Residential real estate project and affordable apartment classification secure concessional GST rate for flat sales.

A post-1 April 2019 residential project with no commercial apartments qualifies as a Residential Real Estate Project where commercial carpet area does not exceed 15% of total apartment carpet area; here, the project met that condition and was treated as an RREP. Apartments in a non-metropolitan location qualify as affordable residential apartments when carpet area does not exceed 90 square metres and the gross amount charged stays within the prescribed limit; the project satisfied both thresholds. As a result, construction of the flats attracts the concessional GST rate applicable to affordable residential apartments in an RREP, with land treated as one-third of the value of supply.

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Issues: (i) whether the project under construction is a Residential Real Estate Project (RREP); (ii) whether the apartments in the project qualify as affordable residential apartments; (iii) what is the applicable GST rate on sale of flats in the project.

Issue (i): whether the project under construction is a Residential Real Estate Project (RREP).

Analysis: A real estate project becomes an RREP where the carpet area of commercial apartments does not exceed 15% of the total carpet area of all apartments. The project disclosed no commercial apartments, and the material on record showed development of a building consisting of apartments for sale.

Conclusion: The project is an RREP.

Issue (ii): whether the apartments in the project qualify as affordable residential apartments.

Analysis: For projects commencing on or after 1 April 2019, an apartment is affordable where it is located in a non-metropolitan area, has carpet area not exceeding 90 square metres in such area, and the gross amount charged does not exceed forty-five lakh rupees. The project is situated in Purba Bardhaman, not in Kolkata metropolitan area, the apartment sizes are within the prescribed limit, and the consideration is within the threshold.

Conclusion: The apartments qualify as affordable residential apartments.

Issue (iii): what is the applicable GST rate on sale of flats in the project.

Analysis: Construction of affordable residential apartments in an RREP commencing on or after 1 April 2019 attracts tax at 1.5% with land valued at one-third of the total amount, resulting in an effective rate of 1%. The higher rate applies only to residential apartments other than affordable residential apartments. Since the project qualifies as an RREP and the apartments are affordable residential apartments, the lower rate applies.

Conclusion: The GST rate on sale of flats is 1.5% with one-third abatement for land, resulting in an effective 1% on the value of supply where land is involved.

Final Conclusion: The application succeeds, and the project is treated as an RREP with affordable residential apartments attracting the concessional rate of tax.

Ratio Decidendi: Where a post-1 April 2019 residential project has no commercial apartments and satisfies the area and value limits for affordability, it is an RREP with affordable residential apartments liable to the concessional GST rate prescribed for such construction services.

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