Real estate GST classification allows mixed residential supply, applies higher tax to commercial apartments, and blocks input tax credit.

The amended real estate GST notification applies to construction undertaken on or after 1 April 2019 and rates depend on apartment classification and the notification's conditions. Affordable residential apartments are taxable at 1.5%, while residential apartments other than affordable units attract 7.5%; both categories may be supplied in the same project if each supply is taxed according to its own classification. Construction of commercial apartments in a real estate project other than a residential real estate project attracts GST at 18% under the relevant entry. Input tax credit on goods and services used for construction of commercial apartments is blocked under section 17, so no credit is available on the facts considered.

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Issues: (i) Whether construction of affordable residential apartments and non-affordable residential apartments under a real estate project is taxable under the amended rate notification; (ii) Whether affordable residential apartments and residential apartments can be supplied conjointly in the same project; (iii) Whether construction of commercial apartments in a real estate project other than a residential real estate project attracts the higher GST rate under the amended rate notification; (iv) Whether input tax credit is available on goods and services used for construction of commercial apartments in a real estate project.

Issue (i): Whether construction of affordable residential apartments and non-affordable residential apartments under a real estate project is taxable under the amended rate notification.

Analysis: The amended rate structure for real estate services applies to construction undertaken on or after 1 April 2019. The notification separately prescribes the rate for affordable residential apartments and for residential apartments other than affordable ones, with valuation governed by the notification's prescribed mechanism. The classification depends on the nature of the apartment and the conditions attached to the respective entries.

Conclusion: The applicable GST rate is 1.5% for affordable residential apartments and 7.5% for residential apartments other than affordable residential apartments, subject to the conditions in the notification.

Issue (ii): Whether affordable residential apartments and residential apartments can be supplied conjointly in the same project.

Analysis: The notification classifies apartments by area and gross amount charged, not by an exclusive project-wise prohibition against mixed supply of apartment categories. Nothing in the notification prevents a promoter from constructing and supplying both categories in the same project, provided each supply is taxed according to its own classification and the relevant conditions are satisfied.

Conclusion: Conjoint supply of affordable residential apartments and residential apartments is permissible, subject to compliance with the notification's conditions.

Issue (iii): Whether construction of commercial apartments in a real estate project other than a residential real estate project attracts the higher GST rate under the amended rate notification.

Analysis: The relevant entry for construction of a complex, building, civil structure, or part thereof, including commercial apartments by a promoter in a real estate project other than a residential real estate project, carries the higher rate prescribed by the notification. The entry is distinct from the entries for affordable and other residential apartments and applies to commercial apartment construction within the notified parameters.

Conclusion: Construction of commercial apartments in such a project attracts GST at 18%, subject to the conditions in the notification.

Issue (iv): Whether input tax credit is available on goods and services used for construction of commercial apartments in a real estate project.

Analysis: Input tax credit under section 16 is subject to the restrictions in section 17. Credit is blocked where goods or services are received for construction of an immovable property on one's own account, including where used in the course or furtherance of business, and the restriction extends to reconstruction, renovation, additions, alterations, or repairs to the extent capitalised. Since construction of the immovable property in question falls within this block, the availability of credit depends on the statutory prohibition rather than the business purpose of the procurement.

Conclusion: Input tax credit is not available for the construction of commercial apartments on the facts considered.

Final Conclusion: The ruling accepts the applicant's position on the applicable GST rates for residential and commercial apartment construction and on mixed supply within the project, but denies input tax credit for construction of commercial apartments because the credit is blocked under the statute.

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