The Authority for Advance Rulings (AAR), Maharashtra has ruled that 12% GST (8% GST after deducting the value of land) would be levied in case of Affordable Housing Project. The authority clarified that if the project qualifies as an Affordable Housing Project, then registration under Pradhan Mantri Awas Yojana is not required to avail this benefit.
It was also clarified that the applicant will be eligible for ITC subject to fulfilment of conditions as prescribed under the GST laws.
The applicant- Firm is a builder is desirous to undertake an affordable housing project in Kolhapur. The applicant is considering the following two options regarding the activities of the project. Firstly, to undertake construction activity on its own. In this case, the required material, labour etc and all other ancillary activities will be undertaken by the firm itself. In that case, the majority of tax rate on inward supplied will be of the rate of 18% or 28%. Secondly, to sublet the entire construction activity to a third-party contractor. In this case, our inward supply will be in the form of a composite works contract service.
Before the AAR, the applicant sought for a clarification with regard to their tax liability under the GST and whether it is mandatory to get the project registered under Pradhan Mantri Awas Yojana(Urban) in order to levy the concessional rate to the prospective buyers.
The authority opined that registration of project under Pradhan Mantri Awas Yojana is not required.
The authority noted that the GST Council in its 25th meeting extended the concessional rate of 12% (8% GST after deducting value of land) to services by way of construction of low cost houses up to a carpet area of 60 sqm in a housing project which has been given infrastructure status under notification No. 13/06/2009 dated 30th March, 2009.
The said notification of Department of Economic Affairs provides infrastructure status to Affordable Housing. It was noted that the benefit would extend the concessional rate to construction of flats/ houses of less than 60 sqm in projects other than the projects covered by any scheme of the Central or State Government also. The Council said that the builder or developer will not be required to pay GST on the construction service of flats etc. in cash but would have enough ITC (input tax credits) in his books to pay the output GST, in which case, he should not recover any GST payable on the flats from the buyers. He can recover GST from the buyers of flats only if he recalibrates the cost of the flat after factoring in the full ITC available in the GST regime and reduces the ex-GST price of flats.
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