A Brief Article on Real Estate Sector under GST

Real Estate Sector contains the following aspects under GST:

1.   Real Estate Project under RERA

2.   Work Contracts

3.   TDR/FSI/Long Term lease

4.   Sale of Land and Developed Plots

5.   Renting and Leasing of Immovable Property

6.   Labour Supply for Construction works

1. Real Estate Project under RERA

As per the Recommendation of 33rd GST Council meeting held on 24-02-2019, the 34th GST Council revised the rate of tax for the Real Estate Projects w.e.f. 01-04-2019 as follow:

Ø 5% without ITC – For Residential Property Non- affordable segment;

Ø 1% without ITC – For Residential Property affordable segment;

Ø 5% without ITC – For Commercial Apartments in RREP

Ø 12% with ITC    - For Commercial Apartments in REP

Condition to avail the above revised rate 1%/5%:

·     That residential and commercial apartments should be covered under RERA

·     ITC shall not be available.

·     80% of inputs and input services shall be purchased from registered persons.

·     On shortfall of purchases from 80%, tax shall be paid by the builder @ 18% on RCM basis. Purchase of Capital Goods from URP also attracts RCM.

·     However, Tax on cement purchased from URP shall be paid @ 28% under RCM

“Affordable Segment” means a residential house/flat having Carpet Area not exceeding 60 SQM / 645.8 SQFT in Metropolitan cities & 90 SQM / 968.8 SQFT in Non- Metropolitan cities & Value not exceeding ₹ 45 Lakhs

2. Works Contract

As per Sec. 2(119) of the CGST Act, 2017 “works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract;

Rate of Tax for Works Contract as below:

Ø 18% with ITC – For Work Contracts involving predominantly earth work (more than 75% of Value to the CG/SG/LA) - w.e.f. 22-09-2025

Ø 18% with ITC -  For offshore works contract relating to oil and gas exploration and production (E&P) in the offshore area beyond 12 nautical miles from the nearest point of the appropriate base line. - w.e.f. 22-09-2025

Ø 18% with ITC - For works contract services of construction of affordable apartments/ apartments being constructed under schemes specified therein. - w.e.f. 22-09-2025

Ø 18% with ITC  -  For all other type of Work Contracts

3. TDR/FSI/Long Term lease                  

·     TDR – Transfer of Development Rights

·     FSI – Floor Space Index

Rate of Tax as below:

Ø Exempt – If Residential Apartments booked before issue of completion certificate or first occupation.

Ø 18%    - For that remain un-booked on the date of issue of completion certificate or first occupation (but the amount of tax shall be limited to Output Tax on that Apartment) (Paid by Promoter under RCM).

Ø 18%   - For construction of commercial apartments & supply of any services other than TDR/FSI/Long Term Lease.

1.   Sale of Land and Developed Plots

As per Schedule III Para 5 of CGST Act, 2017

“Sale of Land & Sale Building shall be treated as neither a Supply of Goods nor Supply of Services”

2.   Renting and Leasing of Immovable Property

Rate of Tax as follows:

Ø Exempt – for Lease of Land by CG/SG/UT/LA to Govt. Entity/Govt. Authority.

Ø Exempt – for by way of undivided share of land by way of lease or sub lease where such supply is a part of composite supply of construction of Apartments.

Ø Exempt – for renting of residential dwelling for use as residence except where the residential dwelling is rented to a RP. (if rented to the RP, it is taxable under RCM)

Ø  18%   - for Other Real Estate Services including Renting/Leasing of Land, building\

3.   Labour Supply for Construction works

Rate of Tax as follows:

Ø Exempt – for pure labour contracts of construction, erection, commissioning works pertaining to a single residential unit other than residential complex.

Ø GST @ 18% - for other labour supplies. 

Reverse Charge in Real Estate Sector:

Applicability & its Rates as follows:

As per Sec. 9(3) of the CGST Act, 2017

Ø 18% with ITC – for services by way of TDR/FSI/Long Term Lease from URP.

Ø 18% without ITC – for renting of residential dwelling for use as residence to RP.

As per Sec. 9(4) of the CGST Act, 2017

Ø 18% without ITC – for Purchase of Cement from URP by a Promoter.

Ø 18% without ITC – for Input & Input Services less than 80% of value from RP.

Ø Respective Goods Rate – for Purchase of Capital Goods from URP.