GST UPDATE ON TREATMENT OF VARIOUS AFFORDABLE HOUSING SCHEMES POST 01.04.2019 PART-6:-

GST UPDATE ON TREATMENT OF VARIOUS AFFORDABLE HOUSING SCHEMES POST 01.04.2019 PART-6:-

In earlier update, we have discussed about the GST rates on various affordable housing schemes post implementation of new scheme for real estate sector w.e.f. 01.04.2019. It was concluded that only the ongoing projects covered under various schemes of affordable housing such as credit linked subsidy scheme for EWS/LIG, Jawaharlal Nehru National Urban Renewal Mission of Rajiv Awas Yojana etc. will be considered as ‘affordable residential apartment’ liable to GST rate of 1%. The new projects will be eligible to concessional GST rate of 1% only if the criteria of 60/90 sq meters + Rs. 45 Lakhs is satisfied. If the criteria is not satisfied, the projects commenced on or after 01.04.2019, even if covered under various affordable schemes would be liable to GST rate of 5% applicable for “construction of apartments other than affordable residential apartments”. In the present update, we will discuss certain other issues such as what will be the GST rate applicable for contractors providing construction services to the promoter in above cases and the amended entries at serial no. 3(iv), 3(v) and 3(vi) of the notification no. 11/2017-Central Tax (Rate) dated 28.06.2017.

The answer to the question regarding the rate of GST applicable to the contractor providing services to the developer with respect to affordable residential apartments lies in entry 3 (va) inserted vide Notification No. 03/2019-Central Tax (Rate) dated 29.03.2019. The said entry states that composite supply of works contract by way of construction/renovation/alteration of affordable residential apartments for which promoter has not opted to pay GST at old rates will be liable to GST at the rate of 12%. However, the condition required to be satisfied for availing concessional rate of 12% is that the carpet area of affordable residential apartments should not be less than 50% of the total carpet area of all the apartments in the project. Moreover, if it is found that the condition of carpet area of 50% affordable residential apartments is not satisfied, the promoter will be liable to pay the differential GST under reverse charge mechanism as if the applicable GST rate was 18%. This will again be hardship for the promoters as the sub-contractor with respect to affordable residential apartments would charge GST at the rate of 12% whereas the GST payable by the promoter on such affordable residential apartments is 1% to be paid in cash. Furthermore, on violation of the condition as regards 50% carpet area for affordable residential apartments, the differential GST would be payable by the builder under reverse charge mechanism in cash thereby ensuring that the concessional GST rate of 12% is applicable only if the contractor provides services with respect to affordable residential apartments constituting at least 50% of the total carpet area of the project.

Now, coming to the another aspect regarding amendment made in the entries 3(iv), 3(v) and 3(vi) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. We submit that the opening paragraph of the above entries has been amended to read as follows:-

*Serial No.*	*Description of services*	*CGST* *Rate*
3(iv)	Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above, supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,- (a) ....................... (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) ....................	6
3(v)	Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above,, supplied by way of construction, erection, commissioning, or installation of original works pertaining to,- (a)................ (b) a single residential unit otherwise than as a part of a residential complex; (c)................	6
3(vi)	Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above,, provided to the Central Government, State Government, Union Territory, a local authority, a Governmental Authority or a Government Entity 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.	6

If we analyse the simultaneous impact of all amended entries of notification no. 03/2019-Central Tax (Rate) dated 29.03.2019, it is found that entries 3(i), (ia), (ib), (ic), (id), (ie) and (if) all pertain to construction of complex, building, civil structure or part thereof, including complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required by the competent authority or after its first occupation, whichever is earlier. However, the entries 3(iv), 3(v), 3(va) and 3(vi) pertain to composite supply of works contract for construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration. Therefore, there is difference in the said entries. Consequently, the entries 3(iv), 3(v), 3(va) and 3(vi) contain phrase “other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above”. However, in our opinion, the entries 3(iv), 3(v) and 3(va) have been kept intact as these prescribe GST rate for the contractors supplying works contract services in relation to construction/renovation of residential apartments. It is found that the government has provided same GST rates for contractor providing works contract services pertaining to various schemes and the affordable residential apartments as 12%. However, the concessional GST rate of 12% is subject to condition that 50% of the carpet area pertains to affordable residential apartments whereas there is no such condition with respect to projects covered under other schemes. This surely creates discrimination as regards works contract services provided by the contractor with respect to various other housing schemes because concessional GST rate of 12% applies without any condition. It is also worth observing that the new projects started on or after 01.04.2019 under the aforesaid housing schemes are not considered as ‘affordable residential apartments’ but still the contractors would enjoy unconditional concessional GST rate of 12% on such projects.
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-6:-

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