A. CHANGES IN THE GST REGIME
Constitution of GST Appellate Tribunal
The Central Government, in an exercise of the powers conferred under section 109 of the CGST Act, 2017 and on the recommendation of the GST Council, has constituted the National Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) at New Delhi by an issuing a notification for the same. This notification was to come into effect from the date of publication of the said notification in the Gazette of India (Extraordinary). This notification was published on the www.egazette.nic.in website on 14th March 2019.
B. PROPOSED CHANGES AND INDUSTRY ISSUES
34th GST Council meet
The 34th GST Council meeting held on 19th March 2019 has discussed the implementation and operational details of the changes proposed in the real estate sector by the 33rd GST Council meeting held on 24th February 2019 (Please refer to ALMT GST Update Volume 87 1st March 2019). These changes will be effective from 1st April 2019 once notified. Some of the key discussions of the meeting are as under:-
• New tax rates
The new tax rates, which shall apply to the real estate sector, are as follows:-
1. Construction of affordable housing projects – 1% without ITC (present rate – 8% with ITC).
2. Construction of houses other than affordable housing projects – 5% without ITC (present rate – 12% with ITC).
• Conditions for availing the new tax rates
The conditions for availing the new tax rates are as follows:-
1. ITC cannot be availed; and
2. 80% of inputs and input services should be purchased from registered persons.
• Transition of ongoing projects
The promoters of the ongoing projects will be given a one-time option to continue to pay tax at the old rates on ongoing projects. Ongoing projects shall mean buildings where construction and actual booking have both started before 1st April 2019 and which have not been completed by 31st March 2019. This option should be exercised once within a prescribed period and where the option is not exercised within the prescribed period, new tax rates will apply.
• ITC provisions
The ITC provisions will be amended to bring greater clarity on monthly and final determination of ITC and reversal thereof in the case of real estate projects. The amended provisions would clearly provide the procedure for availing ITC in relation to commercial units as such units would continue to be eligible for ITC in a mixed project.
• TDR/ FSI and long term lease project
The following treatment shall apply to TDR/ FSI and long term lease projects commencing after 1st April 2019:-
1. The supply of TDR, FSI or long term lease (premium) of land by a landowner to a developer shall be exempted from GST subject to the condition that the constructed flats are sold before issuance of completion certificate and tax is paid on them.
2. Exemption of TDR, FSI or long term lease (premium) shall be withdrawn in case of flats sold after issuing of completion certificate, however, such withdrawal shall be limited to GST at the rate of 1% in case of affordable houses and 5% in case of other than affordable houses.
3. The liability to pay tax on TDR, FSI or long term lease (premium) shall be shifted from landowner to builder under the reverse charge mechanism (RCM).
Glossary
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CGST – Central Goods and Services Tax |
GST Council – Goods and Services Tax Council, a constitutional body comprising of members of the Central and the State Governments to recommend changes under the existing GST regime. |
