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GST – AAR Kerala: GST @ 1.5% is to be paid in respect of the services of construction of affordable residential apartments, and GST @ 7.5% is to be paid in respect of the services of construction of residential apartments other than affordable residential apartments in Residential Real Estate Project [Order attached]

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Admin

28-Oct-2022 13:23:35

Order date – 12 July 2022

Facts –

The Appellant, M/s. Crescent Builders, is a Partnership firm engaged in the development and construction of residential apartments in the State of Kerala. It is engaged in the development and construction of residential apartments.
They proposed residential project consists of 50 units out of which 20 residential units, the sale consideration including all charges will be below 45 lakhs and which would qualify as "Affordable Residential Apartments" as defined in Notification No. 11/2017 as amended by Notification No. 03/2019.
As per the Notification a rate of 0.75% under Item No. (i) of Entry No.3 of Notification No. 03/2019 Central Tax (Rate) can be availed in respect of those units which qualify as "Affordable Residential Apartment" in a "Residential Real Estate Project" when the project consists of both "Affordable Residential Apartments" as well as apartments other than Affordable Residential Apartments.

Issue –

Whether the rate of 0.75% under Item No. (i) of Entry No.3 of Notification No. 03/2019 Central Tax (Rate) can be availed in respect of those units which qualify as "Affordable Residential Apartment" in a "Residential Real Estate Project" when the project consists of both "Affordable Residential Apartments" as well as apartments other than Affordable Residential Apartments?

Order –

The AAR observed that a new tax structure for the real estate sector was introduced with effect from 01.04.2019 onwards by amendment of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 by Notification No. 03/2019 - Central Tax (Rate) dated 29.03.2019. Admittedly, the services of construction of apartments are being rendered by the applicant after 01.04.2019 and hence the rate as notified under the new tax structure is applicable in respect of the construction services rendered by the applicant.
On a combined reading of the entries at Item (i) and (ia) of Sl No.3 of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 and the definitions as per Section 2 of the Real Estate (Regulation and Development) Act, 2016, it is evident that the rate of GST prescribed under the entry at Item (i)applies to the construction of affordable residential apartments and under the entry at Item (ia) applies to the construction of residential apartments other than affordable residential apartments by a promoter in residential real estate project intended for sale to a buyer except where the entire consideration is received after issuance of completion certificate.
The applicant is liable to pay GST at the rate of 1.5% [0.75% - CGST+ 0.75% - SGST] in respect of the services of construction of affordable residential apartments as per entry at Item (i) and the rate of 7.5% [3.75% -CGST+ 3.75% - SGST] in respect of the services of construction of residential apartments other than affordable residential apartments as per entry at Item No. (ia) of Sl No. 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 in the Residential Real Estate Project subject to the conditions prescribed under the respective entries