12 percent GST would be applicable on balance amount due to the builder if the housing project has been granted completion certificate by March 31, 2019, The Central Board of Indirect Taxes and Customs (CBIC), while issuing a set of Frequently Asked Questions (FAQs) last week.
According to the FAQs, the builders who have received a completion certificate for an ongoing project before April 1, 2019, will have to charge 12 percent GST from buyers on the balance amount due towards the purchase of the flat.
The FAQs further said that the builders will not be able to adjust the accumulated credits in ongoing projects in case they opt for lower new GST rate of 5 percent for normal and 1 percent for affordable housing.
A few months ago, the GST Council, the upper policy-making body, had suggested a two-rate structure for under-construction flats or ready-to-move-in flats where the completion certificate has not been issued at the time of sale (buyers do not have to pay GST on completed projects). It prescribes 1 percent GST for affordable houses and 5 percent for others. There will not be any ITC. The new rates will be applicable to new projects (launched after April 1) and ongoing projects.
With regard to the question whether it is the buyer or builder who chooses between new and old tax rates, the Board clarified that it is the builder who can exercise the option to pay tax on construction of apartments at the old rate of 12 percent. This can be opted for by May 10 at the latest. “If the builder does not exercises his option to continue to pay tax at the old rate…the effective GST rate applicable on all your (buyer) installments payable to the builder on or after April 1, 2019, shall be either 1 percent or 5 percent, depending on whether the apartment is an affordable or other-than-affordable residential apartment,” it said.
If the builder chooses to stick to the old rates, the buyer will have to pay 8 percent (for affordable) or 12 percent (for others). The builder, in this case, gets an input tax credit (ITC), which should be passed on to the buyer.
