Differential GST rates allowed within single residential project based on apartment categorization under Notification 11/2017

The AAR Kerala ruled that differential GST rates can be applied within a single residential real estate project. Construction services for affordable residential apartments attract 1.5% GST (0.75% CGST + 0.75% SGST) while other residential apartments attract 7.5% GST (3.75% CGST + 3.75% SGST) under Notification No. 11/2017-Central Tax (Rate). The authority clarified that both rates can be effectively levied in the same project based on apartment categorization, subject to prescribed conditions.

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Issues Involved:
1. Applicability of GST rates for affordable and non-affordable residential apartments within a single residential real estate project.

Summary:

Issue 1: Applicability of GST Rates for Affordable and Non-Affordable Residential Apartments:

The applicant, a leading builder in Kerala, sought an advance ruling on whether different GST rates can be applied to affordable and non-affordable residential apartments within a single residential real estate project as per Notification No. 3/2019. The applicant has been remitting GST at 1% for affordable housing projects and 5% for other residential projects and proposed a new project with both types of units.

The Authority for Advance Ruling clarified that the provisions of the CGST Act and KSGST Act are similar, and the rates specified under Notification No. 11/2017-CT (Rate) dated 28.06.2017, as amended by Notification No. 03/2019 CT (Rate) dated 29.03.2019, are applicable. Specifically, the GST rate for affordable residential apartments is 1.5% (0.75% CGST + 0.75% SGST) and for non-affordable residential apartments is 7.5% (3.75% CGST + 3.75% SGST).

The Authority examined the definitions and conditions under the relevant notifications and concluded that the services of construction of affordable residential apartments and other than affordable residential apartments in a residential real estate project attract GST at the specified rates. Therefore, both rates can be effectively levied within a single project, adhering to the conditions prescribed under the respective entries.

Ruling:

The Authority ruled affirmatively, stating that the services of construction of affordable residential apartments and other than affordable residential apartments in a residential real estate project attract GST at the rates of 1.5% and 7.5% respectively, as per entries at Items (i) and (ia) of SI No. 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017.

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