Under-construction realty projects get Centre’s relief

New Delhi, March 19 

The GST Council today allowed builders an option to choose between old tax rates and the new ones for under-construction residential projects to help resolve input tax credit (ITC) issues.

The Council, headed by Union Finance Minister Arun Jaitley and including representatives of all states, at its 34th meeting here laid out transition rules for the implementation of new tax rates for the real estate sector.

Builders will get a one-time option to continue paying tax at the old rates (effective rate of 8 per cent or 12 per cent with Input Tax Credit or ITC) on ongoing projects (buildings where construction and actual booking have both started before April 1, 2019, but which will not be completed by March 31, 2019), Revenue Secretary AB Pandey told reporters here.

The new tax rate of 1% for affordable houses and 5% for others, without ITC, will apply on new projects.

The move will help address apprehensions as well as potential disputes on various computational and transitional issues such as the loss of input credits and pricing that were bound to arise on account of the change.

“GST Council today has approved transition plan for the new rate structure for real estate residential projects... from April 1, builders have to choose either of the options for which they will get time,” he said. On the time-frame for transition, Pandey said the council has agreed on providing reasonable time to developers.

The matter would be decided in a next few days in consultation with the states, he said, adding that it could be 15 days or one month.

The council also clarified that projects with up to 15% commercial space will be treated as residential property. This will resolve issues faced in cases where buildings have commercial amenities such as clubs and restaurants as well as in case of residential-cum-commercial projects.

Additionally, a condition has also been imposed that 80% procurement by developers should be from registered dealers to avail the composition scheme.

The new tax rates of 1% (on the construction of affordable houses) and 5% (on other than affordable houses) shall be available subject to the condition that input tax credit shall not be available and that 80% of inputs and input services shall be purchased from registered persons. — PTI

Transition guidelines 

• Builders will get a one-time option to continue paying tax at the old rates (effective rate of 8% or 12% with Input Tax Credit) on ongoing projects (buildings where construction and actual booking have both started before April 1, 2019, but which will not be completed by March 31, 2019)
• The new tax rate of 1% for affordable houses and 5% for others, without ITC, will apply on new projects
• The move will help address apprehensions as well as potential disputes on various computational and transitional issues such as the loss of input credits and pricing that were bound to arise on account of the change