GST rate for affordable apartments applies unit-wise, even within mixed residential projects, while non-affordable units face the higher rate.

The amended GST rate notification for construction services in real estate links tax liability to the classification of each apartment, not to whether the entire project is exclusively composed of one category. Affordable residential apartments in a Residential Real Estate Project qualify for the concessional GST rate of 0.75% under item (i) of entry 3, even if the same project also contains non-affordable residential apartments. Non-affordable residential apartments in the same project remain subject to the higher rate under the corresponding entry for such units.

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Issues: Whether the concessional rate of GST of 0.75% under item (i) of entry 3 of Notification No. 03/2019-Central Tax (Rate) applies to affordable residential apartments in a Residential Real Estate Project that also contains residential apartments other than affordable residential apartments.

Analysis: The amended rate notification introduced a new tax structure for construction services in real estate from 01.04.2019. Item (i) applies to construction of affordable residential apartments by a promoter in a Residential Real Estate Project, while item (ia) applies to construction of residential apartments other than affordable residential apartments. The notification definitions of apartment, promoter, project, affordable residential apartment and Residential Real Estate Project show that the rate structure is linked to the category of each apartment, not to exclusive composition of the project. On that reading, each apartment in the project is to be assessed according to its own classification.

Conclusion: The concessional rate of 0.75% is applicable to those units that qualify as affordable residential apartments even where the same project also contains apartments that are not affordable residential apartments. The corresponding higher rate applies to the non-affordable residential apartments.

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