What is an Amendment in Real Estate: An amendment in real estate GST refers to a modification or change made to the Goods and Services Tax (GST) regulations related to real estate transactions. In the context of real estate, the GST amendment typically involves the revision of rules, rates, or exemptions applicable to the sale, purchase, or lease of properties. These amendments are introduced by the government or the GST council to streamline the taxation process, address any loopholes, or accommodate specific industry requirements. The real estate sector in India has witnessed several amendments in GST since its implementation, impacting various aspects such as the taxation of under-construction properties, input tax credits, affordable housing schemes, and more. Understanding the implications of GST amendments in real estate is crucial for developers, buyers, and other stakeholders in ensuring compliance and making informed financial decisions. By staying updated with the latest GST amendments, one can navigate the complex taxation landscape and effectively manage their real estate transactions within the framework of the law.
AMENDMENT IN REAL ESTATE
AMENDMENT IN 43rd GST COUNCIL MEETING AND NOTIFICATIONS DT. 02.06.2021
1. In an Area Sharing Joint Development Agreement:
- The landowner transfers development rights of their owned land to Developer, and
- The developer develops and constructs superstructure inter-ala for the land owner on the Landowner’s share of Land.
2. GST is chargeable on such construction services provided by Developer to the Landowner.
3. Time of Supply:
- Until now, GST law provided that Developer is liable to pay GST on construction service provided to a landowner in lieu of Development Rights at the time of issuance of Completion Certificate (CC) or first occupation (OC), whichever is earlier.
- If Landowner further sell such allotted area (Flats) to other intended buyers before issuance of CC/OC, he is required to raise an invoice and charge GST as when payment is due from buyer.
4. Accumulation of ITC
- Since Landowner has to pay tax as and when payment is due from its buyers, he has to pay tax in Cash (if the time of supply arises i.e. payments due from buyers prior to CC).
- If the Developer raises an invoice and charges GST at the time of CC or First Occupation, it will result into the accumulation of ITC in the hands of the Landowner.
5. The Developer may charge and pay GST in advance i.e. even prior to date of issuance of CC/first occupation to eliminate the issue of accumulation of ITC in the hands of the Landowner.
6. Now the Government has made an amendment vide N.NO. 3/2019-CT(R) dt. 02.06.2021 that the Developer can pay GST on the construction service provided to Landowners at any time on or before issuance of CC/OC.
7. It is merely a clarificatory amendment to remove the technical ambiguity of the literal interpretation of Notification No. 06/2019 -Central Tax (Rate) dated 29.03.2019.
Utilization of ITC by Landowner for payment of tax liability on Residential Apartments
8. Entry No. 3 of tax rate Notification No. 11/2017-CT(R) has a condition in case of residential apartments that tax has to be paid through Cash only. Considering the technical language of the Notification, someone may literally interpret that although Landowner can avail the credit of GST charged by the Developer but he is required to pay output tax on the sale of such residential Flats through Cash only.
9. The Government as it has specifically allowed the credit to Landowner. Now, through an explanation inserted vide N.No 2/2021-CT(R) dt. 02.06.2021, the Government has clarified this aspect that the Landowner can utilize the ITC of tax charged by the Developer to pay its outward tax liability on such residential apartments. The explanation inserted is quoted below:
“The landowner-promoter shall be eligible to utilize the credit of tax charged to him by the developer promoter for payment of tax on apartments supplied by the landowner-promoter in such project.”