GST on Real Estate Sector – Comprehensive Guide to the New Scheme (Effective from 1st April 2019)

The real estate sector in India has witnessed significant regulatory changes under the Goods & Services Tax (GST) regime. The revised provisions effective from 1st April 2019 aim to streamline taxation, bring clarity for promoters and contractors, and ensure better compliance. This article outlines key aspects, definitions, and practical implications of GST in the real estate sector.

1. Key Terms to Understand

REP (Real Estate Project): Covers both residential and commercial apartments as per RERA.
RREP (Residential Real Estate Project): A REP where the commercial apartment carpet area is not more than 15% of the total carpet area.

2. Affordable Housing Criteria (Under GST)

To qualify as affordable housing, a residential property must meet both:

Metro Cities (Delhi NCR, Mumbai MMR, Chennai, Kolkata, Bengaluru, Hyderabad):

Carpet Area: Up to 60 sq. meters (approx. 645 sq. ft.)
Value: Up to ₹45 lakh
Non-Metro Cities:

Carpet Area: Up to 90 sq. meters (approx. 969 sq. ft.)
Value: Up to ₹45 lakh

Both conditions must be satisfied for the concessional GST rates.

3. GST in Redevelopment and TDR Transactions

Transfer of Development Rights (TDR):

Developers pay GST on TDR under Reverse Charge Mechanism (RCM).
Time of Supply: First occupancy or completion certificate, whichever is earlier.
GST payable is capped at 1% (affordable residential) or 5% (other residential) for un-booked apartments at completion.

Advance for Extra Area:
If additional square footage is charged separately (not in original agreement), GST applies at the rate applicable to the project at the time the advance is received.

4. GST Liability on Un-Booked Apartments

GST is not applicable on a completed project sale.
However, for TDR transactions, GST is payable on the un-booked flats at completion based on their value nearest to the completion date.

5. Example: GST Calculation for TDR

A step-by-step case shows how GST is calculated for:

1. TDR attributable to residential apartments.
2. GST on un-booked residential apartments.
3. Capping rules (1%/5% of value).
4. Final liability under reverse charge.

6. GST on Renting of Residential Property

Exempt: Renting of residential dwelling for use as residence.
RCM Applicable: Renting by any person to a registered person (w\.e.f. 18 July 2022) — the recipient pays GST, even if the supplier is unregistered or the property is used commercially.

Conclusion:
GST on real estate involves nuanced rules, from affordable housing criteria to redevelopment taxability. Promoters and developers must carefully track booking statuses, transaction timings, and procurement sources to optimize tax compliance and avoid penalties.