marc, 2019. This is because the time of
supply arising on or after 01st April, 2019 shall be subjected to lower
rates of 1%/5%. In our case the time of supply in respect of booked
apartments has arisen only to the extent of 20% of the value of
apartments booked as invoicing to the extent of only 20% has been
done. This is F3. Hence 80% of the value of booked apartment shall
suffer tax at the reduced rates on or after 01.04.2019. Hence only
INR 0.467 crore (2.33 * 20%) shall be admissible. It may be noted
that if percentage of invoicing done is more than the work completed
(let us say 30% of invoicing is done when work completed is 20%),
such 30% shall be considered in the present step (however please
see 25% rule discussed later in this regard).
TOTAL ADMISSIBLE ITC

20. Now the total admissible ITC shall be ITC attributable to the
commercial portion (Tc) which is INR 0.125 plus ITC attributable to
residential portion which has time of supply on or before 31st March,
2019 (Tr) which is INR 0.467 crore. Hence eligible ITC (Te) shall be
INR 0.592 crore (0.125 + 0.467). Hence the ITC attributable to the
construction of the residential portion which has time of supply on or
after 1st April, 2019 (Tx) shall be total ITC (T) which is INR 1 crore
less Te which is INR 0.592 crore. Hence Tx shall be INR 0.408 crore.
21. Second proviso mentioned earlier provides that the said amount
needs to be paid, by adding the same as part of the output tax
liability, either by debiting the electronic credit ledger, if balance
is available, or to be paid by cash by debiting the electronic cash
ledger. Said amount needs to be paid by the due date for filing the
return for the month of September, 2019. A registered person may
also seek monthly instalment for payment of such dues which may
be granted by the Commissioner. However such instalment period
cannot exceed 24 months and the said instalment shall be paid with
interest. Application has to be made in FORM GST DRC – 20 and the
order to pay in instalment shall be granted in FORM GST DRC – 21.
22. Annexure – I further provides that if the amount of Tx is negative
i.e. ITC eligible is more than the ITC availed till 31st March, 2019,
the registered person shall be eligible to take ITC to the extent of the
difference, on the goods or services received for the said project on
or after 1st April, 2019.
23. Further registered person can calculate Tc (i.e. ITC attributable
to commercial apartments) and utilize the same for paying the tax

on the commercial apartments till the compete calculation for Tx is

carried out and submitted.
24. In case where the percentage completion is zero and only goods
or services have been procured on or before 31st March, 2019 the ITC
attributable to the residential portion which has time of supply on or
after 1st April, 2019 shall also be done as per the above formula only.
The percentage completion (for calculating F4) in the said case shall
be the percentage completion as certified by the registered Architect
or Chartered Engineer which can be achieved with the inputs services
received and the inputs in stock as on 31st March, 2019.
ANNEXURE I – PART 2
25. Methodology prescribed in the Part 2 shall apply where %
completion is zero as on 31st March, 2019 but invoicing has been
done having time of supply before 31stMarch, 2019 and no input
services or inputs have been received as on 31st March, 2019.
26. Hence the methodology prescribed in the said Part 2 shall apply
wherein no procurements of inputs or input services have happened
and hence no construction has started but apartments have been
booked in respect of which time of supply has arisen before 31st In
other words as per the agreement, in respect of booked apartments,
the liability to pay the instalment has arisen before 31st March, 2019.
27. In the above referred methodology only following changes may
be noted. Rest shall remain the same.
28. Since no inputs or input services have been procured, the amount
of ITC (Tn) which is to be taken as the base shall be the ITC on such
inputs and input services received in FY 2019-20. F4 as stated above
shall not be taken into account since no construction has begun as
on 31st March, 2019. It is surprizing to note that the law expects
the promoter to calculate the eligible amount before the due date for
furnishing the return for the month of September, 2019. The same
cannot be calculated for Part 2 since the ITC (Tn) to be considered
for the calculation can only be known after the end of FY 2019-20.
ANNEXURE II
29. Methodology given under Annexure II shall apply in case of a
Residential Real Estate Project. In case of RREP it may be noted
that even the commercial apartments shall be taxed at 5%. Hence
even ITC in respect of commercial apartments which have time of
supply on or after 01st April, 2019 shall not be admissible. Hence
as opposed to Annexure I wherein eligible ITC Te comprised of Tc
(ITC attributable to commercial apartments irrespective of the time
of supply) and Tr (ITC attributable to residential portion which has

time of supply before 31st March, 2019), eligible ITC for RREP (“Te”)
as per Annexure II shall only comprise of the ITC attributable to
commercial as well as residential portion which have time of supply
on or before 31stMarch 2019. This is because any supply of service in
respect of commercial as well as residential portion on or after 01st
April, 2019 shall be taxable at the reduced effective rate of 1%/5%.
30. Similar to Annexure I, even Annexure II comprises of two parts.
Part I applies to cases where % completion as on 31st March, 2019 is
not zero or where there is inventory in stock. Part II applies in cases
where % completion as on 31st March is zero but invoicing has been
done having time of supply before 31st March, 2019 and no input
services or inputs have been received as on 31st March, 2019.
31. Working for both the parts shall be similar to the working done
under Annexure I. Only difference would be that working for Tc shall
not be required and Tr of Annexure I (here referred only as Te) shall
comprise of residential as well as commercial apartments.
25% RULE
32. The stated rule applies to both the annexure’s discussed above.
Where percentage invoicing is more than the percentage completion
and the difference between percentage invoicing (per cent points)
and the percentage completion (per cent points) of construction is
more than 25 per cent points; the value of percentage invoicing shall
be deemed to be percentage completion plus 25 per cent points.
Hence let us say percentage invoicing is 60% whereas percentage
completion is only 20%. Since the difference is of more than 25 per
cent points, the percentage invoicing shall be deemed to be only 45%
(i.e. percentage completion (20%) + 25%). It may be noted that the
difference is to be measured in per cent points (which is absolute)
and not a relative difference by applying 25% to the percentage of
completion.
33. Similarly where the value of invoices issued on or prior to 31st
March, 2019 exceeds the consideration actually received on or prior to
31st March, 2019 by more than 25 per cent of consideration actually
received; the value of such invoices for the purpose of determination
of percentage invoicing shall be deemed to be actual consideration
received plus 25 percent of the actual consideration received.
34. Also where, the value of procurement of inputs and input services
prior to 1st April, 2019 exceeds the value of actual consumption of
the inputs and input services used in the percentage of construction
completed as on 31st March, 2019 by more than 25 percent of value
of actual consumption of inputs and input services, the jurisdictional
commissioner or any other officer authorized in this regard may fix the
Te based on actual per unit consumption of inputs and input services
based on the documents duly certified by a chartered accountant or

cost accountant submitted by the promoter in this regard, applying

the accepted principles of accounting.
35. In a nutshell the logic behind the above provisions seems to be
that the variance to the extent of 25% points between completion
vis-à-vis invoicing, invoicing vis-à-vis actual receipts & value
of procurements vis-à-vis value of actual consumption shall be
considered as within the normal range and in this case the actual
figures shall be considered for determination of the eligible ITC.
However if the variance is more than the 25% points, then in case of
difference between completion vis-à-vis invoicing and invoicing vis-à-
vis actual receipts, only figures upto the 25% points variance shall be
considered. Excess is to be ignored. In case of difference between the
value of procurement vis-à-vis value of actual consumption exceeds
25% points, the jurisdictional commissioner to determine the Te
based on the documents certified by a Chartered Accountant or Cost
Accountant.
36. Perhaps the intention seems to be that the variation exceeding
25% points is unusual and hence can only be on account of some tax
planning to claim higher ITC and hence is sought to be ignored. Author
submits that applying the said rule without seeing the underlying
reasons for variance exceeding the said 25% points is unjust and
needs to be relooked by the Government.
WHAT HAPPENS TO ITC OF CAPITAL GOODS

37. It may be noted that ITC availed on capital goods do not form
part of the above calculations. Hence a clarification is required as
to whether the ITC attributable to capital goods to the extent of the
unexpired period (out of 60 months) shall require any reversal or
not. Plain reading of the notification do not suggest such reversal.
WHAT HAPPENS TO NEW PROJECTS

38. A new project can be either a REP which is a RREP or a non-RREP.
If time of supply has arisen on or before 31st March, 2019 but input
services or inputs have not been received, calculation of eligible ITC
shall be as per Part 2 of the Annexure I (in case of non-RREP) or
Annexure II (in case of RREP). Hence ITC only to the extent of supply
taxed at the higher rates shall be available. In all other new projects
(i.e. where time of supply has not arisen on or before 31st March,
2019) the above referred Annexure’s shall not apply.

CHAPTER 03
RULINGS ON REAL ESTATE BY
ADVANCE AUTHORITIES
WEST BENGAL AUTHORITY FOR ADVANCE RULING

GOODS AND SERVICES TAX
14 Beliaghata Road, Kolkata – 700015
(Constituted under section 96 of the West Bengal
Goods and Services Act, 2017) BENCH
Mr Sydney D’Silva, Joint Commissioner, CGST & CX Mr Parthasarathi
Dey, Senior Joint Commissioner, SGST
Preamble
A person within the ambit of Section 100 (1) of the Central Goods
and Services Act, 2017 or West Bengal Goods and Services Act,
2017 (hereinafter collectively called ‘the GST Act’), if aggrieved by
this Ruling, may appeal against it before the West Bengal Appellate
Authority for Advance Ruling, constituted under Section 99 of the
West Bengal Goods and Services Act, 2017, within a period of thirty
days from the date of communication of this Ruling, or within such
further time as mentioned in the proviso to Section 100 (2) of the
GSTAct.
Every such appeal shall be filed in accordance with Section 100
(3) of the GST Act and the Rules prescribed thereunder, and the
Regulations prescribed by the West Bengal Authority for Advance
Ruling Regulations, 2018.
Name of the applicant Bengal Peerless Housing Development

Company Limited
Address 6/1A, Moira Street, Mangaldeep Build-
ing Ground Floor, Kolkata- 700017
GSTIN 19AABCB3038P1ZE
Case Number 07 of 2019
ARN AD190219000271H
Date of application 08/02/2019

Order number and date 01/WBAAR/2019-20 dated 02/05/2019

Applicant’s representa- Amit Agarwal, Dy. General Manager
tive heard
1. Admissibility of the Application

1.1 The Applicant is a joint venture of The West Bengal Housing
Board and The Peerless General Finance and Investment Company
Limited for developing real estate projects in West Bengal. It is
developing a residential housing project named ‘Avidipta II’ and
supplying construction service to the recipients for possession of
dwelling units in the year 2023. The Applicant is enjoying abatement,
prescribed for construction service under Sl No. 3(i) read with
Paragraph 2 of Notification No 11/2017 - CT (Rate) dated 28/06/2017
(corresponding State Notification No. 1135-FT dated 28/06/2017), as
amended from time to time; hereinafter collectively called the Rate
Notification. In addition to the construction service, the Applicant
provides services like preferential location service, which includes
services of floor rise and directional advantage. It seeks a ruling on
whether the supply of these services constitutes a composite supply
with construction service as the principal supply, and if so, whether
abatement is applicable on the entire value of the compositesupply.
1.2 The question raised is admissible for an advance ruling under
section 97(2)(a) & (b) of the GSTAct.
1.3 The Applicant declares that the issues raised in the Application
are not pending nor decided in any proceedings under any provisions
of the GST Act. The officer concerned from the revenue has raised no
objection to the admissibility of theapplication.
1.4 The Application is, therefore,admitted.
2. Submissions of the Applicant
2.1 ‘Avidipta II’ is being developed on about 2.63 acres of land
as a residential complex. There will be dwelling units for different
income groups. The prices of residential units offered to the
lower income groups (LIG) and the middle-income groups (MIG)
categories are regulated by the State Government. In the case of
the high-income group (HIG) category, the price is determined by
the Applicant. According to the brochure containing the General
Terms of Conditions (hereinafter the GTC) and the prototype of the
agreement with a buyer for a HIG unit (hereinafter the Agreement),
the Applicant is offering at a single consolidated price construction
service based on Standard Built-up Area (SBUA) and the right to use
the allotted car parking space. It also includes services associated
with preferential location, which means charges, if any, for directional
advantage and floor rise. Charges for the right to use the common

areas and recreational facilities are also included in the above single
consolidated price. Other charges, deposits and taxes are separately
recovered. The Applicant’s question is limited to what is being offered
to the buyers of the HIG category offlats.
2.2 In its Written Submission the Applicant makes out a case for
treating the supply of services of directional advantage and benefit of
floor rise as integral to supply of construction service. The Applicant
provides construction service to a recipient only after the Agreement
y is signed and other terms and conditions laid down in the Agreement
s are fulfilled. It is, therefore, absolutely clear from the context that
d the construction service is being provided only with respect to the
f dwelling unit allotted and after the allotment money paid. Supply
, of construction service cannot, therefore, be separated from the
supply of the services of directional advantage and benefit of floor
7 rise associated with the unit allotted to the recipient. Supply of
s construction service is, therefore, naturally bundled with the supply
e of the services of directional advantage and benefit of floor rise,
t and all of them are being supplied in conjunction with one another
in the ordinary course of business. It is, therefore, a composite
n supply with construction supply, being the dominant element, as the
y principalsupply.
r
2.3 The Applicant then draws attention to section 8(a) of the
GST Act, which provides that a composite supply, for the purpose
r of taxation, shall be treated as supply of the principal one. The
abatement, as prescribed for construction service in Paragraph 2 of
the Rate Notification, should, therefore, be available on the value of
the entire composite supply.
o 3. Submission of the Revenue
3.1 The concerned officer from the Revenue submits that the buyer
of a flat pays for the construction of the flat, floor rise and directional
advantage. All such services are supplied as a whole in the ordinary
course of business. Out of these services the construction service is
d the main supply and the other ones are incidental or ancillary to the
t construction service. The Applicant is, therefore, providing composite
e supply to the buyer of the flat wherein the construction service is
the main supply. Hence, abatement for construction in terms of Sl
f No. 3 of the Rate Notification may be considered for the purpose of
y taxation.
l
4. Observation & Findings of the Authority
e
, 4.1 The Agreement refers to the sale of an immovable property.
n It is relevant so far as construction service (SAC 9954) is offered,
e assuring coming into being of the immovable property. The buyer
d also agrees to pay in advance for certain other services that he will
enjoy after obtaining possession of the property. They include inter
n alia the service of preferential location (SAC 9985), right to use the

car parking space and the common areas and facilities (SAC 9972).
The buyer agrees to pay a single consolidated amount for all these
supplies (refer to clause 2.1 of the Agreement). The question that
needs to be examined is whether they are naturally bundled and
are supplied in conjunction with one another in the ordinary course
of business and whether the construction supply is the dominant
element and all other services in the bundle are ancillary or incidental
to the supply of the construction service.
4.2 Actual enjoyment of the construction service and the other
services mentioned in the above bundle are separated by time. The
other services can be enjoyed only after the supply of construction
service is complete. In fact, the buyer of a completed dwelling unit
can pay for and enjoy the other services like preferential location and
right to use the parking space and the common areas and facilities
without having been provided with the construction service.
4.3 Although actual provisioning of the construction and other
services are made at different points of time, they can be supplied in
a bundle because supply, as defined under section 7(1) of the GST
Act, includes agreement to supply even if actual supply is to be made
at a future date, provided and to the extent the recipient pays in
advance. There is no straight jacket formula to examine whether they
are naturally bundled and supplied in conjunction with one another
in the ordinary course of business. The term ‘naturally bundled’ is
not defined in the GST Act. But the concept has been taken from
the previous service tax regime, and the Education Guide that CBEC
published in 2012 throws valuable light on this issue.
4.4 In contrast to other combinations, the services that are
naturally bundled can be treated as provisioning of a single service
that lends the bundle its essential character (Section 9.2.1 of the
Education Guide). The Education Guide illustrates with the example
of convention service that a star hotel provides to the delegates
when it charges a lump sum for a package of services, including
accommodation, breakfast, conference facility, business centre, gym
etc. All these services can be separately provided. However, they
can also be combined together while charging for convention service,
which describes the essence of the package. It is the predominant
element of the combination of services being supplied. Another
example is works contract service, which is the predominant element
in the combination of goods and services supplied in construction,
repair etc of an immovable property, where all other supplies in
course of such construction are ancillary to supply of the works
contract service.
4.5 Whether the services so bundled are provided in conjunction
with one another in the ordinary course of business would depend
upon the normal or frequent practices adopted in a business and
can be ascertained from several indicators. For example, if a large

number of service receivers reasonably expect such services to be

provided as a package, such a package could be treated as naturally
bundled in the ordinary course of business. Similarly, if a majority of
the service providers in a particular area of business provide these
services in a bundle such packing of services may be treated as the
ordinary business practice (Section 9.2.4 of the Education Guide).
4.6 Section 2(30) of the GST Act draws upon these concepts
to define composite supply as supply by a taxable person of a
combination of taxable goods or services or both, which are naturally
bundled and supplied in conjunction with one another in the ordinary
course of business, where one of the supplies can be identified as the
principal supply. Section 2(90) of the GST Act defines principal supply
as the predominant element of such a composite supply where all
other supplies in the bundle are ancillary to the principal supply.
4.7 There is no doubt that the Applicant is a taxable person and
the services offered in the bundle described in para 3.1 are taxable
services. It is also clear from the context that construction service
is the dominant element in the bundle described in para 3.1 above.
Moreover, the recipient, while agreeing to buy these services as a
bundle, cannot enjoy the other services unless he agrees to buy
the service of constructing the allotted dwelling unit. Furthermore,
developers of residential complexes usually offer these services in a
bundle. Although one has the option not to pay for the right to use
car parking space, he cannot buy it, or for that matter any other
service in the bundle, separately. The recipient has to buy these
services only as a package, where the construction service remains
the predominant element. The buyers of the service of constructing
dwelling units in such upscale residential complexes like Avidipta
II expect, apart from the preferential location of the dwelling unit,
right to use car parking space and enjoyment of common areas and
facilities like landscaped gardens, gym, conference hall, a club with
swimming pool etc. They usually buy them as a bundle while booking
a flat in such a complex. It is, therefore, reasonable to conclude
that the services described in para 4.1 above are naturally bundled
and offered in conjunction with one another in the ordinary course
of business, and the other services of the bundle are ancillary to
the supply of the construction service, which describes the essential
character of the bundle of services being supplied. It appears that the
concerned officer from the Revenue holds similar view in the matter.
4.8 The Applicant, therefore, is providing a composite supply of
the bundle of services described in para no. 3.1 above, construction
service being the principal supply. Entire value of the composite
supply is, therefore, to be treated, for the purpose of taxation, as the
supply of construction service, taxable under Sl No. 3(i) read with
Paragraph 2 of the Rate Notification.
In view of the foregoing, we rule as under

RULINGS
The Applicant is providing service of construction of a dwelling

unit in a residential complex, bundled with services relating to the
preferential location of the unit and right to use car parking space and
common areas and facilities. It is a composite supply, construction
service being the principal supply. Entire value of the composite
supply is, therefore, to be treated, for the purpose of taxation, as
supply of construction service, taxable under Sl No. 3(i) read with
Paragraph 2 of Notification No 11/2017 - CT (Rate) dated 28/06/2017
(corresponding State Notification No. 1135-FT dated 28/06/2017),
as amended from time to time.
This Ruling is valid subject to the provisions under Section 103 until
and unless declared void under Section 104(1) of the GST Act.
(SYDNEYD’SILVA) (PARTHASARATHIDEY)
Member Member
West Bengal Authority for Advance Ruling West Bengal Authority for
Advance Ruling
Shri Sanjeev Sharma (AAR Delhi)

In the case of supply of services by way of construction of a complex,
building, civil structure or a part thereof, including a complex
or building intended for sale to a buyer, wholly or partly, except
where the entire consideration has been received after issuance of
completion certificate, where required, by the competent authority
or after its first occupation, whichever is earlier, the GST would
be payable on two-third of the total amount consisting of amount
charged for transfer of land or undivided share of land, as the case
may be, and whole of the consideration charged for the supply of
goods and service.
Hence, the value of land, or the undivided share of land, as the case
may be, would be deemed to be one-third of the total amount, which
is excluded from the value for the purposes of payment of GST. Even if
agreement between the applicant and the buyer is entered after part
of the construction is already completed, whole of the consideration
would be added for payment of GST. The applicable rate of GST on
the said two-third of total amount is 9% (CGST) and 9% SGST under
S. No. 3(i) of Notification No. 11/2017-Central Tax (Rate) dated
28.06.2017 and parallel SGST notification.

FULL TEXT OF ADVANCE RULING
Statement of Facts as per the Applicant:

The applicant plans to engage itself in the development and sale of
residential houses, generally floors/ flats in India.
Acquisition of Land
2. The proposed modus operandi shall be that the applicant shall
either purchase land or it shall enter into collaboration agreements
with various land owners whereby the applicant shall acquire the
right to develop the property and further sell the units developed
thereon.
a. In case of purchased land: the applicant shall be entitled to sell all
the units developed thereon,
b. In cases of development and sale rights: the applicant shall be
entitled to sell the flats/ unit falling to the applicant’s share, in terms
of the collaboration agreement.
Development and construction of Project

3. Post purchase of land/ acquisition of land rights:
a. The applicant shall apply for the requisite approvals.
b. The applicant plans to get the construction work done by contractors
as well as on its own.
4. Following agreements would be entered into by the Applicant:
a. One for sale of undivided and impartible share in land; and
b. Another agreement for sale of superstructure.
Details of Question on which Advance Ruling is requested:

5. In case where there are two transactions each represented by a
separate Agreements i.e.
i. One for sale of undivided and impartible share in land @ say Rs.
100; and
ii. Another agreement for sale of superstructure @ say Rs. 15
6. Following are the questions on which the applicant is seeking
advance ruling
a) Whether GST will be applicable on the sale of undivided and
impartible share of land represented by Agreement to sell the land?

b) Whether GST shall be applicable on sale of superstructure (which

is under construction)?
c) If yes:-
i. What will be the value on which tax is payable?
ii. What would be the applicable rate for charging GST?
Views of The Applicant:

7. Sale of land is out of the scope of the definition of Supply under
GST, as the same has been prescribed under Entry 5 of Schedule
III of the CGST Act, 2017. Consequently, transfer of undivided and
impartible share in land would not be leviable to GST.
8. For the purpose of analysing the above transaction, it is of
importance to have a perusal of the relevant portion of the provisions
providing for the scope of ‘supply’, which reads as under:
“7. (1) For the purposes of this Act, the expression “supply” includes-
….
….
(2) Notwithstanding anything contained in sub-section (1), –
(a) activities or transactions specified in Schedule Ill: or
(b) shall be treated neither as a supply of goods nor a supply of
services.”
9. A perusal of the above extracted provision shows that all
transactions provided under Schedule III of the CGST Act are out
of the purview of GST and no GST is leviable on the said activities/
transactions.
10. The relevant Entry under the said Schedule, for the purpose of
instant application, reads as under
“SCHEDULE III
ACTIVITIES OR TRANSACTIONS WHICH’SHALL BE TREATED NEITHER
AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES.
1. …..
2. …..
3. …..
4. Sale of land and, subject to clause (b) of paragraph 5 of Schedule
II, sale of building.
6. …..

11. From a conjoint reading of Section 7 and Entry 5 of Schedule III

of CGST Act, any activity/ transaction which is in the nature of ‘sale of
land’ is not covered within the purview of GST. Consequently, no GST
is payable on the transactions resulting in the sale of land.
12. Construction of superstructure would attract tax on Rs. 15.
Further, even in respect of superstructure, GST should be imposed
only on the value of construction on or after the agreement with the
buyer i.e. after deducting the value of construction already completed
till the date of agreement
13. Relevant Notification No. 11/2017- Central Tax (Rate) dated
28.06.2017:
Paragraph 2: In case of supply of service specified in column (3) of

the entry at item (i) against serial nb. 3 of the Table above, involving
transfer of property in land or undivided share of land, as the case
may be, the value of supply of service and goods portion in such
supply shall be equivalent to the total amount charged for such
supply less the value of land or undivided share of land, as the case
may be, and the value of land or undivided share of land, as the case
may be, in such supply shall be deemed to be one third of the total
amount charged for such supply.
Explanation.— For the purposes of paragraph 2, “total amount”
means the sum total of,-

(a) consideration charged for aforesaid service; and

(b) amount charged for transfer of land or undivided share of land,
as the case may be.
Discussion:
14. The issue for decision in this case is regarding value and rate of
tax for payment of GST on the service of construction of a complex,
building, civil structure or a part thereof, including a complex
completion certificate, where required, by the competent authority or
after its first occupation, whichever is earlier.
15. It is observed that as per Section 7(2)(a) of the CGST Act, 2017,
activities or transactions specified in Schedule Ill of the said Act shall
be treated neither as a supply of goods nor a supply of services.
Further, Paragraph 5 of the said Schedule III specifically covers sale
of land. Hence, sale of land is not covered under the scope of supply
under GST hence on the sale of land, no GST is payable. Similarly,
sale of undivided portion of land on outright sale of immovable
property and hence outside the scope of GST.
However, the Section 7(1)(d) of the CGST Act, 2017 read with
Paragraph 5(b) of Schedule II of the said Act specifically provides
that supply of goods or supply of services Include “construction of
a complex, building, civil structure or a part thereof, including a
complex or building intended for sale to a wholly or partly, except
completion certificate, where required, by the competent authority or
after its first occupation, whichever is earlier”. Hence, if construction
activity is done on behalf of the buyer i.e. as a supply of goods or
services to the buyer, GST is payable.
17. It is also observed that during the construction of a complex,
building etc., the land and its superstructure becomes inseparable
and hence, separate sale of land and its superstructure does not
appear to be permissible. During the hearings, the applicant was
asked to submit a sample copy of ‘Registered Sale Agreement’ in
Delhi where sale of land and sale of its superstructure have been
separately registered. However, they could not produce any such
registered agreements.
18. The applicant has submitted that laws in India recognises “land”
and “super-structure” as separate and independent immovable
properties. The applicant has referred to provision of General Clauses
Act, Indian Contract Act, 1872, Specific Relief Act, Transfer of Property
Act, The Indian Evidence Act, Registration Act, Stamp Act, Income
Tax Act etc. to claim that land and building are two different assets
or immovable property and that land and superstructure can be
independently sold and purchased. However, under GST, the valuation

of supply of goods and services has to be done in accordance with

Section 15 of the CGST Act, 2017.
19. Further, even if separate values would be available for land and
goods & services, the paragraph 2 of the Notification No. 11/2017
— Central Tax (Rate) dated 28.06.2017 would be applicable for
ascertaining value of goods and services for levy of GST, as discussed
below.
20. The supply in this case is a composite supply consisting of three
components, namely (i) land on which the complex or building is
constructed, (ii) goods which are used in construction activities and
(iii) services undertaken by the applicant directly or through other
contractors.
21. While admitting that GST cannot be levied on the value of land
or value of undivided share of land, the question which needs to be
answered is how the value of the said land needs to be ascertained.
22. In this case, the measure of tax should be the value of goods and
services supplied by excluding the value of land. However, since land
cannot be separately ERT sold, IFIED COPY a deemed value of land
need to be ascertained on which GST would not be payable.
23. The applicant wants the value of land to be ascertained by him
on the basis of Rule 30 of CGST Rules, 2017, as the said Rules, do
not provide any other specific provision to ascertain the value of land
for exclusion.
24. It is also observed that a similar issue under Service Tax was
decided by Hon’ble High Court of Delhi under W.P. (Civil) No.
2235/2011 in the case of Shri Suresh Kumar Bansal V/s Union of
India. The Hon’ble High Court held in its judgement dated 03.06.2016
that in the case of sale of complex, which is a composite contract, the
levy of service tax would be restricted to the service element of the
contract, after excluding the value of goods as well as the value of
land from such contracts. It was also held that statutory framework
must provide for machinery provisions to ascertain the value of such
service element which are charged to Service Tax. In Service Tax, the
Section 67 of the Finance Act, 1994 and by virtue of Section 67(1)(iii)
of the said Act, Rule 2A of the Service Tax (Determination of value)
Rules, 2006 provided mechanism to ascertain the value of services
and goods in a composite works contract. However, the said Rule did
not cater to determination of value of services in case of a composite
contract which also involves sale of land. Further, circulars or other
instructions could not provide the machinery provisions for levy of
tax, which must be provided in the statute or the Rules framed under
the statute. In Service Tax, the provision to exclude the value of land
was sought to be provided by exemption Notification No. 26/2012 —
ST dated 20.06.2012 which had been issued under Section 93 (1)
of Finance Act, 1994. The scope of the said Section 93 of the said
Act, was limited to grant of exemption provided the service tax was

leviable under Section 66/66B of the Finance Act, 1994. It was held
that the abatement to the extent of 75% or 70% by a notification or a
circular cannot substitute the lack of statutory machinery provisions
to ascertain the value of services involved in a composite contract.
25. However, under GST Notification No. 11/2017 – Central Tax
(Rate) dated 28.06.2017 – S. No. 3 r/w Paragraph 2, the deemed
value of land or undivided share of land has been fixed at one-third
of the total amount charged. Hence, in GST, the machinery provisions
to ascertain the value of land is available in the notification which has
been issued under Sub-Section (5) of Section 15 of the CGST Act,
2017 regarding value of taxable supply. The said sub-section (5) of
Section 15 of CGST Act, 2017 reads as under:
“Notwithstanding anything contained in sub-section (1) or sub-section
(4), the value of such supplies as may be notified by the Government
on the recommendations of the Council shall be determined in such
manner as may be prescribed.”
26. Thh. The said Notification has been issued under Section 15(5)
of the CGST Act, 2017 by the Government on the recommendation
of the GST Council and hence, no separate Rule was required to be
issued. Hence, Paragraph 2 of the Notification No. 11/2017 – Central
Tax (Rate) dated 28.06.2017 is fully authority Section 15(5) of the
CGST Act, 2017 to provide machinery provisions to ascertain the
value of land for exclusion and to measures the value of supply of
goods and services for levy of GST. The said machinery provisions
cannot be equated with exemption Notification issued under Section
93(1) of the Finance Act, 1994 which were held to be insufficient by
the Hon’ble High Court, as mentioned above.
Ruling
27. In the case of supply of services by way of construction of a
complex, building, civil structure or a part thereof, including a complex
completion certificate, where required, by the competent authority
or after its first occupation, whichever is earlier, the GST would
be payable on two-third of the total amount consisting of amount
charged for transfer of land or undivided share of land, as the case
may be, and whole of the consideration charged for the supply of
goods and service. Hence, the value of land, or the undivided share
of land, as the case may be, would be deemed to be one-third of the
total amount, which is excluded from the value for the purposes of
payment of GST. Even if agreement between the applicant and the
buyer is entered after part of the construction is already completed,
whole of the consideration would be added for payment of GST. The
applicable rate of GST on the said two-third of total amount is 9%
(CGST) and 9% SGST under S. No. 3(i) of Notification No. 11/2017 –
Central Tax (Rate) dated 28.06.2017 and parallel SGST notification.

CHAPTER 04
KEY PRESS RELEASES, NOTIFICATIONS AND
FAQS OF GST FOR THE REAL ESTATE SECTOR
1. Press Releases:
34th GST Council Meeting Press Release

Decisions taken by the GST Council in the 34thmeeting held
on 19thMarch, 2019regarding GST rate on real estate sector
GST Council in the 34th meeting held on 19th March, 2019 at New
Delhi discussed the operational details for implementation of the
recommendations made by the council in its 33rd meeting for lower
effective GST rate of 1% in case of affordable houses and 5% on
construction of houses other than affordable house. The council
decided the modalities of the transition as follows.
Option in respect of ongoing projects:
2. The promoters shall be given a one -time option to continue to pay
tax at the old rates (effective rate of 8% or 12% with ITC) on ongoing
projects (buildings where construction and actual booking have
both started before 01.04.2019) which have not been completed by
31.03.2019.
3. 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.
New tax rates:
4. The new tax rates which shall be applicable to new projects or
ongoing projects which have exercised the above option to pay tax in
the new regime are as follows.
(i) New rate of 1% 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 upto RS. 45 lakhs), and

(b) affordable houses being constructed in ongoing projects under

the existing central and state housing schemes presently eligible for
concessional rate of 8% GST (after 1/3rd land abatement).
(ii) New rate of 5% without input tax creditshall be applicable on
construction of,-
(a) all houses other than affordable houses in ongoing projects whether
booked prior to or after 01.04.2019. In case of houses booked prior
to 01.04.2019, new rate shall be available on instalments payable on
or after 01.04.2019.
(b) all houses other than affordable houses in new projects.
(c) 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% of total carpet area of all
apartments.
Conditions for the new tax rates:
5. The new tax rates of 1% (on construction of affordable) and
5% (on other than affordable houses) shall be available subject to
following conditions,-
(a) Input tax credit shall not be available,
(b) 80% of inputs and input services (other than capital goods, TDR/
JDA, FSI, long term lease (premiums)) shall be purchased from
registered persons. On shortfall of purchases from 80%, tax shall be
paid by the builder @ 18% on RCM basis. However, Tax on cement
purchased from unregistered person shall be paid @ 28% under
RCM, and on capital goods under RCM at applicable rates.
Transition for ongoing projects opting for the new tax rate:
6.1 Ongoing projects (buildings where construction and booking both
had started before 01.04.2019) and have not been completed by
31.03.2019 opting for new tax rates shall transition the ITC as per
the prescribed method.
6.2 The transition formula approved by the GST Council, for residential
projects (refer to para 4(ii)) extrapolates ITC taken for percentage
completion of construction as on 01.04.2019 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 thus 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.

r 6.3 For a mixed project transition shall also allow ITC on pro-rata
r basis in proportion to carpet area of the commercial portion in the
ongoing projects (on which tax will be payable @ 12% with ITC even
after 1.4.2019) to the total carpet area of the project.
n
Treatment of TDR/ FSI and Long term lease for projects
commencing after 01.04.2019
r
r 7. The following treatment shall apply to TDR/ FSI and Long term
n lease for projects commencing after 01.04.2019.
7.1 Supply of TDR, FSI, long term lease (premium) of land by a
landowner to a developer shall be exempted subject to the condition
that the constructed flats are sold before issuance of completion
l
certificate and tax is paid on them. Exemption of TDR, FSI, long term
l
lease (premium) shall be withdrawn in case of flats sold after issue of
completion certificate, but such withdrawal shall be limited to 1% of
value in case of affordable houses and 5% of value in case of other
than affordable houses. This will achieve a fair degree of taxation
parity between under construction and ready to move property.
d
o 7.2 The liability to pay tax on TDR, FSI, long term lease (premium)
shall be shifted from land owner to builder underthe reverse charge
mechanism (RCM).
7.3 The date on which builder shall be liable to pay tax on TDR, FSI,
/
long term lease (premium) of land under RCM in respect of flats
m
sold after completion certificate is being shifted to date of issue of
e
completion certificate.
t
r 7.4 The liability of builder to pay tax on construction of houses given
to land owner in a JDA is also being shifted to the date of completion.
Decisions from para 7.1 to 7.4 are expected to address the problem
of cash flow in the sector.
h
Amendment to ITC rules:
y
r 8. ITC rules shall be amended to bring greater clarity on monthly and
final determination of ITC and reversal thereof in real estate projects.
The change would clearly provide procedure for availing input tax
l
credit in relation to commercial units as such units would continue to
e
be eligible for input tax credit in a mixed project.
r
d 9. The decisions of the GST Council have been presented in this note
in simple language for easy understanding. The same would be given
t effect to through Gazette notifications/ circulars which alone shall
e have force of law.

33rd GST Council Meeting Press Release
Press note on recommendations of the 33rd GST Council

meeting held on 24thFebruary, 2019
Real estate sector is one of the largest contributors to the national GDP
and provides employment opportunity to large numbers of people.
“Housing for All by 2022” envisions that every citizen would have a
house and the urban areas would be free of slums. There are reports of
slowdown in the sector and low off-take of under-construction houses
which needs to be addressed. To boost the residential segment of the
real estate sector, following recommendations were made by the GST
Council in its 33rd meeting held today:
2. GST rate:
i. GST shall be levied at effective GST rate of 5% without ITC on
residential properties outside affordable segment;
ii. GST shall be levied at effective GST of 1% without ITC on affordable
housing properties.
3. Effective date:
The new rate shall become applicable from 1st of April, 2019.
4. Definition of affordable housing shall be:-
A residential house/flat of carpet area of upto 90 sqm in non-
metropolitan cities/towns and 60 sqm in metropolitan cities having
value upto Rs. 45 lacs (both for metropolitan and non-metropolitan
cities).
Metropolitan Cities are Bengaluru, Chennai, Delhi NCR (limited to
Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad),
Hyderabad, Kolkata and Mumbai (whole of MMR).
5. GST exemption on TDR/ JDA, long term lease (premium),
FSI:
Intermediate tax on development right, such as TDR, JDA, lease
(premium), FSI shall be exempted only for such residential property
on which GST is payable.
6. Details of the scheme shall be worked out by an officers committee
and shall be approved by the GST Council in a meeting to be called
specifically for this purpose.
7. Advantages of the recommendations made:

The new tax rate in principle was approved by the Council taking into
consideration the following advantages:-
i. The buyer of house gets a fair price and affordable housing gets
very attractive with GST @ 1%.
ii. Interest of the buyer/consumer gets protected; ITC benefits not
being passed to them shall become a non-issue.
iii. Cash flow problem for the sector is addressed by exemption of
GST on development rights, long term lease (premium), FSI etc.
iv. Unutilized ITC, which used to become cost at the end of the project
gets removed and should lead to better pricing.
v. Tax structure and tax compliance becomes simpler for builders.
8. GST Council decided that the issue of tax rate on lottery needs
further discussion in the GoM constituted in this regard.
The decisions of the GST Council have been presented in this note in
simple language for easy understanding. The same would be given
effect to through Gazette notifications/ circulars which alone shall
have force of law.
25th GST Council Meeting Press Release
Recommendations made by the GST Council in its 25th Meeting

held on 18thJanuary, 2018 at Delhi for the housing sector
In the meeting held on 18th January, 2018, the GST Council has
made several important recommendations for the housing sector.
The recommendations are expected to promote affordable housing
for the masses in the country. The recommendations are discussed
below.
One of the important recommendations is to extend the concessional
rate of GST of 12% (effective rate of 8% after deducting one third of
the amount charged for the house, flat etc. towards the cost of land
or undivided share of land, as the case may be) in housing sector
to construction of houses constructed/ acquired under the Credit
Linked Subsidy Scheme for Economically Weaker Sections (EWS)
/ Lower Income Group (LIG) / Middle Income Group-1 (MlG-1) /
Middle Income Group-2 (MlG-2) under the Housing for All (Urban)
Mission/Pradhan Mantri AwasYojana (Urban). Credit Linked Subsidy
Scheme is one of the components of Housing for All (Urban) Mission/

Pradhan Mantri Awas Yojana (Urban). Under this component, subsidy

would be provided on home loans taken by eligible urban poor (EWS/
LIG/ MIG-I/ MIGII) for acquisition, construction of house. Credit
linked subsidy would also be available for housing loans availed for
new construction and for addition of rooms, kitchen, toilet etc, to
existing dwellings as incremental housing. The carpet area of houses
constructed under this component of the mission would be upto 30
square meters for EWSA, 60 square meters FOR LIG, 120 sqm for
MIG I and 150 sqm for MIG II. The benefit of Credit Linked Subsidy
Scheme may be taken by the Economical Weaker sections or Low/
Middle Income Groups for purchase of houses under any project.
The maximum annual income for eligibility of beneficiaries under
the scheme can be upto 18 lakhs. It covers a very large section of
population which aspires to own a home.
2. So far, houses acquired under CLSS attracted effective GST
rate of 18% (effective GST rate of 12% after deducting value of
land). The concessional rate of 12% was applicable only on houses
constructed under the other three components of the Housing for
All (Urban) Mission/Pradhan Mantri AwasYojana (Urban), namely
(i) ln-situ redevelopment of existing slums using land as a resource
component; (ii) Affordable Housing in partnership and (iii) Beneficiary
led individual house construction / enhancement. The exemption
has now been recommended for houses acquired under the CLSS
component also. Therefore, the buyers would be entitled to interest
subsidy under the scheme as well to a lower concessional rate of GST
of 8% (effective rate after deducting value of land).
3. The Council has also recommended that the benefit of concessional
rate of GST of 12% (effective GST rate of 8% after deducting value
of land) applicable to houses supplied to existing slum dwellers
under the in-situ redevelopment of existing slums using land as a
resource component of PMAY may be extended to houses purchased
by persons other than existing slum dwellers also. This would make
the in-situ redevelopment of existing slums using land as a resource
component of PMAY more attractive to builders as well as buyers.
4. The third recommendation of the Council is to include houses
constructed for “Economically Weaker Section (EWS)” under the
Affordable Housing in partnership (PMAY) under the concessional
rate of GST of 8% (effective rate after deducting value of land). This
will support construction of houses upto 30 sqm carpet area.
5. The fourth recommendation of the Council is to extend the
concessional rate of 12% to services by way of construction of low cost
houses upto a carpet area of 60 sqm in a housing project which has

been given infrastructure status under notification No. 13/06/2009

dated 30th March, 2009. The said notification of Department of
Economic Affairs provides infrastructure status to Affordable Housing.
Affordable Housing has been defined in the said notification as a
housing project using at least 50% of the FAR/FSI for dwelling units
with carpet area of not more than 60 sqm. The recommendation of
the Council would extend the concessional rate of 8% GST (after
deducting value of land) to construction of flats/ houses of less than
60 sqm in projects other than the projects covered by any scheme of
the Central or State Government also.
6. In addition to the above, in order to provide a fillip to the housing
and construction sector, GST Council has decided to give exemption
to leasing of land by government to governmental authority or
government entity. [Government entity is defined to mean an
authority or board or any other body including a society, trust,
corporation, (i) set up by an Act of Parliament or State Legislature; or
(ii) established by any Government, with 90% or more participation
by way of equity or control, to carry out any function entrusted by
the Central Government, State Government, UT or a local authority].
Also, any sale/lease/sub-lease of land as a part of the composite sale
of flats has also been exempted from GST. Therefore, in effect, the
government does not levy GST on supply of land whether by way
of sale or lease or sublease to the buyer of flats and in fact, gives
a deduction on account of the value of land included in the value of
flats and only the value of flat is subjected to GST.
7. It may be recalled that all inputs used in and capital goods deployed
for construction of flats, houses, etc attract GST of 18% or 28%. As
against this, most of the housing projects in the affordable segment
in the country would now attract GST of 8% (after deducting value of
land). As a result, the builder or developer will not be required to pay
GST on the construction service of flats etc. in cash but would have
enough ITC (input tax credits) in his books to pay the output GST, in
which case, he should not recover any GST payable on the flats from
the buyers. He can recover GST from the buyers of flats only if he
recalibrates the cost of the flat after factoring in the full ITC available
in the GST regime and reduces the ex-GST price of flats.
8. The builders/developers are expected to follow the principles laid
down under section 171 of the GST Act scrupulously.
9. The above changes shall come into force with effect from 25
January 2018.

Dated 8th December 2018

Effective tax rate on complex, building, flat etc.
It is brought to the notice of buyers of constructed property that there

is no GST on sale of complex/ building and ready to move-in flats
where sale takes place after issue of completion certificate by the
competent authority. GST is applicable on sale of under construction
property or ready to move-in flats where completion certificate has
not been issued at the time of sale.
2. Effective rate of tax and credit available to the builders for payment
of tax are summarized in the table for pre-GST and GST regime.
Pe- Output Input Tax Credit details Effective

riod Tax Rate Rate of Tax
Pre- Service Central No input tax Effective
GST Tax: Excise on credit (ITC) of pre-GST
4.5% most of VAT and Central tax inci-
VAT: 1% the Excise duty paid dence: 15-
to 5% con- on inputs was 18%
(com- struction available to the
position materials: builder for pay-
scheme) 12.5% ment of output
VAT: 12.5 tax, hence it got
to 14.5% embedded in the
Entry Tax: value of proper-
Yes ties. Considering
that goods con-
stitute approx-
imately 45% of
the value, em-
bedded ITC was
approximately
10- 12%.

GST Afforda- Major con- ITC availa- Effective

ble hous- struction ble and GST inci-
ing seg- materials, weighted average dence, for
ment: capital of ITC incidence affordable
8%, Oth- goods and is approximately segment
er seg- input ser- 8 to10%. and for
ment: vices used other
12% for con- segment
after struction has not
1/3rd- of flats, increased
abate- houses, as com-
ment of etc. at- pared to
value of tract GST pre- GST
land of 18% or regime.
more.
3. Housing projects in the affordable segment such as Jawaharlal

Nehru National Urban Renewal Mission, Rajiv Awas Yojana, Pradhan
Mantri Awas Yojana or any other housing scheme of State Government
etc., attract GST of 8%. For such projects, after offsetting input tax
credit, the builder or developer in most cases will not be required to
pay GST in cash as the builder would have enough ITC in his books
of account to pay the output GST.
4. For projects other than affordable segment, it is expected that
the cost of the complex/ buildings/ flats would not have gone up
due to implementation of GST. Builders are also required to pass on
the benefits of lower tax burden to the buyers of property by way
of reduced prices/ installments, where effective tax rate has been
down.
Dated 15th June 2017

F. No.296/07/2017-CX.9
Govt. of India
Ministry of Finance
Department of Revenue
(Central Board of Excise and Customs)
New Delhi, the 15th June, 2017

OFFICE MEMORANDUM
Please find enclosed a press release issued by Central Board of Excise
and Customs w.r.t. “Reduced Liability of Tax on complex, building,
flat etc. under GST”, for taking necessary action at your end.
Encls: As above
PRESS RELEASE
The CBEC and States have received several complaints that in view
of the works contract service tax rate under GST at 12% in respect of
under construction flats, complex etc, the people who have booked
flats and made part payment are being asked to make entire payment
before 1st July 2017 or to face higher tax incidence for payment
made after 1st July 2017. This is against the GST law. The issue is
clarified as below:-
1. Construction of flats, complex, buildings will have a lower incidence
of GST as compared to a plethora of central and state indirect taxes
suffered by them under the existing regime.
2. Central Excise duty is payable on most construction material
@12.5%. It is higher in case of cement. In addition, VAT is also
payable on construction material @12.5% to 14.5% in most of the
States. In addition, construction material also presently suffer Entry
Tax levied by the States. Input Tax Credit of the above taxes is not
currently allowed for payment of Service Tax. Credit of these taxes
is also not available for payment of VAT on construction of flats etc.
under composition scheme. Thus, there is cascading of input taxes
on constructed flats, etc.
3. As a result, incidence of Central Excise duty, VAT, Entry Tax, etc. on
construction material is also currently borne by the builders, which
they pass on to the customers as part of the price charged from
them. This is not visible to the customer as it forms a part of the cost
of the flat.
4. The current headline rate of service tax on construction of flats,
residences, offices etc. is 4.5%. Over and above this, VAT @1%
under composition scheme is also charged. The buyer only looks at
the headline rate of 5.5%. In other cities/states, where VAT is levied
under the composition scheme @2% or above, the headline rate
visible to the customer is above 6.5%. What the customer does not
see is the embedded taxes on account of cascading and sticking of

input taxes in the cost of the flat, etc.

5. This will change under GST. Under GST, full input credit would be
available for offsetting the headline rate of 12%. As a result, the
input taxes embedded in the flat will not (& should not) form a part of
the cost of the flat. The input credits should take care of the headline
rate of 12% and it is for this reason that refund of overflow of input
tax credits to the builder has been disallowed.
6. The builders are expected to pass on the benefits of lower tax
burden under the GST regime to the buyers of property by way of
reduced prices/ installments. It is, therefore, advised to all builders
/ construction companies that in the flats under construction, they
should not ask customers to pay higher tax rate on instalments to be
received after imposition of GST.
7. Despite this clarity on law position, if any builder resorts to such
practice, the same can be deemed to be profiteering under section
171 of GST law.
Notifications
Notification No. 11/2017-Central Tax (Rate) – Rate for supply of

constructed units and WCS
Notification No. 11/2017-Central Tax (Rate)
New Delhi, the 28th June, 2017
G.S.R……(E).- In exercise of the powers conferred by sub-section
(1) of section 9, subsection (1) of section 11,sub-section (5) of
section 15 and sub-section (1) of section 16 of the Central Goods
and Services Tax Act, 2017 (12 of 2017), the Central Government,
on the recommendations of the Council, and on being satisfied that
it is necessary in the public interest so to do, hereby notifies that
the central tax, on the intra-State supply of services of description
as specified in column (3) of the Table below, falling under Chapter,
Section or Heading of scheme of classification of services as
specified in column (2), shall be levied at the rate as specified in
the corresponding entry in column (4), subject to the conditions as
specified in the corresponding entry in column (5) of the said Table:-
Table

Sl Chapter, Description of Service Rate Con-

No. Section or (per di-
Heading cent.) tion
(1) (2) (3) (4) (5)
1 Chapter All Services
99
2 Section 5 Construction Services
3 Head- (i) Construction of a com- 9 –
ing 9954 plex, building, civil structure
(Con- or a part thereof, including
struction a complex or building in-
services) tended for sale to a buy-
er, wholly or partly, except
where the entire considera-
tion has been received after
issuance of completion cer-
tificate, where required, by
the competent authority or
after its first occupation,
whichever is earlier. (Pro-
visions of paragraph 2 of
this notification shall apply
for valuation of this ser-
vice)
(ii) composite supply of 9 –
works contract as defined
in clause 119 of section 2
of Central Goods and Ser-
vices Tax Act, 2017.
…
[2. In case of supply of service specified in column (3), in item (i);
sub-item (b), sub-item (c), sub-item (d), sub-item (da) and sub-item
(db) of item (iv); sub-item (b), sub-item (c), sub-item (d) and sub-
item (da) of item (v); and sub-item (c) of item (vi), against serial
number 3 of the Table above, involving transfer of land or undivided
share of land, as the case may be, the value of such supply shall be
equivalent to the total amount charged for such supply less the value
of transfer of land or undivided share of land, as the case may be,
and the value of such transfer of land or undivided share of land, as

the case may be, in such supply shall be deemed to be one third of
the total amount charged for such supply.
Explanation. –For the purposes of this paragraph, “total amount”
means the sum total of,-
(a) consideration charged for aforesaid service; and
(b) amount charged for transfer of land or undivided share of land, as
the case may be including by way of lease or sublease.][24]
Notification No. 4/2018-Central Tax (Rate) – GST on TDR

Government of India
Ministry of Finance
(Department of Revenue)
Notification No. 4/2018-Central Tax (Rate)

New Delhi, the 25th January, 2018
G.S.R……(E).- In exercise of the powers conferred by section 148

of the Central Goods and Services Tax Act, 2017 (12 of 2017), the
Central Government, on the recommendations of the Council, hereby
notifies the following classes of registered persons, namely :-
(a) registered persons who supply development rights to a developer,
builder, construction company or any other registered person against
consideration, wholly or partly, in the form of construction service of
complex, building or civil structure; and
(b) registered persons who supply construction service of complex,
building or civil structure to supplier of development rights against
consideration, wholly or partly, in the form of transfer of development
rights, as the registered persons in whose case the liability to pay
central tax on supply of the said services, on the consideration
m received in the form of construction service referred to in clause (a)
- above and in the form of development rights referred to in clause
l
d
e
e
,
s

(b) above, shall arise at the time when the said developer, builder,
construction company or any other registered person, as the case
may be, transfers possession or the right in the constructed complex,
building or civil structure, to the person supplying the development
rights by entering into a conveyance deed or similar instrument (for
example allotment letter).
[F. No.354/13/2018 -TRU]
(Ruchi Bisht)
Under Secretary to the Government of India
Further, list of Notifications relevant to Real Estate Sector:
Sl. Notification No. Gist of the Notifi- Effective

No. cation from
1 Notification No. 3/2019 Changes in GST 01.04.2019
-CTR dt 29.03.2019 rates
2 Notification No. 4/2019 Exemption to 01.04.2019
-CTR dt 29.03.2019 TDR, FSI and
land premium
3 Notification No. 5/2019 RCM for TDR, FSI 01.04.2019
-CTR dt 29.03.2019 and land premi-
um
4 Notification No 6/2019- Time of Supply 01.04.2019
CTR dt 29.03.2019 for JDA
5 Notification No. 7/2019 RCM for 80% 01.04.2019
-CTR dt 29.03.2019 criteria
6 Notification No. 8/2019 Rate for RCM 01.04.2019
-CTR dt 29.03.2019
7 RDO 4/2019-CT Credit attributa- 01.04.2019
dt.29.03.2019 ble to be deter-
mined based on
carpet area
FAQs –
FAQs released on Real Estate Sector released by CBIC as on

7th May 2019

S. Question Answer
No.
1. What are the rates With effect from 01-04-2019, effective
of GST applicable on rate of GST applicable on construction
construction of resi- of residential apartments by promoters
dential apartments? in a real estate project are as under:
Description Effective rate of
GST (after de-
duction of value
of land)
Construction of af- 1% without ITC
fordable residential on total consid-
apartments eration.
Construction of 5% without ITC
residential apart- on total consid-
ments other than eration.
affordable residen-
tial apartments
The above rates are effective from
01-04-2019 and are applicable to
construction of residential apart-
ments in a project which commences
on or after 01-04-2019 as well as in
on-going projects. However, in case
of on-going project, the promoter
has an option to pay GST at the old
rates, i.e. at the effective rate of 8%
on affordable residential apartments
and effective rate of 12% on other
than affordable residential apart-
ments and, consequently, to avail
permissible credit of inputs taxes;
in such cases the promoter is also
expected to pass the benefit of the
credit availed by him to the buyers.

2. What is an affordable Affordable residential apartment is

residential apart- a residential apartment in a project
ment? which commences on or after 01-04-
2019, or in an ongoing project in re-
spect of which the promoter has opt-
ed for new rate of 1% (effective from
01-04-2019) having carpet area up
to 60 square meter in metropolitan
cities and 90 square meter in cities
or towns other than metropolitan cit-
ies and the gross amount charged
for which, by the builder is not more
than forty five lakhs rupees. [Cities
or towns in the notification shall in-
clude all areas other than metropoli-
tan city as defined, such as villages.]
In an ongoing project in respect of
which the promoter has opted for
new rates, the term also includes
apartments being constructed un-
der the specified housing schemes of
Central or State Governments.
[Metropolitan cities are Bengaluru,
Chennai, Delhi NCR (limited to Del-
hi, Noida, Greater Noida, Ghaziabad,
Gurgaon, Faridabad), Hyderabad,
Kolkata and Mumbai (whole of MMR)
with their geographical limits pre-
scribed by Government.]
3. What is an on-going A project which meets the following
project? conditions shall be considered as an
ongoing project.

(a) Commencement certificate

for the project, where required,
has been issued by the competent
authority on or before 31stMarch,
2019, and it is certified by a regis-
tered architect, chartered engineer
or a licensed surveyor that construc-
tion of the project has started (i.e.
earthwork for site preparation for the
project has been completed and ex-
cavation for foundation has started)
on or before 31st March,2019.
(b) Where commencement cer-
tificate in respect of the project,
is not required to be issued by the
competent authority, it is to be cer-
tified by any of the authorities speci-
fied in (a) above that construction of
the project has started on or before
the 31st March,2019.
(c) Completion certificate has
not been issued or first occupation of
the project has not taken place on or
before the 31st March, 2019.
(d) Apartments of the project
have been, partly or wholly, booked
on or before 31stMarch, 2019.
4. Does a promoter or a Yes, but such an option is available
builder has option to in the case of an ongoing project. In
pay tax at old rates case of such a project, The promot-
of 8% & 12% with er or builder has option to pay GST
ITC? at old effective rate of 8% and 12%
with ITC.
To continue with the old rates, the
promoter/builder has to exercise one
time option in the prescribed form
and submit the same manually to
the jurisdictional Commissioner by
the 10th of May, 2019.
However, in case where a promoter
or builder does not exercise option
in the prescribed form, it shall be
deemed that he has opted for new
rates in respect of ongoing projects
and accordingly new rate of GST i.e.
5%/1% shall be applicable and all
the provisions of new scheme
including transitional provisions shall
be applied.

There is no such option available in

case of projects which commence on
or after 01.04.2019. Construction
of residential apartments in projects
commencing on or after 01.04.2019
shall compulsorily attract new rate of
GST @ 1% or 5% without ITC.
5. What is the rate of With effect from 01-04-2019, effec-
GST applicable on tive rate of GST, after deduction of
construction of com- value of land or undivided share of
mercial apartments land, on construction of commercial
[shops, godowns, apartments [shops, godowns, offices
offices etc.] in a real etc.] by promoter in real estate pro-
estate project? ject are as under:
Description Effective
rate of
GST (after
deduction
of value of
land)
Construction of com- 5% without
mercial apartments in ITC on total
a Residential Real Es- considera-
tate Project (RREP), tion.
as explained in ques-
tion no. 6 below,
whichcommences on
or after 01-04-2019
or in an ongoing
project in respect of
which the promot-
er has opted for new
rates effective from
01-04-2019
Construction of com- 12% with
mercial apartments in ITC on total
a Real Estate Project considera-
(REP) other than Res- tion.
idential Real Estate
Project (RREP) or in
an ongoing project in
respect of which the
promoter has opted
for old rates

6. What is a Residential A “Residential Real Estate Project”

Real Estate Project? means a „Real Estate Project” in
which the carpet area of the com-
mercial apartments is not more than
15 per cent. of the total carpet area
of all the apartments in the project.
7. What is the criteria Construction of a project shall be
to be used by an considered to have been started on
architect, a char- or before 31stMarch, 2019, if the
tered engineer or a earthwork for site preparation for the
licensed surveyor project has been completed, and ex-
for certifying that cavation for foundation has started
construction of the on or before the 31stMarch, 2019.
project has started
by 31st March, 2019
8. Does a promoter/ A promoter shall purchase at least
builder have to pur- eighty percent. of the value of input
chase all goods and and input services, from registered
services from regis- suppliers. For calculating this thresh-
tered suppliers only? old, the value of services by way of
grant of development rights, long
term lease of land, floor space in-
dex, or the value of electricity,
high Speed diesel, motor spirit and
natural gas used in construction of
residential apartments in a project
shall be excluded.
9. If value of purchases Promoter has to pay GST @ 18% on
as prescribed above reverse charge basis on all such in-
from registered ward supplies (to the extent short
supplier is less than of 80% of inward supplies from reg-
80%, what would be istered supplier) except cement on
the applicable GST which tax has to be paid (by the pro-
rate on such pur- moter on reverse charge basis) at
chases? the applicable rate, which at presen-
tis28% (CGST 14% + SGST 14%)

10. In case of new rate Yes. All the specified conditions

of 5% / 1%, whether against clause (i) to (id) of Sl. No 3
the conditions of pay- of Notification No. 11/2017- CTR are
ment of tax through mandatory.
Cash Ledger, pay-
ment of tax under
RCM subject to 80%
limit, non- availing of
Input Tax Credit, re-
versal of credit, main-
tenance of project
wise account, report-
ing of ITC not availed
in corresponding
GSTR-3B etc. are re-
quired to be complied
mandatorily by the
Developer?
11. What is the rate of Supply of TDR or FSI or long term
GST applicable on lease of land used for the construc-
transfer of develop- tion of residential apartments in a
ment rights, FSI and project that are booked before issue
long term lease of of completion certificate or first occu-
land? pation is exempt.
Supply of TDR or FSI or long term
lease of land, on such value which
is proportionate to construction of
residential apartments that remain
un-booked on the date of issue of
completion certificate or first oc-
cupation, would attract GST at the
rate of 18%, would attract GST at
the rate of 18%, but the amount of
tax shall be limited to1% or 5%of
value of apartment depending upon
whether the residential apartments
for which such TDR or FSI is used, in
the affordable residential apartment
category or in other than affordable
residential apartment.
TDR or FSI or long term lease of land
used for construction of commercial
apartments shall attract GST of 18%.
The above shall be applicable to sup-
ply of TDR or FSI or long term lease
of land used in the new projects
where new rate of 1% or 5% is ap-
plicable.

12. Who is liable to pay The promoter is liable to pay GST

GST on TDR and floor on TDR or floor space index supplied
space index? on or after 01-04-2019 on reverse
charge basis.
13. At what point of The liability to pay GST on develop-
time, the promoter ment rights shall arise on the date
should discharge its of completion or first occupation of
tax liability on TDR. the project, whichever is earlier.
Therefore, promoter shall be liable
to pay tax on reverse charge basis,
on supply of TDR on or after 01-04-
2019, which is attributable to the
residential apartments that remain
un-booked on the date of issuance of
completion certificate, or first occu-
pation of the project.
14. At what point of On FSI received on or after 1.4.2019,
time, the promoter the promoter should discharge his
should discharge its tax liability on FSI as under:
tax liability on FSI (i) In case of supply of FSI
(including additional wherein consideration is in form of
FSI). construction of commercial or res-
idential apartments, liability to pay
tax shall arise on date of issuance of
Completion Certificate.
(ii) In case of supply of FSI
wherein monetary consideration
is paid by promoter, liability to pay
tax shall arise on date of issuance of
Completion Certificate only if such
FSI is relatable to construction of
residential apartments. However, li-
ability to pay tax shall arise immedi-
ately if such FSI is relatable to con-
struction of commercial apartments.
15. At what point of On long term lease received on or
time, the promoter after 1.4.2019, the promoter should
should discharge its discharge his tax liability on long
tax liability on supply term lease as under:
of long term lease. In case of supply of long term lease
of land for construction of commer-
cial apartments, tax shall be paid by
the promoter immediately. However,
for construction of residential apart-
ment, liability to pay tax on the up-
front amount payable for long term
lease shall arise on the date of issu-
ance of Completion Certificate.

16. Land development The liability to pay tax on Long term

corporation of Orissa lease of land (30 years or more) re-
has provided land ceived against consideration in the
on long term lease form of upfront amount and peri-
for 99 years, for odic license fee is on the promoter.
construction of a real The promoter has to discharge tax
estate project. As per liability on the same on RCM basis.
the lease agreement, However, the upfront amount paya-
promoter has to pay ble for the long term lease (known
an upfront amount of as premium, salami, cost, price, de-
Rs. 10 Crore and an- velopment charges etc.) is exempt to
nual/ monthly licence the extent it is used for construction
fee of 5 lakhs. Does of residential apartments that are
the promoter has to booked before issuance of comple-
pay GST on the sea- tion certificate or first occupation.
mounts? Annual/ monthly rent or licence fee
payable for long term lease is taxable
under GST.
17 Someone booked a GST on the remaining portion of the
flat from XYZ Devel- value of flat payable to the promot-
opers in June, 2018. er on or after 01-04-2019 as per the
As of 31-03-2019, contract between the promoter and
he had paid 40 % of buyer shall be payable at effective
the value of the flat. rate of 1% or 5%, subject to the
What shall be the condition that the builder has not
GST rate applicable exercised the option to pay tax on
on the remaining construction of apartments at the
portion of value of old rates of 12% or 18%. If the XYZ
the flat? developer exercises option to contin-
ue to pay tax at old effective rate of
8% or 12% by 10th May, 2019, then
GST has to be paid @ 8% or 12%
on remaining portion of the value of
the flat; in such cases, the promot-
er would be entitled to permissible
credit of input taxes and, as such,
the price that he charges from the
buyer should appropriately reflect
this credit.
18 I am a beneficiary of You are eligible for new GST rate of
PMAY- CLSS and car- 1%, subject to the condition that the
pet area of my house developer-promoter with whom you
being constructed in have booked the house has not exer-
an ongoing project cised option to pay tax on construc-
is 150 sq m. Am I tion of apartments at the old rate of
eligible for new rate %.
of 1% on same?
19 I am planning to pur- The tax rate applicable on construc-

chase an apartment tion of the apartments in a pro-
in a newly launched ject that commences on or after
project. The project 01.04.2019 would be 5%.
has been launched
after 31.03.2019 by
XYZ Developers at
Noida. Price of the
apartment having
carpet area of 80
sqm is 48 lakhs.
What is the rate of
GST applicable on
construction of this
apartment?
20 I have already paid The buyer cannot exercise option on
tax of 12% (effec- pay tax at the new or old rates. It
tive) on installments is the builder, who has to exercise
paid before 01. the option to pay tax on construc-
04.2019. I wish to tion of apartments at the old rate of
get the benefit of 12% latest by 10th May, 2019. If the
new rate of 1% or builder doesn’t exercises his option
5%. Whether it is the to continue to pay tax at the old rate
builder or the buyer by the said date, then the effective
who has the option GST rate applicable on all your in-
to pay tax at the new stallments payable to the builder on
or old rates? or after 01.04.2019 as per the con-
tract shall be either 1% or 5%, de-
pending on whether the apartment is
an affordable or other than afforda-
ble residential apartment.

21 In respect of supply Where the GST rate at which tax has

made in an ongoing been charged in the invoices issued
Project covered by by the promoter prior to 10th May,
clauses (ie) and (if) 2019 are not in accordance with the
of Entry 3 of Notifi- option required to be exercised by
cation No. 3/2019, him on or before 10th May, 2019 to
CT (R), an option is pay GST on construction of apart-
required to be exer- ments in an ongoing project at either
cised by the Promot- the new or old rates, the promoter
er in Annexure IV by may issue debit or credit notes in
10th May 2019. At accordance with Section 34 of CGST
the same time, it is Act, 2017.
permissible for him
to issue invoices be-
tween 1st April 2019
to 9th May 2019
which shall, howev-
er, be in conformity
with the option to be
exercised. Whether it
is permissible for the
Promoter to revise
the invoice as provid-
ed in Section 34 of
CGST Act, 2017,
including by way of
issuance of Credit/
Debit Notes so as to
bring the transaction
in conformity with
the option exercised
by the Promoter ulti-
mately by 10th May
2019?

22 How to compute Developer shall be able to issue a

adjustment of tax Credit Note to the buyer as per provi-
in a Credit Note to sions of section 34 in case of change
be issued u/s 34 by in price or cancellation of booking
Real Estate Develop- provided that the amount received
er in case unit was in excess if any, consequent to issu-
booked prior to 1st ance of Credit Note, is refunded to
April, 2019 on which the Buyer by the Developer before
GST was paid on September following the end of the
financial year. Developer shall be
part consideration
able to take adjustment of tax paid in
received at the time
respect of the amount of such Cred-
of booking, but can-
it Note. For example, a Developer
celled after 1st April, who paid GST of Rs. 1,20,000 at the
2019. rate of 12% (effectively) in respect
of a gross amount of booking of
Rs.10,00,000 before 1st April, 2019
shall be entitled to take adjustment
of tax of Rs. 1,20,000 upon cancel-
lation of the said booking on or af-
ter1st April, 2019 against other lia-
bility of GST including liability arising
at the rate of 5% / 1% provided that
the entire amount received from the
buyer is refunded by the Developer.
Further, in case apartments booked
prior to 1.04.2019 on which GST has
been paid till 31.03.2019 at the old
rates of 8%/ 12% with ITC, are can-
celled and rebooked at the new rates
of 1% / 5% without ITC or sold after
issuance of completion certificate,
the credit taken in respect of such
apartments for supply of service till
31.03.2019 on which tax was paid
@ 8%/12% with ITC shall be re-
quired to be reversed.
23. Whether the option No, there is no option to pay tax at
to pay tax at the the effective rate of 12% or 8% with
applicable effective ITC on construction of residential
rate of 12% or 8% apartments in projects which com-
(with ITC) is availa- mences on or after 01-04-2019.
ble to the Promoter
in respect of the New
Project, which has
been commenced
on or after 1st April
2019?

24. From the plain read- Yes. The option to pay tax on con-
ing of the provisions struction of apartments in the ongo-
and the definitions of ing projects at the effective old rates
the various terms as of 8% and 12% with ITC has to be
defined in the Noti- exercised for each ongoing project
fication No. 3/2019- separately. As per RERA, 2016, pro-
CT(R), it appears ject wise registration is allowed. So,
that the one- time the promoter may exercise different
option is required to options for different ongoing projects
be exercised for the being undertaken by him.
entire REP or RREP.
Does this mean that
a Promoter can opt
for old rates or new
rates, as the case
may be, for different
projects being under-
taken by him under
the same entity?
25. In respect of the No. The rate of 8% and 12% with
construction and ITC is not available for construction
supply of premis- of apartments in a project that com-
es under specific mences on or after 01-04-2019. It
schemes like PMAY, makes no difference whether or not
Housing for All the apartments are being construct-
(Urban), RAY etc. ed under PMAY or any other housing
as mentioned in sub schemes of the Central or State Gov-
items (b), (c), (d), ernment.
(da), (db) of item
(iv) and sub items
(c), (d), (da) of
item(v) of Entry 3 of
Notification 11/2017
– CT (R), wheth-
er the pre-existing
effective rate of 8%,
with ITC benefit con-
tinues to be avail-
able in case of any
New Project that has
commenced under
any such schemeaf-
ter1/4/2019?

26. In respect of any Yes. The promoter has the option to

ongoing project pay tax either at the old rate of 8%
undertaken under (with ITC) or at 1% (without ITC)
the specific schemes on construction of residential apart-
like PMAY, Housing ments in ongoing projects being con-
for All(Urban), RAY structed under PMAY and other spec-
etc. as mentioned ified housing schemes of the Central
in items(iv) and (v) or State Governments in items (iv)
of Entry 3 of Noti- and (v) of Entry 3 of Notification
fication 11/2017- 11/2017- Central Tax (Rate) dated
CT (R), prior to 28-06-2017. The option to pay tax
31/3/2019, whether on construction of apartments in the
an option is available ongoing projects at the old rates of
to the Promoter to 8% with ITC has to be exercised by
pay the tax at the the promoter for on going project.
new rates of 1% or
5% (without ITC) or
at the existing rates
of 8% (with ITC)?
27. In case where the Yes. Tax liability on service by way
Development rights of transfer of development rights pri-
are supplied by the or to 01-04-2019 is required to be
Landowner to the discharged in terms of Notification
Promoter, under an No. 4/2018-CentralTax (Rate) dated
area sharing ar- 25.01.2018.
rangement between
1st July 2017 and
31/3/19, but the
allotment of con-
structed area in an
ongoing project is
made by the Promot-
er to the Landowner
on or after 1/4/2019,
whether the tax
liability, if any, is
required to be dis-
charged in terms of
the Notification No.
4/2018 –CT (R)?

28. Whether the GST is Yes, GST is payable on transfer of

leviable on the out- development rights by a developer
put supply of Trans- to another developer or promoter or
ferrable Development to any other person under reverse
rights by a developer charge mechanism @ 18% with ITC
(usually evidenced under Sl. No. 16, item (iii) of Noti-
by TDR Certificate fication No. 11/2017 - Central Tax
issued by the author- (Rate) dated 28-06-2017 (heading
ities). If yes, under 9972).
which entry and at
what rate?
29. What is the meaning The term “first occupation” appear-
of the term “first oc- ing in Schedule II para 5 (b) and in
cupation” referred to notification No. 11/2017 – Central
in clauses (i) to (id) Tax (Rate) dated 29-03-2019 means
of Entry 3 of Notifi- the first occupation of the project in
cation No. 3/2019? accordance with the laws, rules and
Whether, in case of regulations laid down by the Central
an ongoing project, Government, State Government or
where part occupa- any other authority in this regard.
tion certificate has Where occupation certificate has
been received in re- been issued for part (s) of the pro-
spect of some of the ject but not for the entire project by
premises comprised 31-03-2019, the first occupation of
in the on going the project shall not be considered
project, the Pro- to have taken place on or before 31-
moter is entitled to 03- 2019 and the project shall be
exercise the option considered ongoing project provided
of 1% / 5% (without it satisfies the other requirements of
ITC)or @ 8%/12% the definition of the term ongoing
(with ITC)available project. Promoter shall be entitled to
in terms of Notifi- exercise option to pay tax @ 1%/5%
cation No. 3/2019 (without ITC)or @ 8%/12% (with
CT (R), in respect of ITC) on construction of apartments
the balance ongoing in such project.
project?

30. (a) In case of a single (a) Both the projects registered

building registered as as separate projects under RERA,
2 (two) separate pro- 2016 shall be treated as distinct
jects under the provi- projects for the purpose of Notifica-
sions of RERA viz. 1st
tion No. 11/2017-Central Tax (Rate)
to 10th floor as one
dated 28-06-2017 as amended by
Project and 11thto
20th floor as another Notification No. 3/2019-Central Tax
project, whether the (Rate) dated 29-03-2019. Both the
Developer can con- projects will have to independently
sider the entire build- satisfy the requirements of the defi-
ing as single ongoing nition of ongoing projects.
project, since all the
three conditions to (b) No. All the towers registered
be complied with for as different projects under RERA
classifying a project
shall be treated as distinct projects.
as an ongoing project
Only such towers registered as dis-
can be satisfied only if
the entire building is tinct projects for which commence-
considered as a single ment certificate has been issued on
project? or before 31-03-2019, construction
(b) Furthermore, if has started on or before 31-03-2019
different towers in a and for which apartments have been
single layout are reg- booked on or before 31-03- 2019 but
istered as separate completion certificate has not been
projects under the issued or first occupation has not
provisions of RERA but
taken place by the said date shall be
where the approvals
treated as ongoing projects.
are common for all the
towers, whether the
Developer can con-
sider entire layout as
a single Ongoing pro-
ject?
31. Whether TDR pur- Yes. Portion of such TDR transferred
chased on or on or after 01-04-2019 which is
after 1.4.2019 to used in an ongoing project in respect
be consumed by a of which the promoter has opted
developer-promoter in for new rate of tax on construction
an ongoing project, in of apartment @ 1% or 5% without
respect of which the ITC which remained un-booked on
promoter has opted the date of issuance of completion
for the new rate of
certificate or first occupation of the
tax, shall be liable
project shall be liable to tax at the
to be taxed at the
applicable rate not exceeding 1% of
applicable rate, but
the value in case of affordable res-
limited to 1% or 5%,
as the case may be, idential apartments and 5% of the
of the unsold area at value in case of other than affordable
the time of issuance of residential apartments.
completion certificate?

32. What shall be the The rate of tax applicable on the work
classification of and contract service provided by a con-
rate of tax applicable tractor to a promoter for construction
to works contract of a real estate project shall be 12%
service provided by or 18% depending upon whether such
a contractor to a work contract service is provided for
developer or promot- construction of affordable residential
er under the new dis- apartments or residential apartments
other than affordable residential apart-
pensation effective
ments. Rate of tax applicable on such
from 01-04-2019for
work contract service provided by a
(a)New project after
contractor to a promoter on construc-
1.4.2019 and ongo-
tion of commercial apartments shall be
ing projects where 18%(irrespective of option exercised
option has been by developer- promoter).The rele-
exercised for new vant entries of the notification are at
rate and items (iv), (v), (va) and (vi) against
sl. no. 3 of the table in Notification No.
(b)Ongoing projects 11/2017-Cenral Tax (rate) dated 28-
where option has not 06-2017 prescribing rate of 12% for
been exercised for works contract services of construction
new rate? of affordable apartments/ apartments
being constructed under schemes
specified therein. In case of works con-
tract services for construction of other
apartments, rate of 18% as prescribed
in item(xii) against sl. no. 3 of the ta-
ble in Notification No. 11/2017-Cenral
Tax (rate) dated28-06-2017shall be
applicable.
33. A registered project Where more than one completion
has three blocks certificate is issued for one project,
and Completion for the purpose of definition of ongo-
Certificate has been ing project as defined in the clause
received for one (xx) in the paragraph 4 of the no-
block prior to 1st tification No. 11/ 2017- CTR, dated
April, 2019 and for 28.06.2017, completion certificate
two blocks will be issued for part of the project shall not
received after that be considered to have been issued
date. for the project on or before 31-03-
Will such a project 2019 unless completion certificate(s)
for which multiple have been issued for the entire pro-
completion certifi- ject. Therefore, if completion certifi-
cates are received cate has not been issued for part of
partly before 1st the project on or before 31-03-2019,
April, 2019 and part- the project shall still be considered
ly after that date, as ongoing project provided other
constitute an ongo- conditions of the definition of ongo-
ing project? ing project are met.
34. It is a prevalent Where commencement certificate

practice that more has been issued even for part of the
than one commence- project on or before 31-03- 2019, it
ment certificate is shall be treated as an ongoing pro-
issued by competent ject provided other requirements of
authority for single the definition of ongoing project are
project. For example, met.
in case of a single
tower comprising of
50 floors and reg-
istered as single
project, separate
commencement
certificates may be
issued by the compe-
tent authority for (i)
basement and park-
ing which is common
to entire building (ii)
first twenty floors
(iii) next thirty floors.
If one or two com-
mencement certifi-
cates are received by
the Developer prior
to 1st April, 2019
and remaining on
or after that date,
will such a project
be considered as an
ongoing project?

35. There are many pro- In case of redevelopment or slum

jects of redevelop- rehabilitation projects, the original
ment/ slum rehabil- inhabitants or the slum dwellers are
itation in pipeline as not required to pay any monetary
on 1st April, 2019. consideration to the promoter for
It is possible that the residential apartments allotted
in such projects the to them. Therefore, the residential
development rights apartments allotted to the original
have been conferred inhabitants in case of redevelopment
upon the develop- project or slum dwellers in case of
er and pursuant to slum rehabilitation or redevelopment
which the develop- project, the requirement that at least
ment process has one installment has been credited to
been initiated such the bank account of the promoter
as receipt of com- shall not be required to be met for
mencement cer- such apartments to be considered
tificate, excavation as having been booked on or before
for foundation etc., 31-03-2019 provided other require-
but booking against ments for considering an apartment
units for sale has not booked on or before 31.03.2019
been received prior have been met. The consideration
to 1st April, 2019. for such apartments is receipt in
However, allotment of the form of transfer of development
units to the existing rights from the original inhabitants in
dwellers (in respect case of redevelopment projects or
of free supply units) the government in case of slum
which will yield no rehabilitation projects.
monetary considera- Hence, the condition relating to cred-
tion has been done. it of at least one installment in the
Clause (xiii) of Para bank account of the promoter for the
4 of Notification No. apartments being constructed in a
11/ 2017 -CTR as slum redevelopment project to have
amended by Notifica- been partly or wholly booked shall be
tion No. 3/2019-CTR deemed to have been satisfied in or-
requires credit of at der to consider the project as an on-
least one installment going project, provided all other con-
in the bank account ditions for considering an apartment
prior to 1st April, as booked are met in case of apart-
2019 for a project ments allotted to slum dwellers; as
to be considered as there is no cash payment to be made
ongoing project. It by the slum dwellers.
may please be clari-
fied whether in such
cases, apartments
being constructed in
the project shall be
deemed to have been
booked prior to
1st April, 2019 in case

development agree-
ment is executed pri-
or to that date and
whether accordingly
such projects shall be
considered as an on-
going project?
36. Can a developer No. Valuation mechanism prescribed
take deduction of in paragraph 2 of the notification
actual value of Land No. 11/2017- CTR dated 28.06.2017
involved in sale of clearly prescribes one- third abate-
unit instead of taking ment towards value of land.
deduction of deemed
value of Land as per
Paragraph 2to Notifi-
cation No. 11/2017-
CTR ?
37. Para 3 of Annexure The illustrations given in the said an-
I and II to Notifica- nexure clearly explain how the provi-
tion No. 3/2019-CTR sions given in the clause (i) and (ii)
dated 29.03.02019, of para 3 of the said annexure relat-
stipulate three dif- ing to percentage of invoicing shall
ferent conditions. operate. The same may be referred
Clause (i) and (ii) of to.
the said Para 3 are
relating to percent-
age of invoicing. It is
requested to clarify
as to how and where
the percentage of in-
voicing is to be taken
into consideration
while determining
quantum of ITC
reversal.

38. It may be clarified The new dispensation has been pre-

whether exemption scribed for real estate sector vide
granted on transfer notifications issued on 29.03.2019.
of development right The same are effective prospective-
or FSI for reside- ly from 01.04.2019. They shall ap-
tial construction ply only to development rights or FSI
and reverse charge transferred on or after 01.04.2019.
mechanism pre- They shall not apply to develop-
scribed for pament ment rights transferred by way of an
of tax on TDR, FSI agreement prior to 01.04.2019 even
or long term lease if the consideration for the same, in
(premium) in the cash or kind, is paid in part or full on
new dispensation or after 01.04.2019.
is applicable where
development rights
were transferred by
way of an agreement
executed prior to 1st
April, 2019 but con-
sideration, whether
in cash or other
form, flowed to the
land owner, in full or
part, on or after 1st
April 2019.
39. Land Owner being an The term business has been assigned
individual is not en- a very wide meaning in the CGST Act
gaged in the business and it includes any trade, commerce,
of land relating activ- manufacture, profession, vacation,
ities and thus wheth- adventure, or any other similar ac-
er the transfer of tivity whether or not it is for a pe-
development rights cuniary benefit irrespective of the
by an individual to a volume, frequency, continuity or reg-
promoter is liable for ularity of such activity or transaction.
GST and whether the Therefore, the activity of transfer of
same will fall within development rights by a land own-
the scope of “Sup- er, whether an individual or not, to a
ply‟ as defined in promoter is a supply of service sub-
Section 7 of CGST/ ject to GST.
SGST Act, 2017?
Position of such a
transaction may be
clarified in light of
amendments recent-
ly made.

40. In certain projects, As per explanation in clause (xxvi-

developers have ii) of para 4 of the notification No.
started construction 11/2017- CTR dated28.06.2017,
on or before 31-03- “project which commences on or af-
2019. However, book- ter 01.04.2019” shall mean a project
ings in the project other than an ongoing project. A pro-
have not started. One ject, in which bookings for the apart-
of the conditions pre- ments have not started, would not be
scribed for a project covered under definition of “ongoing
to qualify as an on- project”. The same would accordingly
going project is that be treated as a project which com-
apartments being mences on or after 01.04.2019 sub-
constructed should ject to the new rates of 1% or 5%
have been partly without ITC, as the case maybe.
or wholly booked.
Whether such project
where bookings have
not started but con-
struction has started,
would be eligible for
the new rates of 1%
or 5% without ITC?
41. Whether the Form as No. The Form shall be filed manually
per Annexure IV of with the office of the Commissioner
the Notification No. in whose jurisdiction the registration
3/2019-CTR is to be of the promoter is assigned.
filed with both the No modification / amendment of the
jurisdictional com- option is allowed in the Form once
missioner i.e. Central submitted.
Tax, State Tax.
Whether modifica-
tion/amendments
in such Form are
allowed subsequent
to filing of the form,
after 10th May,
2019?

FAQs released on Real Estate Sector released by CBIC as on

14th May 2019
Sl. Question Answer

No.
1 In case of an area sharing ar- The legal and operational har-
rangement between a Land- mony necessitates that both
owner-Promoter and a Develop- the Landowner-Promoter and
er-Promoter, where the Project the Developer-Promoter ex-
qualifies to be considered an ercise identical option for a
“Ongoing Project”, whether an project.
option of 1% or 5% (without ITC)
vis-à-vis 8% or 12% (with ITC)
as prescribed in Notification No.
3/2019 can be exercised by the
Developer- Promoter and Land
owner-Promoter independently?
2 In case of an area sharing ar- The new effective rates of
rangement between a Land- 1% and 5% without ITC are
owner-Promoter and a Devel- applicable to the apartments
oper-Promoter in a New Project booked by the land owner
undertaken on or after 1/4/2019, promoter in an ongoing pro-
whether the new rate of 1% or ject as well as a new project
5% is applicable in case of the which commences on or after
Landowner-Promoter who sells 01- 04-2019. The land owner
the under-construction premises promoter shall be entitled to
before completion of the project? ITC in respect of tax charged
Will the Landowner- Promoter be to him by the developer pro-
entitled to ITC in respect of tax moter on construction of such
charged to him by the Develop- apartments. However, the
er-Promoter on such supply? land owner promoter shall not
Whether the Landowner- Promot- be entitled to avail ITC on any
er shall be entitled to avail ITC on other services or goods used
any other services or goods used by him.
by him in furtherance of his busi-
ness(such as brokerage on sales
etc.)?

n 3 Residential Real Estate Project The term “Residential Real Es-

(RREP) shall mean a REP in tate Project (RREP) has been
which the carpet area of the defined in the notification to
commercial apartments is not mean a REP in which the car-
more than 15% of the total pet area of the commercial
carpet area of all the apartments apartments is not more than
in the REP (Clause xix). “Carpet 15 per cent. of the total carpet
area” shall have the same mean- area of all the apartments in
ing as assigned to it in clause the REP.
(k) of Section 2 of the RERA,
2016. Whether non-saleable Apartments shall be taken
areas such as society office, club as commercial or residential
house, etc., are to be taken into apartments as declared to
consideration for determining RERA authority.
15% for deciding whether the
project is RREP or not?
4 For the purpose of determining For the purpose of determin-
the threshold of Rs.45 lakhs in ing the threshold of the gross
case of “affordable residential amount of Rs.45.00 lakh for
apartment”, whether the follow- affordable residential apart-
ing charges generally recovered ments, all the charges or
by the developer from the buyer amounts charged by the pro-
shall be included? moter from the buyer of the
• Amenity Charges apartments shall form part of
• Society formation charges the gross amount charged.
• Advance maintenance Clause xvi, sub-clause (a)(ii)
• Legal Charges (C) of paragraph 4 of notifica-
tion No. 11/2017-CT(R) dated
28.06.2017, reproduced be-
low, refers.
“C. Any other amount charged
by the promoter from the buy-
er of the apartment including
preferential location charges,
development charges, park-
ing charges, common facility
charges etc.”
However the value shall not
include stamp duty payable to
the statutory authority, main-
tenance charges / deposits for
maintenance of apartment or
maintenance of common in-
frastructure.

5 In case of a Real Estate Project, The promoter shall apportion

comprising of Residential as well and account for the procure-
as Commercial portion (more ments for residential and com-
than 15%), how is the minimum mercial portion on the basis of
procurement limit of 80% to be the ratio of the carpet area of
tested, evaluated and complied the residential and commer-
with where the Project has single cial apartments in the project.
RERA Registration and a single
GST Registration and it is not
practically feasible to get sepa-
rate registrations due to peculiar
nature of building(s)?
6 In an area sharing model, a pro- Value of TDR, shall be equal
moter has to handover construct- to the amount charged by the
ed flats/ apartments to the land promoter for similar apart-
owner who supplied TDR for the ments from the independent
project. Value of TDR at the time buyers booked on the date
when the landowner transferred that is nearest to the date
it to the promoter is not known. on which such development
How would the promoter deter- rights or FSI is transferred by
mine GST on TDR? the land owner to the promot-
er.
7 In the formula prescribed under The GST on transfer of devel-
first proviso to Entry 41A of the opment rights or FSI (includ-
Notification 12/2017- CT (R), as ing additional FSI) is payable
amended by Notification 4/2019 at the rate of 18% (9% + 9%)
CT (R), what rate shall be taken with ITC under Sl. No. 16,
to determine the value to be item
ascribed to the “GST Payable on (iii) of Notification No. 11/2017
TDR or FSI or both for construc- - Central Tax (Rate) dated 28-
tion of the residential apart- 06-2017 (heading 9972).
ments in the project but for ex-
emption contained therein” as no There is no exemption on TDR
specific rate has been prescribed or FSI (Addl. FSI) for con-
in Notification 11/2017 CT-Rate struction of commercial apart-
or any other notification? ments. Therefore, GST shall
be payable on TDR or FSI(in-
What is the rate applicable to cluding additional FSI) or both
output supply of TDR or FSI? used in respect of
(i) carpet area of commercial
Whether the quantum of TDR apartment and
or FSI (including additional FSI) (ii) un-booked residential
or both shall be taken only in apartments as on the date
respect of un-booked apart- of issuance of Completion
ments as on the date of issuance Certificate or first occupa-
of Completion Certificate or first tion of the project for the
occupation of the project for the purpose of formula.
purpose of formula?

8 In case of Redevelopment, Slum The apartments given to the

Rehabilitation or similar arrange- original inhabitants or the
ments, the Developer will be con- slum dwellers in redevelop-
structing two types of units i.e. ment project or slum reha-
one which is allotted to existing bilitation project are given by
occupiers for no monetary con- the promoter against consid-
sideration and second which is eration received by them in
sold in the market to outside buy- the form of TDR/ FSI/ mon-
er. Price at which the unit is being etary consideration from the
sold to the outsider is determined original inhabitants in case of
in a manner to factor cost of con- redevelopment projects and
struction of both type of units so from the Government in case
that the unit to existing occupiers of slum rehabilitation projects.
may be allotted free of monetary The supply of service by way
consideration. It may be clarified of construction of such apart-
whether the Input Tax Credit in ments against construction
relation to construction of units wholly or partly in the form of
to be allotted to existing occupi- TDR/FSI is a taxable supply
ers, in case of residential project subject to GST.
opted for old rates or commercial Wherever tax is paid on con-
projects, shall be allowed to the struction of such apartments
Developer. at the effective rates of GST
of 8%/12% with ITC, the pro-
moters shall be eligible for
ITC, including ITC in relation
to construction of units to be
allotted to the existing occu-
piers even though there may
not be a monetary considera-
tion but the consideration is in
the form of grant of TDR/FSI.

9 In case of redevelopment or slum Yes, units supplied free of cost

rehabilitation project, (new or also attract GST as their con-
an existing project) whether the sideration is not money but
constructed units supplied to ex- TDR/ FSI or rights relatable
isting occupiers by the developer to land on which construction
free of monetary consideration takes place.
are taxable? In such an ongoing project,
In case of ongoing project in the units sold in open market
respect of which the promoter would be eligible for GST rate
has opted for new rates of 1% / of 1% (without ITC), if such
5%, it may be clarified whether units are covered under Cred-
the units being supplied free of it Linked Subsidy Scheme, as
monetary consideration to ex- provided in the definition of
isting dwellers will fall within the “affordable residential apart-
definition of affordable housing ments” given in notifica-
when certain units being sold tion no 11/ 2017- CTR dated
in the open market are eligible 28.06.2017 as amended by
for concessional rates under the notification No. 3/2019-CTR
category of Credit Linked Subsi- dated 29.03.20 19.
dy Scheme i.e. sub- item (da) of The apartments being con-
item (iv) of Sl. No. 3 of notifica- structed in such ongoing pro-
tion No. 11/2017- CTR? ject, for existing slum dwell-
ers/ occupiers shall be eligible
for 1% rate if they meet the
definition of affordable resi-
dential apartment, asunder-
(a) They have carpet area of
less than 60 sqm in specified
metropolitan cities or 90 sqm
in places other than the spec-
ified metropolitan cities and
the gross amount charged for
similar apartments from inde-
pendent buyers is not more
than rupees 45 lakhs. (Please
refer to para 2A of notifica-
tion No. 11/2017- CTR dated
28.06.2019 as amended vide
notification No. 3/2019- CTR
dated 29.03.2019), or
(b) They are being construct-
ed under any of the schemes
specified in sub-item (b), sub-
item (c), sub-item (d), sub-
item (da) and sub-item (db)
of item (iv); sub-item (b),
sub-item (c), sub-item (d)
and sub item (da) of item (v);
and sub-item (c) of item (vi),
against serial number 3 of the
said notification.

10 What shall be the rate of GST ap- Time of supply of the service
plicable on projects in respect of by way of construction of
which OC has been issued prior apartments in such projects
to 01.04.2019, but the balance falls prior to 01.04.2019 and
demands are pending? Such accordingly the rates as exist-
projects are neither projects ed prior to 01.04.2019 would
which commence on or after apply to such balance de-
01.04.2019 nor ongoing projects. mands.
11 The affordable residential apart- “Carpet area” is defined in
ment should not have a carpet clause (k) of section 2 of the
area exceeding 60 sqm in metro- RERA, 2016 and the same has
politan cities and 90 sqm in other been adopted in the notifica-
places. Will the internal walls of tion.
the apartment, balcony or veran-
dah be included 60/90sq meter?
12 If an un-registered person trans- Promoter shall be liable to
fers development right to a devel- pay GST on TDR transferred
oper-promoter, then it is appar- by any person whether regis-
ently not covered by the fourth tered or not on RCM basis.
proviso applicable to clause (i) to
clause (id) of serial 3 of Notifica-
tion No. 11/2017 (as amended).
Will the promoter be liable to pay
GST on TDR received from an un-
registered land owner?
13 Whether the ITC availed as per No. GST on services of con-
the second proviso applicable to struction of an apartment by
clause (i) to clause (id) of serial a promoter at the rate of 1%/
3 of Notification No. 11/2017 5% is to be discharged in cash
(as amended) can be adjusted only.
against the output liability of5%/ ITC, if any, may be used for
1%? discharging any other supply
of service.
14 If a developer-promoter opts to Reply as in Q. No. 13 above.
pay tax for the ongoing project
of affordable residential apart-
ment at the new rate, can he use
the ITC available to him under
the second proviso applicable to
clause (i) to clause (id) of seri-
al 3 of Notification No. 11/2017
(as amended) for payment of tax
at1%/5%?

15 The condition in Notification No. Services by an employee to

3/2019 specifies that 80% of in- the employer in the course of
puts and input services should be or in relation to his employ-
procured from registered person. ment are neither a goods nor
What about expenditure such as a service as per clause 1 of
salaries, wages, etc. These are the Schedule III of CGST Act,
not supplies under GST [Sl. 1 of 2017. Therefore, salaries and
Schedule III]. Now, my question wages paid by promoter to his
is, whether such services will be employees will not be relevant
included under input services for for the minimum purchase re-
considering 80% criteria? quirement of 80% .
16 A buyer has booked an apart- No. For the past payments
ment prior to 1st April, 2019 made before the transition
and paid part consideration to date (01.04.2019), no addi-
the developer. The developer de- tional GST is required to be
cides to opt for the new scheme paid.
for this ongoing project. Will the
buyer be required to pay any ad-
ditional tax for such payment
he has made priorto31st march,
2019?
17 Whether the condition of receiv- No, if the developer opts to
ing 80% of inputs and input ser- continue to pay tax at the old
vices from the registered person rates of 12%/8% in respect of
shall be applicable if the devel- an ongoing project, the con-
oper opts to continue to pay tax dition of receiving 80% of in-
at the old rates of 12%/8%inre- puts and input services from
spect of an ongoing project? the registered person doesn’t
apply.
18 Whether the inward supplies of Yes. Inward supplies of ex-
exempted goods / services shall empted goods / services shall
be included in the value of sup- be included in the value of
plies from unregistered persons supplies from unregistered
while calculating 80% threshold? persons while calculating 80%
threshold.
19 Whether the purchase of Land No. As per Schedule III, Entry
from an unregistered person No 5, of CGST Act, sale of land
shall be required to be included is not a supply. In addition, as
in the value of Input and Input per 5th proviso to entries at
Services for the purpose of cal- Sl. No. (i), (ia), (ib), (ic) and
(id) against Serial No 3 in the
culation of 80% threshold? Notification No.11 / 2017-CTR
dated 28.06.2017 as amend-
ed by Notification No. 3 /
2019-CTR dated 30/03/2019,
transactions by way of grant
of development rights, long
term lease, FSI etc. are not
required to be included in the
value of Input and Input Ser-
vices for evaluation of criteria
of 80% from registered per-
sons.

20 When a developer prefers the Yes, in case of an ongoing

option of paying tax at 1%/5%, project in respect of which the
without ITC, for an ongoing pro- promoter has not opted to pay
ject, whether the apartments GST at the old rate, he shall
which were not considered as pay tax at the effective rate
affordable in the earlier scheme of 1% without ITC on apart-
(though certain apartments in ments which meet the new
such project were considered as definition of affordable resi-
affordable in the earlier scheme) dential apartment.
will be considered as afforda-
ble after 1st April, 2019, if such
apartments fit the definition of
affordable residential apartments
as provided in notification No.
3/2019-CT(R) dated 29.03.2019?
21 Whether the amended rule 42 In case of an ongoing RREP,
shall apply to all RREPs including in respect of which promot-
ongoing projects? er opts for the new rates of
1%/5% and which underwent
transition of ITC consequent
to change of rates of tax on
01.04.2019, ITC determined
under sub- rule (1) of rule 42
shall not be required to be cal-
culated finally on the comple-
tion or first occupation of the
RREP.
22 Whether separate Form (An- Yes.
nexure IV) shall be filed by the The promoter has to exercise
Developer in respect of each of the option for payment of tax
the Ongoing Projects? at the old rates of 8%/ 12%
with ITC for each of the ongo-
ing projects separately.
23 On what basis a Contractor / The contractor may charge
Sub-contractor executing a com- tax on the works contract
posite supply of works contract service provided by him to a
in terms of clause(va) promoter at the concessional
i.e. 12% for affordable resi- rate of 12% under notifica-
dential apartments, shall satisfy tion No. 11/2017- CTR dated
himself as regards condition of 28.06.2019, S. No.3,entry
50% of the total carpet area? (va) on the basis of a decla-
ration by the promoter to the
contractor that the project
meets the conditions pre-
scribed for concessional rate
of GST on works contract
service prescribed under the
said entry.

24 Whether the condition to make The apartments given to the

payment within 180 days by Land Owner – Promoter are
Land Owner – Promoter to De- given by the Developer – Pro-
veloper – Promoter as provided moter against consideration
in second proviso to section 16 received by him in the form
(2), shall be applicable for re- of TDR from the Land Own-
versal of input tax credit? er – Promoter. Therefore,
the payment by Land Own-
er – Promoter for service of
construction of apartments
received from the Developer –
Promoter is made even before
the service is provided.
Therefore, Land Owner – Pro-
moter shall not be required
to reverse input tax credit of
tax charged from him by the
Developer – Promoter on the
ground that he has not made
payment for the service re-
ceived from the Developer –
Promoter.
25 Whether the exemption given by The exemption is available
way of Entry 41A / 41B of Notifi- only on TDR/ FSI transferred
cation No. 12/2017-CTR shall be on or after 1st April, 2019
available in respect of develop- for construction of residential
ment rights etc. transferred to apartments by a promoter in a
a person other than promoter? real estate project.
Please clarify whether sub-clause
(v) in clause (zk) in section 2 in
RERA Act, 2016 covers a person
who purchases TDR as develop-
er?
26 How to determine value of Value of construction servic-
construction services provided es provided by the promoter
by the promoter to land owner to land owner in such cases
in lieu of transfer of develop- shall be determined based
ment rights, when land owner on the total amount charged
is not registered? by the promoter for similar
apartments in the project
from independent buyers,
other than the land owner,
nearest to the date on which
such development right etc.
is transferred to the promot-
er, less the value of transfer
of land, if any, as prescribed
in paragraph 2 of Notifica-
tion No.11/2017-CT(R) dat-
ed 28.06.2017.
27 In case of a project, where Time of supply of service of

completion certificate has been construction of such apart-
received prior to 31-03-2019 ments is prior to 01.04.2019
but some part of the consider- and the same shall be sub-
ation in relation to the apart- ject to tax at the old rates of
ment is due after 31-03-2019, 12%/8%.
it appears that such project
will not qualify as ongoing
project.
What will be the applicable tax

rate on such amount received
on or after 01.04.2019 – old
rate or new rate?
RELEVABT NOTIFICATIONS
03/2019 Central (Rate) dated 29/03/2019
04/2019 Central (Rate) 29/03/2019 Amended 12/2017 dated
28/06/2017
05/2019 Central (Rate) 29/03/2019 Amended 13/2017 dated
28/06/2017
07/2019 Central (Rate) dated 29/03/2019 Amended from 02/2017
dated 28/06/2017
03/2019 Integrated (Rate) dated 29/03/2019
06/2019 Integrated (Rate) dt.29/03/2019
08/2019 Integrated (Rate) dated 29/03/2019
09/2019 Integrated (Rate) dt.29/03/2019
16/2019 Central (Rate) dt.29/03/2019


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Introductory Edition -December 2019

The Institute of Cost Accountants of India

© All rights reserved

Policy reforms such as the GST, registration of commercial and residential

'Impact of GST on Real Estate' is a publication of the Tax Research

CMA Balwinder Singh

On a brighter note, as per leading industry players and analysts, 2019

CMA Niranjan Mishra

At the onset, I would like to congratulate Team – Tax Research for

CMA Rakesh Bhalla

WORK FLOW OF GOODS AND

RULINGS ON REAL ESTATE BY

KEY PRESS RELEASES, NOTIFICATIONS AND

Firstly let’s understand the Real Estate Sector

HANDBOOK ON IMPACT OF GST ON REAL ESTATE 1

condominiums, and townhouses. The structures may be single-

Now, let’s know how the Real Estate Market work

2 HANDBOOK ON IMPACT OF GST ON REAL ESTATE

- After the process of Joint Development Agreement and Power of

S. Type of approval Approving Authority

HANDBOOK ON IMPACT OF GST ON REAL ESTATE 3

6. Infrastructure Layout Approval Development Authority/

Approvals before construction – independent of Building Plan

S. Type of approval Approving Authority

Approvals During Construction

S. Type of approval Approving Authority

4 HANDBOOK ON IMPACT OF GST ON REAL ESTATE

1. Approved Building Plans,

All the above mentioned approvals depends upon the nature of

Lets, get to know some of the relevant terms definitions/ meanings:

What is the meaning of Joint Development Agreement?

HANDBOOK ON IMPACT OF GST ON REAL ESTATE 5

Who are the Real Estate Developers?

6 HANDBOOK ON IMPACT OF GST ON REAL ESTATE

Type of Project GST Rate (Upto GST Rate (From 1st

HANDBOOK ON IMPACT OF GST ON REAL ESTATE 7

• Total value of property cannot exceed Rs.45 lakh in either

GST Rates for Construction Materials

GST on Key Construction Material*

GST on Key Construction Services*

8 HANDBOOK ON IMPACT OF GST ON REAL ESTATE

r GST is not applicable to the following construction-related

a • Sale of ready to move in flats

HANDBOOK ON IMPACT OF GST ON REAL ESTATE 9

Copy of Demand is as follows:

Plotting in GST Returns:

10 HANDBOOK ON IMPACT OF GST ON REAL ESTATE

CGST @3.75% = 48,368.00

How to com- Developer shall be able to issue a Credit Note to

HANDBOOK ON IMPACT OF GST ON REAL ESTATE 11

In case a flat is booked after 01.04.2019 and gets cancelled, the

GST Provisions under Real Estate

12 HANDBOOK ON IMPACT OF GST ON REAL ESTATE

lead to the situation which the Government expected. With regard

CONDITIONS RELATED TO ITC

HANDBOOK ON IMPACT OF GST ON REAL ESTATE 13

extent permissible. Hence the promoter shall be required to calculate

14 HANDBOOK ON IMPACT OF GST ON REAL ESTATE

11. Essentially the objective of the working is to arrive at the ITC in