2024 (10) TMI 1376 - AAR - GST

AAR rules GST rates for real estate: 1.5% affordable residential, 7.5% non-affordable residential, 18% commercial apartments under Section 17

In Re: M/s. Castle Realtors

AAR Rajasthan ruled on GST rates for real estate projects. Affordable residential apartments attract 1.5% GST, non-affordable residential apartments 7.5%, ... Classification of supply - GST Rate - supply of affordable and non-affordable apartments under REP - Supply of Affordable residential apartments and residential apartments under REP conjointly - supply of Construction of a complex, building, civil structure or a part thereof, including, commercial apartments (shops, offices, godowns etc.) by a promoter in a RFP other than RREP - Eligibility of Input Tax Credit which will be used in the course of business or for furtherance of business for Construction of Commercial apartments in a Real Estate Project (REP). GST Rate on supply of affordable and non-affordable apartments under REP - HELD THAT:- The services of construction of affordable and other than affordable apartments under REP provided by the applicant fall within the description of services specified in serial no. (ic), (id) and (if) of Notification No. 3/2019-Central Tax (Rate), dated 293-2019 and accordingly the tax rates as prescribed in the said entries shall be applicable to the said services supplied by the applicant. Accordingly, the applicant is liable to pay GST at the rate of 1.5% in respect of the services of construction of affordable residential apartments as per entry at item No. (ic), at the rate of 7.5% in respect of the services of construction of residential apartments other than affordable residential apartments as per entry at item No. (id) and at the rate Of 18% in respect of the services of construction of complex, building, civil structure or a part including commercial apartments (shops, offices, godowns etc,) as per entry at item No. (if) of Notification No. 3/2019-CentraI Tax (Rate), dated 29-3-2019 subject to the conditions prescribed under the respective entries. Whether taxpayer can supply of Affordable residential apartments and residential apartments under REP conjointly? - HELD THAT:- The services provided by taxpayer is clearly fall under notification No. 03/2019-CT (rate) dated 29th March, 2019 - the notification bifurcates affordable and non-affordable apartments by area and gross amount charge for the apartment. There appears no bar for a promoter to supply affordable residential apartments and residential apartments conjointly. The only thing is that the taxpayer has to pay the tax according to the size and gross amount charge for the apartment subject to the condition mentioned in the Notification No. 03/2019-CT(Rate) dated 29th March 2019. GST Rate on supply of Construction of a complex, building civil structure or a part thereof, including, commercial apartments (shops, offices, godowns etc.) by a promoter in a REP other than RREP - HELD THAT:- The applicant is liable to pay GST at the rate of 18% in respect of the services of construction of complex, building, civil structure or a part including commercial apartments (shops, offices, godowns etc.) as per entry at Item No. (if) of Notification No. 3/2019-CentraI Tax (Rate), dated 29-3-2019 subject to the conditions prescribed under the said entry. Eligibility of input tax credit which will be used in the course of business or for furtherance of business for Construction of Commercial apartments in a Real Estate Project (REP) - HELD THAT:- ITC is restricted in case of construction undertaken on his own account. Clause (d) restricts input tax credit of goods and services used by a person for construction of immovable property (except plant and machinery) on his own account. Thus, if a person purchases construction material and engages a labour contractor to provide the construction services using the purchased material, ITC shall not be available of both the goods purchase and the services of the labour contractor procured - Section 16 of CGST Act, 2017 defines the eligibility and conditions for taking input tax credit wherein section 17 of CGST Act,2017 deals in apportionment of credit and blocked credits hence these sections must be treated simultaneously. Thus, input tax credit is not available for construction of immovable property on its own account even if inputs and input services are used in course or furtherance of business. Issues Involved:1. GST Rate on supply of affordable and non-affordable apartments under Real Estate Project (REP).2. Supply of affordable residential apartments and residential apartments under REP conjointly.3. GST Rate on supply of construction of a complex, building, civil structure, or part thereof, including commercial apartments by a promoter in a REP other than Residential Real Estate Project (RREP).4. Eligibility of Input Tax Credit (ITC) for the construction of commercial apartments in a Real Estate Project (REP).Issue-wise Detailed Analysis:1. GST Rate on Supply of Affordable and Non-affordable Apartments under REP:The applicant, engaged in the construction of affordable and non-affordable residential apartments, sought clarity on the applicable GST rates. The ruling clarified that under Notification No. 03/2019-Central Tax (Rate) dated 29th March 2019, the GST rate for affordable residential apartments is 1.5% (0.75% CGST + 0.75% SGST), while for residential apartments other than affordable ones, the rate is 7.5% (3.75% CGST + 3.75% SGST). These rates are subject to the conditions prescribed under the respective entries in the notification. The deduction of one-third of the total amount charged for the supply as the value of transfer of land or undivided share of land is applicable irrespective of the actual value of land.2. Supply of Affordable Residential Apartments and Residential Apartments under REP Conjointly:The applicant queried whether both affordable and non-affordable residential apartments could be supplied conjointly under REP. The ruling confirmed that there is no restriction on supplying both types of apartments together. The differentiation is based on the carpet area and gross amount charged, as defined in the notification. The applicant must comply with the conditions specified in Notification No. 03/2019-CT(Rate) dated 29th March 2019.3. GST Rate on Supply of Construction of a Complex, Building, Civil Structure, or Part Thereof, Including Commercial Apartments by a Promoter in a REP Other than RREP:The applicant was informed that the GST rate applicable for the construction of commercial apartments, as per entry at Item No. (if) of Notification No. 03/2019-Central Tax (Rate), is 18% (9% CGST + 9% SGST). This rate applies to services involving the construction of complex, building, civil structure, or part thereof, including commercial apartments like shops, offices, and godowns, subject to the conditions prescribed under the said entry.4. Eligibility of Input Tax Credit for Construction of Commercial Apartments in a Real Estate Project (REP):The applicant sought clarification on the eligibility of ITC for the construction of commercial apartments. The ruling, referencing Section 17(5) of the CGST Act, 2017, stated that ITC is not available for goods or services received for the construction of an immovable property on the taxpayer's own account, even if used in the course or furtherance of business. The restriction applies unless the construction is for plant and machinery. The ruling emphasized that ITC is blocked for construction activities capitalized in the books of accounts, and thus, ITC is not available for the construction of commercial apartments in this context.Conclusion:The ruling provided clarity on the applicable GST rates for different types of residential and commercial constructions under the specified notifications. It also addressed the eligibility of ITC, emphasizing the restrictions under Section 17(5) of the CGST Act, 2017. The applicant was advised to adhere to the conditions outlined in the relevant notifications to ensure compliance with GST provisions.