What Is The Gst Rate For Construction?

20.01.2023

18% GST rate on construction services and materials. In general, the GST rate on construction services is 18%. However, this rate varies in the construction sector as for affordable housing; it is 1%.

Contents

1 What is the GST rate for under-construction properties?
- - 1.0.1 What is the GST rate of cement products?
- 1.1 What is the GST rate on completion certificate?
  - 1.1.1 What is the GST rate in India?
2 What is the GST on construction material?
- 2.1 What is the effective GST incidence for affordable segments?
  - 2.1.1 What is the GST rate for affordable homes?
- 2.2 Is GST payable on ready to move in or completed property?

What is the GST rate for under-construction properties?

Key Points of New GST Proposal –

The GST rate on under-construction property or ready-to-move-in flats, where the completion certificate is not issued at the time of sale is currently at 12% with full Input Tax Credit (ITC). For affordable homes, the existing tax rate is 8%. On 24 Feb 2019, GST Council decided that after removal of ITC, the rates will be 5 % for normal housing projects and 1 % for affordable homes. A residential property, with a carpet area of up to 90 sq.mts in non-metropolitan cities and 60 sq.mts in metro cities (Delhi-NCR, Bengaluru, Chennai, Hyderabad, Mumbai-MMR and Kolkata) with the value up to Rs 45 lakhs would fall under the affordable housing category. Effective from 1st April 2019, the GST applicable for affordable homes is 1% without Input Tax Credit (ITC).

What is the GST rate of cement products?

Types of cement are classified under chapter 25 of the HSN Code. All iron and steel products are classified under chapter 72 of the HSN code and attract a uniform GST rate of 18%. Hence, iron blocks, wire, rolls, rods, etc. used in construction attract 18% GST. ( Full list of GST rate of iron and stee l).

What is the GST rate on completion certificate?

Currently, the Goods and Services Tax (GST) is levied at 12 per cent on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale. However, GST is not levied on buyers of real estate properties for which completion certificate has been issued at the time of sale.

What is the GST rate in India?

GST Rates on Materials used for Property Construction – The GST for real estate sector is applicable in two ways. The key points are as follows

The GST is applicable to different materials used for the construction process The service used for the construction of residential property.

The Government has introduced a 4-tier tax structure for all goods and services under the slabs- 5%, 12%, 18%, and 28%. These GST rates are given in the final cost of the property for the end-user, and the prices vary based on the stage of construction.

The total applicable GST is calculated by adding State GST (SGST) and Central GST(CGST).
For Example, it is calculated as below.18% GST = 9% SGST + 9% CGST 12% GST = 6% SGST + 6% CGST The basic construction cost may be low compared to premier properties, but as the input tax credit is limited to 12%.

Under the new proposed GST, many of the construction materials come under the 18 and 28 percent slab. The steel and steel products mostly come under an 18 % tax. The cement and prefabricated structural components for building or civil engineering are in the 28 % tax slab.

What is the GST on construction material?

GST on construction material has rationalised the taxation system and subsumed various state and Central government taxes. The government also levies GST on construction contracts. Before July 2017, the tax levied on the goods and services was complex, as there were numerous taxes imposed on the goods and their services.

What is the effective GST incidence for affordable segments?

GST Rates on Construction Industry- An Analysis A Kerala based reputed builder advertised that they have apartments ready for sale. The hash tag in that advertisement was NO GST. In the same newspaper there was another piece of news which stated that a Delhi based builder by name Emmar MGF, an associate of UAE based construction giant was found guilty of violating the Anti-Profiteering provision of the and directed to pass on a total sum of 13.5 crores to home buyers and also directed to reduce the prices of unsold flats in the Emerald Floor Premier, commensurate with the benefit of input tax (ITC) availed by the builder.

The above information found in the newspaper has caused confusion in the minds of several logical thinkers as the above are contradicting to one another.
In the first advertisement, the builder has advertised to sell homes without GST and in the second news item, a huge sum is bundledupon a builder as penalty by an authority under GST Law and directed to return to clients who have purchased apartments from the builder and also directed to reduce the price of unsold flats.

The logical question that arose here was how a builder can avoid GST in a sale transaction of an apartment. Is this legal. Is this false information to mislead buyers? The second logical question is how GST authorities can involve in the pricing of the product which is a prerogative of the vendor, inthe present case apartments.

If this news istrue, will that not amount to infringement of fundamental rights of a business entity to take business decisions? How can government interfere in product pricing and costing? In India real estate sector is the largest employer after the agriculture.
Presently, sale of immovable property (land and building) is out of the purview of the GST law.

The exclusion of a constructed property from the ambit of GST happens when either of the two conditions is satisfied. In the absence of the following two conditions GST shall apply to under construction properties.1. Issuance of completion certificate by the competent authority OR 2.

Schedule II reads as follows: –
5(b) Construction of a complex, Building, Civil Structure or part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certification, where required by the competent authority or after its first occupation whichever is earlier.
5(2) of the schedule II further clarifies that the expression “construction” included additions alterations replacements or remodeling of any existing Civil Structure.

In nut shell under construction properties shall come within the ambit of GST. Once construction is completed and completion certificate is obtained or occupancy happens, an apartment falls out of the ambit of GST and as in the case of any immovable property title is transferred in a sale transaction involving stamp duty and registration charges.

So going back to the advertisement of the builder with the catching word NO GST, what he meant is that he is selling a completed property having an occupancy certificate. As in such case, the apartments come within the definition of immovable property and the same is excluded by schedule III of the item 5 of the CGST Act 2017.

Whether or not this NO GST tag in the advertisement does honestly mean complete tax benefit to a buyer?The answer definitely is a big NO. The price which the builder would be willing to transfer title of an immovable property, an apartment in this case consisting of undivided share of land and the agreed built up area is inclusive of all taxes paid for the inputs used for the construction.

Since in such sale the builder is not entitled to claim any input tax benefits,(taxes paid for inputs used for paying the output tax) the net effects of the sale price could be almost similar to an under construction property where GST is also added to arrive at the gross consideration.
In the case of an under construction property, while GST is added to arrive at the gross consideration, the builder enjoys the benefit off setting his output tax liability from the taxes paid for inputs such as steel, cement, tiles, doors, bathroom fitting, switches, fans etc.

Which are estimated as 45% of the cost.While the builder is given the benefit setting off output tax with the input tax, the GST law requires the builder to pass on that benefit to the final consumer by way of commensurate reduction in prices. In order to fully comprehend why national Anti-Profiteering Authority directed Emmar MGF to pass on an amount of 13.5 crore to home buyers, we need to understand how the tax system operated during the pre GST and post GST period.

Period	Output tax Rate	Embedded tax effect of inputs.		Effective rates of tax
Pre GST	Service tax 4.5% VAT 1% to 5%	Central Excise on most construction materials 12.5% VAT 12.5 to 14.5%	No input tax credit (ITC) of VAT and Central Excise duty paid on inputs was available to builder for payment of output tax. Hence it got embedded in the value of properties considering that goods constitute 45% of the value.	Effective Pre – GST tax incidents 15 to 17.75%

COSTING EXAMPLE PRE GST

Cost of material and Labour	Rs.75
Tax on 45% of the material and labour at the rate 12.5% excise and 12.5% VAT.33.75 x 25% =	8.43
Profit	Rs.25
Total sale price before tax	Rs.108.43
Service Tax 4.5%	Rs.4.87
VAT 2%	Rs.2.17
Total sale consideration	Rs.115.47

Tax structure when GST was introduced

GST

Affordable Housing segment 8% other segment 12% after 1/3 abatement of land value

Major Construction materials and input services attract 18% GST.

ITC available and weighed average of ITC incidence 8%-10%

Effective GST incidence, for affordable segments has not increased as compared to Pre GST regime.

COSTING EXAMPLE GST

Cost of material and Labour	Rs.75
Tax on 45% of the material and labour at the rate of 18% GST.33.75 x 18% =	6.07
Profit	Rs.25
Total sale price before tax	Rs.106.43
GST 12%	Rs.12.77
Less input tax credit	Rs.6.07
Total sale consideration	Rs.112.77

Thus with the implementation of GST the net effect of taxes on under construction properties should have been neutral or negative, as under GST, the full amount of input credit would be available for setting off the headline rate of 12%. As a result, the input tax embedded in the under construction property should not form part of the cost.

However, builders started charging more amount as sale consideration just by comparing the headline rate of 12% GST with 6.5%(4% service tax and 2% VAT) in the pre GST regime.
In other words builders were not properly costing their product and passing the benefit of input tax availed by them to be final consumer resulting in higher rate of sale price.

This entire exercise was defeating the anti-inflationary theory envisaged in introducing GST. In this MGF case one of the apartment buyers who booked flat on 24.01.2010 and had paid 10 installments prior to the GST coming into force, (July 2017) filed a complaint dated 07.01.2019 before the standing committee of Anti-profiteering Authority under rule 128 (1) of the CGST rules.

National Anti-profiteering Authority (NAA) is a statutory mechanism under GST law to check the unfair profiteering activities by registered suppliers. The formation of NAA came into being when the 22 nd GST council decided to reduce the rates of large number of items. The object behind NAA is to ensure that the reduction in the rate of tax or the benefit of input tax credit is passed on to the final consumer by way of commensurate reduction in prices.

This is the only way cascading effect of taxes are not saddled on the final consumer and thereby control inflationary impact on the overall economy. In this instant Emaar MGF case, the NAA concluded that there was profiteering by the Emaar MGF in respect of Flat No.

EFP24-050 in their Emerald Floor Premises.
The Emaar has not passed on the benefit of input tax (ITC) by way of commensurate reduction in the price of Flat.
In a similar case, consumer giant Johnson & Johnson was found guilty of profiteering the tax advantage when the rate applied in its products were reduced to 18% from 28%.

The quantum of money arrived was Rs.230 crore. Since the buyers cannot be identified Rs.230 crore was asked to deposit to the consumer welfare fund. The 35 th meeting of the GST council extended the term of NAA up to Nov 2021. The GST council has also sought to impose 10% penalty on a company if the profiteered amount quantified is not deposited in 30 days.

You might be interested: How Camber Is Provided During Construction?

National Anti-Profiteering provision is criticized for not having prescribed a methodology based on which one could determine whether or not there has been profiteering by an enterprise. The law is also silent of a statutory appellate mechanism to deal with challenges to orders of NAA. What is meant by the term commensurate as used in section 171 of the CGST Act is silent as to whether the same has to be an absolute figure of price reduction or would it be enough if the reduction is within a range?.

The 34 th GST council held on 19 th March 2019 decided to lower the rates in the real estate sectors as an impetus to revive the slagging real estate sector which is the second employment producer in India. The GST council also was convinced that the rate reduction in the GST system did not benefit several final consumers as in the case of the complainant in the Emaar MGF case.

In the newly reduced rate scheme, builders are given one time option either to continue to pay at the old rate of 8%-12% with input tax credit for ongoing projects were construction and actual booking both have started before 01.04.2019 but which has not been completed by 31.03.2019.
NEW RATES 1% without on affordable homes.

Affordable homes are houses having 60 sqmt in non-metro/90sqmt in Metro and value not exceeding Rs.45 Lakhs.5% for all houses other than affordable houses. There shall not be any input tax credit available. The promoters could apply new rates only if 80% of the inputs and input services are purchased from a registered vendor.

In case the promoter decides to purchase from unregistered suppliers, the tax for such purchases shall be paid by the promoter at the rate of 18% or higher rates on reverse charge mechanism.
Reverse charge is a mechanism under which the recipient of goods or services is liable to pay tax instead of supplier of goods or services.

In case of transferable development rights and long term lease by a landowner to a developer shall be exempted subject to the condition that the constructed flat are sold as under construction property and applicable GST is paid to the government. In case flats are sold after issuance of completion certificate.

Cost of material and Labour	Rs.75
Tax on 45% of the material and labour at the rate of 18% GST.33.75 x 18% =	6.075
Profit	Rs.25
Total sale price before tax	Rs.106.43
GST 5%	Rs.5.32
Less input tax credit	Nil
Total sale consideration	Rs.111.75

Thus the impact of New rates is lower than the Pre GST regime as the cascading effect of supply by the manufacturer through wholesaler (excise duty in Pre GST regime) is absent almost similar to the Pre GST rate, except that the cascading effect of excise duty is absent.

Government is aware that the real estate sector is the primary sector in India where maximum amount of tax aviation and cash generation takes place despite the inclusion of various stringent provisions in the direct tax code such as Section 269 ST.
Government is considering bringing real estate under the ambit of GST and would result in consumers paying one final tax on the property.

Prathap Pillai | Advocate | High Court of Kerala : GST Rates on Construction Industry- An Analysis

What is the GST rate for affordable homes?

The above information found in the newspaper has caused confusion in the minds of several logical thinkers as the above are contradicting to one another.
In the first advertisement, the builder has advertised to sell homes without GST and in the second news item, a huge sum is bundledupon a builder as penalty by an authority under GST Law and directed to return to clients who have purchased apartments from the builder and also directed to reduce the price of unsold flats.

If this news istrue, will that not amount to infringement of fundamental rights of a business entity to take business decisions? How can government interfere in product pricing and costing? In India real estate sector is the largest employer after the agriculture.
Presently, sale of immovable property (land and building) is out of the purview of the GST law.

Schedule II reads as follows: –
5(b) Construction of a complex, Building, Civil Structure or part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certification, where required by the competent authority or after its first occupation whichever is earlier.
5(2) of the schedule II further clarifies that the expression “construction” included additions alterations replacements or remodeling of any existing Civil Structure.

So going back to the advertisement of the builder with the catching word NO GST, what he meant is that he is selling a completed property having an occupancy certificate.
As in such case, the apartments come within the definition of immovable property and the same is excluded by schedule III of the item 5 of the CGST Act 2017.

Since in such sale the builder is not entitled to claim any input tax benefits,(taxes paid for inputs used for paying the output tax) the net effects of the sale price could be almost similar to an under construction property where GST is also added to arrive at the gross consideration. In the case of an under construction property, while GST is added to arrive at the gross consideration, the builder enjoys the benefit off setting his output tax liability from the taxes paid for inputs such as steel, cement, tiles, doors, bathroom fitting, switches, fans etc.

Period	Output tax Rate	Embedded tax effect of inputs.		Effective rates of tax
Pre GST	Service tax 4.5% VAT 1% to 5%	Central Excise on most construction materials 12.5% VAT 12.5 to 14.5%	No input tax credit (ITC) of VAT and Central Excise duty paid on inputs was available to builder for payment of output tax. Hence it got embedded in the value of properties considering that goods constitute 45% of the value.	Effective Pre – GST tax incidents 15 to 17.75%

COSTING EXAMPLE PRE GST

Cost of material and Labour	Rs.75
Tax on 45% of the material and labour at the rate 12.5% excise and 12.5% VAT.33.75 x 25% =	8.43
Profit	Rs.25
Total sale price before tax	Rs.108.43
Service Tax 4.5%	Rs.4.87
VAT 2%	Rs.2.17
Total sale consideration	Rs.115.47

Tax structure when GST was introduced

GST

Affordable Housing segment 8% other segment 12% after 1/3 abatement of land value

Major Construction materials and input services attract 18% GST.

ITC available and weighed average of ITC incidence 8%-10%

Effective GST incidence, for affordable segments has not increased as compared to Pre GST regime.

COSTING EXAMPLE GST

Cost of material and Labour	Rs.75
Tax on 45% of the material and labour at the rate of 18% GST.33.75 x 18% =	6.07
Profit	Rs.25
Total sale price before tax	Rs.106.43
GST 12%	Rs.12.77
Less input tax credit	Rs.6.07
Total sale consideration	Rs.112.77

However, builders started charging more amount as sale consideration just by comparing the headline rate of 12% GST with 6.5%(4% service tax and 2% VAT) in the pre GST regime. In other words builders were not properly costing their product and passing the benefit of input tax availed by them to be final consumer resulting in higher rate of sale price.

EFP24-050 in their Emerald Floor Premises. The Emaar has not passed on the benefit of input tax (ITC) by way of commensurate reduction in the price of Flat. In a similar case, consumer giant Johnson & Johnson was found guilty of profiteering the tax advantage when the rate applied in its products were reduced to 18% from 28%.

National Anti-Profiteering provision is criticized for not having prescribed a methodology based on which one could determine whether or not there has been profiteering by an enterprise.
The law is also silent of a statutory appellate mechanism to deal with challenges to orders of NAA.
What is meant by the term commensurate as used in section 171 of the CGST Act is silent as to whether the same has to be an absolute figure of price reduction or would it be enough if the reduction is within a range?.

You might be interested: What Is A Finisher In Construction?

In the newly reduced rate scheme, builders are given one time option either to continue to pay at the old rate of 8%-12% with input tax credit for ongoing projects were construction and actual booking both have started before 01.04.2019 but which has not been completed by 31.03.2019. NEW RATES 1% without on affordable homes.

In case the promoter decides to purchase from unregistered suppliers, the tax for such purchases shall be paid by the promoter at the rate of 18% or higher rates on reverse charge mechanism.
Reverse charge is a mechanism under which the recipient of goods or services is liable to pay tax instead of supplier of goods or services.

Cost of material and Labour	Rs.75
Tax on 45% of the material and labour at the rate of 18% GST.33.75 x 18% =	6.075
Profit	Rs.25
Total sale price before tax	Rs.106.43
GST 5%	Rs.5.32
Less input tax credit	Nil
Total sale consideration	Rs.111.75

Government is aware that the real estate sector is the primary sector in India where maximum amount of tax aviation and cash generation takes place despite the inclusion of various stringent provisions in the direct tax code such as Section 269 ST. Government is considering bringing real estate under the ambit of GST and would result in consumers paying one final tax on the property.

Prathap Pillai | Advocate | High Court of Kerala : GST Rates on Construction Industry- An Analysis

Is GST payable on ready to move in or completed property?

Meaning of ‘Construction Services’ under GST Law,2017: As per Section 2(119) of the CGST Act, 2017 as ‘ 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.” As per the GST (Goods and Services Tax) law, construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer is a supply of service and hence, is liable to the goods and services tax (GST). Schedule II of the CGST Act, 2017 pertains to activities or transactions to be treated as ” Supply of goods or supply of services “.5(b) of Schedule-II ” Supply of services” Construction of complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.” Original Work means : As per Notification No.12/2017-CT (Rate), dated.28 th June, 2017, Para 2(zs) “Original Works” means all new constructions.

They are (i) All types of additional and alterations to abandoned or damaged structures on land that are required to make them workable, (ii) Erection, commissioning or installation of plant, machinery or equipment or structures whether pre-fabricated or otherwise. Residential Complex : As per Notification No.12/2017-CT (Rate), dated.28 th June, 2017, Para 2 (zzb) “Residential Complex” means any complex comprising of a building or buildings having more than one single residential unit.

Single Residential Unit : As per Notification No.12/2017-CT (Rate), dated.28 th June, 2017, Para 2 (zze), “Single Residential Unit” means a self-contained residential unit which is designed for use wholly or principally for residential purposes for one family.

Apartment : As per Notification No.12/2017-CT (Rate), dated.28 th June, 2017, Para 3(v) of the notification, The term ‘Apartment means” shall have the same meaning as assigned to it in clause (E) under section 2 of the Real Estate (Regulation and Development) Act,2016,
Whereas, as per Sec.2€ of the RERA Act, The term “Apartment” whether called as block, chamber, dwelling unit, flat, office, showroom, shop, godown, premises, suit tenement, unit or by any other name, means a separate ad self – contained part of any immovable property, including one or more rooms or enclosed spaces, located on one or more floors or any part thereof, in a building or on a plot of land, used or intended to be used for any residential or commercial use such as residence, office shop, show room, or godown or for carrying on any business, occupation, profession or trade or for any other type of use ancillary to the purpose specified.

Affordable Residential Apartment: As per Notification No.12/2017-CT (Rate), dated.28 th June, 2017, Para 3 (vi) of the notification. The term “Affordable Residential Apartment” shall have meaning assigned to it in the notification No.11/2017-Central Tax (Rate), published in the Gazette of India, Extraordinary Part II, Sec.3, Sub-Section(i) dated.28 th June, 2017 vide GSR No.690 E dated.28 th June, 2017.

Promoter: As per Notification No.12/2017-CT (Rate), dated.28 th June, 2017, Para 3(vii) and further Notification No.04/2019–Central Tax (Rate), dated.29.03.2019, w.e.f.01.04.2019.
The term “Promoter” shall have the same meaning as assigned i=to it in clause (zk) under section 2 of the Real Estate (regulation and Development) Act, 2016.

Whereas, as per section 2(zk) of the RERA Act, the term “Promoter means (i). A person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees; or (ii).

A person who develops land into a project, whether or not the person also constructs structures on any of the plots, for the purpose of selling to other persons all or some of the plots in the said project, whether with or without structures thereon, or (iii).
Any development authority or any other public body in respect of allottees of:- (a) Buildings or apartments, as the case may be, constructed by such authority or body on lands owned by them or placed at their disposal by the Government; or (b) Plots owned by such authority or body or placed at their disposal by the Government for the purpose of selling all or some of the apartments or plots; or (iv).

an apex State level co-operative housing finance society and a primary co-operative housing society which constructions apartments or buildings for its members or in respect of the allottees of such apartments or buildings; or (v). Any other person who acts himself as a builder, colonizer, contractor, developer, Estate developer or by any other name or claims to be acting’s as the holder of a power of attorney from the owner of the and on which the building or apartment is constructed or plot is developed for sale ; or (vi).

Such other person who constructs any building or apartment for sale to the general public. Explanation:- For the purpose of this clause, where the person who constructs or converts a building into apartments or develops a plot for sale and the persons who sells apartments or plots are different persons, both of them shall be deemed to be the promoters ad shall be jointly liable as such for the functions and responsibilities specified under this Act or the rules and regulations made thereunder.

Landowner Promoter : Landowner Promoter means as per Explanation given in the Notification No.03/2019-CT(Rate), dated.29 th March, 2019, a promoter who transfer the land or development rights or FSI to a developer-promoter for construction of apartments and receives constructed apartments against such transferred rights and sells such apartments to his buyers independently.

Developer Promoter : Developer Promoter means as per Explanation given in the Notification No.03/2019-CT(Rate), dated.29 th March, 2019, a promoter who constructs or converts a buildings into apartments or develops a plot for sale. Project : As per Notification No 12/2017-CT(Rate), dated.28 th June, 2017, Para 3 (viii) further notification No.04.2019-Central Tax (Rate) dated.29.03.2019, w.e.f.01.04.2019, The term ‘Project” shall mean a Real Estate Project or a Residential Real Estate Project.

Real Estate Project (REP ): As per Notification No 12/2017-CT(Rate), dated.28 th June, 2017, Para 3 (ix) further notification No.04/2019-Central Tax (Rate) dated.29.03.2019, w.e.f.01.04.2019. The term “Real Estate Project (REP)” shall have the same meaning as assigned to it in clause (zn) under Section 2 of the Real Estate (Regulation and Development) Act, 2016, whereas as per section 2 (zn) of the RERA Act “Real Estate Project means the development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of land into plots or apartments as the case may be, and includes the common areas, the development works, all improvements and structures thereon, and all easement rights and appurtenances belonging thereto.

Residential Real Estate Project (REP): As per Notification No 12/2017-CT(Rate), dated.28 th June, 2017, Para 3 (x) further notification No.04/2019-Central Tax (Rate) dated.29.03.2019, w.e.f.01.04.2019,
The term “Residential Real Estate Project (RREP) shall mean a REP in which the carpet area of the commercial apartments is not more than 15% of the total carpet area of all the apartments in the REP.

Carpet Area:- As per Notification No 12/2017-CT(Rate), dated.28 th June, 2017, Para 3 (xi) further notification No.04.2019-Central Tax (Rate) dated.29.03.2019, w.e.f.01.04.2019. The term “Carpet Area” shall have the same meaning as assigned to it clause (k) under section 2 of the Real Estate (Regulation and Development) Act, 2016, where, as per section 2 (zk) of the RER Act, Carpet Area” means net usable floor of an apartment, excluding the area covered by the external walls, area under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.

An Apartment booked on or before the date of issuance of completion certificate or first occupation of the project : :- As per Notification No 12/2017-CT(Rate), dated.28 th June, 2017, Para 3 (xii) further notification No.04.2019-Central Tax (Rate) dated.29.03.2019, w.e.f.01.04.2019,”An Apartment booked on or before the date of issuance of completion certificate or first occupation of the project “shall means an apartment which meets all the following three conditions namely:- (a) Part of supply of construction of the apartment service has time of supply on or before the said date; and (b) Consideration equal to at least one installment has been credited to the bank account of the registered person on or before the said date; and (c) An allotment letter or sale agreement or any other similar document evidencing booking of the apartment has been issued on or before the said date.

Floor Space Index (FSI): :- As per Notification No 12/2017-CT(Rate), dated.28 th June, 2017, Para 3 (xiii) further notification No.04.2019-Central Tax (Rate) dated.29.03.2019, w.e.f.01.04.2019,” Floor Space Index (FSI) shall means the ratio of a building’s total floor area (Gross Floor Area) to the size of the piece of land upon which it is built.

You might be interested: How To Calculate Cement Bags For Slab?

Affordable Residential Apartment : As per Notification No 12/2017-CT(Rate), dated.28 th June, 2017, Para 3 (xiii) further notification No.04.2019-Central Tax (Rate) dated.29.03.2019, w.e.f.01.04.2019,The term ‘Affordable Residential Apartment” shall mean:- (a) A residential apartment n a project which commences on or after 1 st Aprl, 2019, or in an going project in respect of which the promoter has not exercised option in the prescribed form to pay central tax on construction of apartments at the rates as specified for item (ie) or (if) against serial number 3, as the case may be, having carpet area not exceeding 60 square meter in metropolitan cities and 90 square meters in cities or towns other than metropolitan cities and for which the gross amount charged is not more than forty five lakhs rupees.

For the purpose of this clause:- (i) Metropolitan cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi) Noida, Greater Noida, Ghaziabad Gurgaon, Faridabad), Hyderabad, Kolkata, and Mumbai (Whole of MMR) with their respective geographical Limits prescribed by an order issued by the Central Government or State Government in this regard; (ii) Gross amount shall be the sum total of:- A.

Consideration charged for the services specified at item (i) and (ic) in column (3) against sl.3 in Table; B.
Amount charged for the transfer of land or undivided share of land, as the case may be including by way of lease or sublease; and C.
Any other amount charged by the promoter from the buyer of the apartment including preferential location charges, development charges, parking charges, common facility charges etc.

(b) An apartment being constructed in an ongoing project under any of the schemes specified in sub-item (b), sub-item(c),sub-item(d) and sub item(da) and sub-item(db) of item (iv),sub item(b) sub-item(c),sub-item(d) and sub-item(da)of item(v), and sub-item (c) of item(vi), against serial number 3 of table above in respect of which the promoter has not exercised option to pay central tax on construction of apartments at the rates as specified for item(ie) or (if) against serial number 3 as the case may be.

Construction services are divided into 2 construction services: (i) General Construction services for all complete constructions, (ii) Specialized construction services like services related to parts of buildings or civil engineering works, rather than the complete construction services. General Constructions services are divided into 6 categories.

They are as below: 1. General Construction Services of single dwelling or multi dwelling or multi storied residential buildings, 2. General Construction Services of other residential buildings, 3. General Construction Services of industrial buildings, 4.

General Construction Services of commercial buildings, 5. General Construction Services of other non-residential buildings.6. General Construction Services of other buildings n.e.c. Specialized construction services divided into 3 categories. They are as below : 1. Services involving repair, alterations, additions, replacements, renovation, maintenance or remodeling of the buildings covered above, 2.

Site preparation services, 3. Building completion and finishing services. General Construction services of buildings: 1. General Construction Services of single dwelling or multi dwelling or multi storied residential buildings : This services includes construction services of single dwelling or multi dwelling residential buildings and Construction Services of single storied or Multi Storied Residential Buildings.

Service Account Code is 995411.2. General Construction Services of other residential buildings : Construction services of residential buildings for communities, including residences for the elderly, students, children and other social groups such as retirement homes, hostels, fraternity homes, orphanages, homeless shelters etc.

Service Account Code is 995412.3. General Construction Services of industrial buildings : (1) Construction services includes buildings used for production and assembly activities of industrial establishments. (2) Factories, plants and workshops, (3) Agricultural buildings including silos and other storage facilities etc., Service Account Code is 995413 for the above services as per GST Law, 2017.4.

General construction services of commercial buildings: The following Constructions are treated as “Construction services of commercial or administrative buildings “:- (1) Buildings used primarily in the wholesale and retail trades, (2) Shopping centers, shopping malls, department stores, detached shops and boutiques, indoor markets etc., (3) Warehouses, (4) Exhibition halls, (5) Office buildings and bank buildings, (6) Air, Rail, or Road transport terminals, (7) Parking garages and Petrol and service stations etc., (8) Service Account Code is 995414 for the above services as per GST Law, 2017.5.

General Construction services of other non-residential buildings: The following services are considering construction services of other –residential buildings under GST Law, 2017:- (1) Public entertainment buildings such as cinemas, theatres, concert halls, dance halls and nightclubs, (2) Hotels, motels, inns, hostels ad similar buildings, (3) Restaurants, (4) Educational buildings such as schools, colleges, universities, libraries, archives and museums etc., (5) Health-related buildings such as hospitals, clinics and sanatoria including veterinary clinics etc., (6) Indoor sports or recreation installations (ice rinks, gymnasia, indoor tennis courts, general purpose sports halls, boat sheds, boxing rings etc., (7) Convention and congress centers etc., (8) Religious buildings etc., (9) Prison buildings, law courts, parliament buildings etc., (10) Non-residential farm buildings etc., (11) Communication buildings (radio and television broadcast buildings, telephone exchange buildings, telecommunication centers etc., (12) Service Account Code is 995415 for the above services as per GST Law, 2017.6.

General Construction Services of other buildings n.e.c : This Construction Services of other buildings not elsewhere specified classified as” Construction Services of other buildings n.e.c.
Service Account Code is 995416 as per GST Law,2017.
Eligibility of Input Tax : Up to 31 st March,2019 the input tax credit (ITC) was available to supplier of construction services.

But as per recent notification no.3/2019, CT(Rate) dt.29.3.2019, Input Tax Credit shall not be taken (Except to the extent as prescribed in Annexure –I in the case of REP other than RREP and in Annexure-II in the case of RREP. It may be noted that there is no bar in taking ITC for the supply of construction services mentioned against entries No.3(ie) and (if).

There is also no bar for residual entry at S.No.3(xii). Assesse can avail ITC for these entries. Reverse Charge Mechanism : RCM is applicable as per Notification No.3/2019-Central Tax (Rate) dated.29.03.2019. As per the above notification the below items are liable to RCM:- (1) Inputs and input service s (other than cement and capital goods) (a) Calculate tax payments on the shortfall at the end of the financial year, (b) Tax liability shall be added to his output tax liability in the month not later han the month of JUNE following the end of the financial year.

(2) Cement: In the month in which it is received, (3) Capital Goods: Since provisions are silent, hence in the month of receipt of these goods. Rate of Tax for the purpose of RCM: Dear Colleagues for better understanding regarding RCM here with I am providing information in Table Form:

S.NO.	Description	Notification No.	Rate of Tax
1	All inputs other than cement	No.8/2019-CT(Rate) dt.29.03.2019 (Entry No.452Q of Schedule-III)	18%
2	Cement	No.3/2019-CT ( R ) dated.29.03.2019	Applicable Rate
3	All Input Services	No.3/2019-CT(R) dt.29.3.2019 (Entry No.39	18%
4	Capital Goods	——	Applicable Rate.

Requirement of Registration: Requirement of registration under GST Law,2017: As per Section 22 (1) of CGST Act, 2017 every supplier shall be liable to take registration in every State or UT from where he makes a taxable supply of goods /or services, if his aggregate turnover in a financial year exceeds threshold limit of Rs.20 Lakhs or 10 Lakhs in Easter States.

Example for aggregate turnover: (1) If any taxable person (PAN Based) is having business turnover Rs.15 Lakhs and Rs.6 lakhs rental income on immovable property liable to take GST registration. (ii). If any taxable person (PAN Based)is having tax business turnover Rs 13 Lakhs and Rs.6 Lakhs rental income on immovable property not require to take registration (Rs.13 plus Rs.6 lakhs = 19 Lakhs, no obligation to take registration.

(iii) Is any taxable person (PAN Based) is having Rs.25 Lakhs business turnover and such business in “Individual Status” as per Individual PAN Based he has to take registration for such business and income from immovable property belongs to (HUF PAN BASED) and turnover on immovable property of Rs.6 lakhs, there is no obligation to take GST registration under HUF capacity.

S. No	Entry No.	Nature of Service	Gross Rate	Effective Rate
1	3(i)/R	Affordable residential apartment in a RREP (Commenced on or after 01.04.2019 or ongoing projects opted for new rates) intended for sale	@1.5%	@1%
2	3(ia)/R	Residential apartment (other affordable residential apartments) in a RREP (commenced on or after 01.04.2019) or ongoing projects opted for new rates), intended for sale	@7.5%	@5%
3	3(ib)/R	Commercial Apartments in a RREP (commenced on or after 01.04.2019 or ongoing projects opted for new rates) intended for sale	@7.5%	@5%
4	3(ic)/R	Affordable residential apartment in REP, other than in a RREP (commenced on or after 01.04.2019, or ongoing projects opted for new rates), intended for sale	@1.5%	@1%
5	3(id)/R	Residential apartment (other than affordable residential apartments) in REP other than in a RREP (Commenced on or after 01.04.2019, or ongoing projects opted for new rates) intended for sale	@7.5%	@5%
6	3(ie)/R	Ongoing projects in specified schemes (of lower rate of tax) where the promoter has not opted for new rates	@12%	@8%
7	3(if)/R	Commercial Apartments in REP other than in RREP	@18%	@12%
8	3(if)/R	Ongoing Residential apartments as on 31.03.2019, other tha affordable residential apartments, where promoter has opted to pay at old rates (other than S.No1 to 6 above)	@18%	@12%

Note : Gross rate is the rate of specified in the respective entry, and effective rate is after one third deduction rom the total value towards value of land as specified in Paragraph 2 of the Notification No.11/2017 –CTR dated.28 th June, 2017. > Effective GST Rate on affordable housing has been reduced to 1% without the benefit of the ITC as against the earlier effective rate of @8% with ITC. Further new definition has been provided for the term “affordable housing”. For ongoing projects, the constructions under the specified scheme shall be called as “affordable residential apartments” even though they do not satisfy the area requirement (60 or 90 square meters) or Rs 45 Lakhs provided the promoter has opted to pay tax at new rates. > Effective GST Rate for non-affordable housing has been reduced to 5% without Input Tax Credit from the earlier effective rate of 12% with Input Tax Credit. > Amendments apply only to residential projects and not to commercial projects (except located in RREP). > New GST rates are mandatory for new projects from 01 st April,2019, > Residential projects with 15% commercial space will be treated as residential projects, > Transfer of Development Right, Long Term Lease and Floor Space Index etc., an Intermediate tax will be exempt from GST Tax on such residential properties on which GST is payable, otherwise GST shall be payable by the promoter on reverse charge basis on completion of project. Comprehensive Notifications have been issued in this regard, > Builders of ongoing housing projects as on 31 st March,2019 have been allowed to choose either of the two options. (i) Pay GST at existing rates till the completion of project, or (2) adopt the new GST rates. Option for the new rates could be exercised project wise, > Option could be exercised up to 20 May,2019. If the specified form has not been filed, it shall be deemed that promoter has opted new rates, > In the new regime, procurement of(80% of inputs and input services) an capital goods should be made from the registered dealer, other wise tax shall be paid on RCM basis by the Promoter, > Project wise records and accounting shall maintained, > Eligible Input Tax Credit on the ongoing projects shall be mandatory determined by the promoter as per formula laid down in the Notification within 6 months, notwithstanding he does not have any ITC balance as on 31 March, 2019. These calculations not only provide relief to the promoter to carry forwarded ITC to the next year 2019-20, but also make the promoter liable to reverse/pay the ITC excess availed (utilized or not) up to till 31 st March, 2019 which depends upon project to project.

Nehru Baral

Stroymaster – building materials