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We hope you read the 2nd part of our blog on FAQs and clarifications about Real Estate. Presenting the 3rd part of the blog, containing a few more questions for your immediate reference.

I am a beneficiary of PMAYCLSS and carpet area of my house being constructed in an ongoing project is 150 sq. metres. Am I eligible for new rate of 1% on same?

You are eligible for new GST rate of 1%, subject to the condition that the developer-promoter with whom you have booked the house has not exercised option to pay tax on construction of apartments at the old rate of 8%.

I am planning to purchase an apartment in a newly launched project. The project has been launched after 31st March 2019. Price of the apartment having carpet area of 80 sq. metres is INR 48 lakhs. What is the rate of GST applicable on construction of this apartment?

The tax rate applicable on construction of the apartments in a project that commences on or after 1st April 2019 would be 5%.

I have already paid tax of 12% (effective) on instalments paid before 1st April 2019. I wish to get the benefit of new rate of 1% or 5%. Whether it is the builder or the buyer who has the option to pay tax at the new or old rates?

The buyer cannot exercise option to pay tax at the new or old rates. It is the builder, who must exercise the option to pay tax on construction of apartments at the old rate of 12% latest by 10th May 2019. If the builder doesn’t exercise his option to continue to pay tax at the old rate by the said date, then the effective GST rate applicable on all your instalments payable to the builder on or after 1st April 2019 as per the contract shall be either 1% or 5%, depending on whether the apartment is an affordable or other than affordable residential apartment.

In respect of supply made in an ongoing project, an option is required to be exercised by the promoter in Annexure IV by 10th May 2019. At the same time, it is permissible for him to issue invoices between 1st April 2019 to 9th May 2019 which shall, however, be in conformity with the option to be exercised. Whether it is permissible for the promoter to revise the invoice, including by way of issuance of Credit / Debit Notes to bring the transaction in conformity with the option exercised by the promoter ultimately by 10th May 2019?

Where the GST rate at which tax has been charged in the invoices issued by the promoter prior to 10th May 2019 are not in accordance with the option required to be exercised by him on or before 10th May 2019 to pay GST on construction of apartments in an ongoing project at either the new or old rates, the promoter may issue debit or credit notes.

How to compute adjustment of tax in a Credit Note to be issued by Real Estate developer in case unit was booked prior to 1st April 2019 on which GST was paid on part consideration received at the time of booking, but cancelled after 1st April 2019?

Developer shall be able to issue a Credit Note to the buyer in case of change in price or cancellation of booking provided that the amount received in excess if any, consequent to issuance of Credit Note, is refunded to the buyer by the developer before September following the end of the financial year. Developer shall be able to take adjustment of tax paid in respect of the amount of such Credit Note. Further, in case apartments booked prior to 1st April 2019 on which GST has been paid till 31st March 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 completion certificate, the credit taken in respect of such apartments for supply of service till 31st March 2019 on which tax was paid at 8% / 12% with ITC shall be required to be reversed.

Whether the option to pay tax at the applicable effective rate of 12% or 8% (with ITC) is available to the promoter in respect of the new project, which has been commenced on or after 1st April 2019?

No, there is no option to pay tax at the effective rate of 12% or 8% with ITC on construction of residential apartments in projects which commences on or after 1st April 2019.

From the plain reading of the provisions and the definitions of the various terms, it appears that the onetime option is required to be exercised for the entire REP or RREP. Does this mean that a promoter can opt for old rates or new rates for different projects being undertaken by him under the same entity?

Yes. The option to pay tax on construction of apartments in the ongoing projects at the effective old rates of 8% and 12% with ITC must be exercised for each ongoing project separately. As per RERA 2016, project wise registration is allowed. So, the promoter may exercise different options for different ongoing projects being undertaken by him.

In respect of the construction and supply of premises under specific schemes like PMAY, Housing for All (Urban), RAY etc., whether the pre-existing effective rate of 8%, with ITC benefit continues to be available in case of any New Project that has commenced under any such scheme after 1st April 2019?

No. The rate of 8% and 12% with ITC is not available for construction of apartments in a project that commences on or after 1st April 2019. It makes no difference whether the apartments are being constructed under PMAY or any other housing schemes of the Central or State Government.

In respect of any ongoing project undertaken under the specific schemes like PMAY, Housing for All (Urban), RAY etc., prior to 31st March 2019, whether an option is available to the promoter to pay the tax at the new rates of 1% or 5% (without ITC) or at the existing rates of 8% (with ITC)?

Yes. The promoter has the option to pay tax either at the old rate of 8% (with ITC) or at 1% (without ITC) on construction of residential apartments in ongoing projects being constructed under PMAY and other specified housing schemes of the Central or State Governments. The option to pay tax on construction of apartments in the ongoing projects at the old rates of 8% with ITC must be exercised by the promoter for ongoing project.

Stay tuned for the next part of this blog, to be published soon.

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Pramit Pratim Ghosh

Author: Pramit Pratim Ghosh

Pramit, who has been with Tally since May 2012, is an integral part of the digital content team. As a member of Tally’s GST centre of excellence, he has written blogs on GST law, impact and opinions - for customer, tax practitioner and student audiences, as well as on generic themes such as - automation, accounting, inventory, business efficiency - for business owners.