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We hope you read the 1st part of our blog on FAQs and clarifications about Real Estate. Presenting the 2nd part of the blog, containing a few more questions for your immediate reference.

If value of purchases as prescribed above from registered supplier is less than 80%, what would be the applicable GST rate on such purchases?

The promoter must pay GST at 18% on reverse charge basis on all such inward supplies (to the extent short of 80% of inward supplies from registered supplier) except cement on which tax must be paid (by the promoter on reverse charge basis) at the applicable rate, which at present is 28% (CGST 14% + SGST 14%)

In case of new rate of 5% / 1%, whether the conditions of payment of tax through Cash Ledger, payment of tax under RCM subject to 80% limit, non-availing of Input Tax Credit, reversal of credit, maintenance of project wise account, reporting of ITC not availed in corresponding GSTR-3B etc. are required to be complied mandatorily by the developer?

Yes. All the specified conditions are mandatory.

What is the rate of GST applicable on transfer of development rights, FSI and long-term lease of land?

Supply of TDR or FSI or long-term lease of land used for the construction of residential apartments in a project that are booked before issue of completion certificate or first occupation 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 occupation, 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 supply of TDR or FSI or long-term lease of land used in the new projects where new rate of 1% or 5% is applicable.

Who is liable to pay GST on TDR and floor space index?

The promoter is liable to pay GST on TDR or floor space index supplied on or after 1st April 2019 on reverse charge basis.

At what point of time, the promoter should discharge its tax liability on TDR?

The liability to pay GST on development rights shall arise on the date of completion or first occupation of the project, whichever is earlier. Therefore, the promoter shall be liable to pay tax on reverse charge basis, on supply of TDR on or after 1st April 2019, which is attributable to the residential apartments that remain un-booked on the date of issuance of completion certificate, or first occupation of the project.

At what point of time, the promoter should discharge its tax liability on FSI (including additional FSI)?

On FSI received on or after 1st April 2019, the promoter should discharge his tax liability on FSI as under:

  • In case of supply of FSI wherein consideration is in form of construction of commercial or residential apartments, liability to pay tax shall arise on date of issuance of Completion Certificate
  • 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, liability to pay tax shall arise immediately if such FSI is relatable to construction of commercial apartments.

At what point of time, the promoter should discharge its tax liability on supply of long-term lease?

On long term lease received on or after 1st April 2019, the promoter should discharge his tax liability on long term lease as under: In case of supply of long-term lease of land for construction of commercial apartments, tax shall be paid by the promoter immediately. However, for construction of residential apartment, liability to pay tax on the upfront amount payable for long term lease shall arise on the date of issuance of Completion Certificate.

The land development corporation of Orissa has provided land on long term lease for 99 years, for construction of a real estate project. As per the lease agreement, promoter must pay an upfront amount of INR 10 crores and annual / monthly licence fee of INR 5 lakhs. Does the promoter have to pay GST on these amounts?

The liability to pay tax on Long term lease of land (30 years or more) received against consideration in the form of upfront amount and periodic licence Fee is on the promoter. The promoter must discharge tax liability on the same on RCM basis. However, the upfront amount payable for the long-term lease (known as premium, salami, cost, price, development charges etc.) is exempt to the extent it is used for construction of residential apartments that are booked before issuance of completion certificate or first occupation. Annual / monthly rent or licence fee payable for long term lease is taxable under GST.

Someone booked a flat in June 2018. As of 31st March 2019, he had paid 40% of the value of the flat. What shall be the GST rate applicable on the remaining portion of value of the flat?

GST on the remaining portion of the value of flat payable to the promoter on or after 1st April 2019 as per the contract between the promoter and buyer shall be payable at effective rate of 1% or 5%, subject to the condition that the builder has not exercised the option to pay tax on construction of apartments at the old rates of 12% or 18%. If the developer exercises option to continue to pay tax at old effective rate of 8% or 12% by 10th May 2019, then GST has to be paid at 8% or 12% on remaining portion of the value of the flat; in such cases, the promoter 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.

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.