GST UPDATE ON TREATMENT OF VARIOUS AFFORDABLE HOUSING SCHEMES POST 01.04.2019 PART-5

GST UPDATE ON TREATMENT OF VARIOUS AFFORDABLE HOUSING SCHEMES POST 01.04.2019 PART-5:-

In earlier updates, we have discussed the basic features of the new scheme introduced for the real estate sector by the government recently and the analysis of the condition of 80% procurement by registered suppliers. In the present update, we seek to discuss about the fate of various kinds of affordable housing schemes post implementation of new scheme for real estate sector w.e.f. 01.04.2019.
Prior to 01.04.2019, the notification no. 11/2017-Central Tax (Rate) dated 28.06.2017 provided concessional rate of GST being 12% with 1/3 deduction of value of land leading to effective GST rate of 8%. The various entries that provided concessional GST rate in order to achieve the objective of the government “Housing for all by 2020” which are listed as follows:-

*Serial No.*	*Description of Service*	*Condition*
3(iv)	Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,- (b) a civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission of Rajiv Awas Yojana; (c) a civil structure or any other original works pertaining to the “ln-situ redevelopment of existing slums using land as a resource, under the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana (Urban); (d) a civil structure or any other original works pertaining to the “Beneficiary led individual house construction / enhancement” under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana; (da) a civil structure or any other original works pertaining to the “Economically Weaker Section (EWS) houses” constructed under the Affordable Housing in partnership by State or Union territory or local authority or urban development authority under the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana (Urban); (db) a civil structure or any other original works pertaining to the “houses constructed or acquired under the Credit Linked Subsidy Scheme for Economically Weaker Section (EWS)/ Lower Income Group (LIG)/ Middle Income Group-1 (MlG-1)/ Middle Income Group-2 (MlG-2)” under the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana (Urban);
3(v)	Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, or installation of original works pertaining to,- (b) a single residential unit otherwise than as a part of a residential complex; (c) low-cost houses up to a carpet area of 60 square metres per house in a housing project approved by competent authority empowered under the 'Scheme of Affordable Housing in Partnership' framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India; (d) low cost houses up to a carpet area of 60 square metres per house in a housing project approved by the competent authority under- (1) the “Affordable Housing in Partnership” component of the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana; (2) any housing scheme of a State Government; (da) low-cost houses up to a carpet area of 60 square metres per house in an affordable housing project which has been given infrastructure status vide notification of Government of India, in Ministry of Finance, Department of Economic Affairs vide F. No. 13/6/2009-INF dated the 30^th March, 2017
3(vi)	[Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, provided] 12 to the Central Government, State Government, Union Territory, [a local authority, a Governmental Authority or a Government Entity]13 by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of – (c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act, 2017.	Provided that where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority, as the case may be

It is submitted that the GST applicable on all the above mentioned entries was 12% with deduction of 1/3 with respect to value of land with effective rate of GST being 8%. Now, the question is that whether the concessional rate of GST enjoyed with respect to above cited entries prior to 01.04.2019 would be continued with the concessional GST rate of 1% pertaining to affordable housing post 01.04.2019 or not? In order to answer this question, reference is made to the definition of ‘affordable residential apartment’ given in the notification no. 03/2019-Central Tax (Rate) dated 29.03.2019 according to which following will be considered as ‘affordable residential apartment’:

A residential apartment in a project which commences on or after 01.04.2019, or in an ongoing project in which promoter has not opted for paying GST at earlier rates, having carpet area not exceeding 60 sq meter in metropolitan cities or 90 sq meter in cities or town other than metropolitan cities and for which gross amount charged is not more than forty lakhs rupees.
An apartment being constructed in an ongoing project under any of the schemes listed above in table, in respect of which promoter has not exercised option to pay central tax on construction of apartments at the old rates.

From the above definition, it is clear that only with respect to ongoing projects, the definition of ‘affordable residential apartment’ includes the various schemes as listed in the table above for the purpose of benefit of 1% GST rate with effect from 01.04.2019. However, it is to be noted that new projects commenced on or after 01.04.2019, and covered under any of the various schemes as listed in the table above will be considered for GST rate of 1% only if the criteria of 60 Sq meters in metropolitan/90 Sq meters in non-metropolitan with total consideration upto Rs. 45 Lakhs is being satisfied. The GST rates applicable can be summarised as follows:-

Serial No.	Whether ongoing project?	Whether project covered under any of the schemes listed in table?	Whether project satisfies criteria of affordable housing (60/90 Sq meter + Rs. 45 Lakhs) post 01.04.2019?	GST Rate applicable	Remarks
1.	Yes	Yes	Not Required as project is considered as affordable	1% (If the promoter does not opts to pay tax at old rates)	In case of ongoing project covered by any of the various schemes as listed above, there is no need to satisfy the criteria of 60/90 sq meters + Rs. 45 Lakhs subsequently
2.	No	Yes	Yes	1%	The new project started on or after 01.04.2019 and covered by various schemes as listed in table is not considered as affordable unless it satisfies the criteria of 60/90 Sq Meters + Rs. 45 Lakhs
3.	No	Yes	No	5%	The new project covered by various schemes as listed in table does not fulfil the criteria of 60/90 Sq Meters + Rs. 45 Lakhs so will be liable to GST rate applicable to residential apartments other than affordable.

This is not the end of the analysis. Certain issues are pending for discussion such as what will be the GST rate applicable for contractors providing construction services to the promoter in above cases. Also, the entries listed in above table have not been omitted and are still part of the notification no. 11/2017-Central Tax (Rate) dated 28.06.2017. These open issues will be covered by us in detail in our next update.

This is solely for the educational purpose.
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GST UPDATE ON TREATMENT OF VARIOUS AFFORDABLE HOUSING SCHEMES POST 01.04.2019 PART-5

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