GST on Flats: Payment Deadline Extended Due to Corona virus Pandemic

GST on Flats

Owing to the corona virus outbreak in India government has decided to extend the deadline for payment of GST on flats and no penalties shall be imposed for non-payment.

The government has extended the deadline of GST to be paid for the months of march-may 2020 quarter.

You should know GST on flat and its rates applicable from April 2019 and computation of impact of GST revision on property prices. One should be conscious of the intent of GST, the structure of taxation under GST and the impact of GST on real estate. One should know the effect on GST of flats, GST on real estate and GST on home. 

Will GST help home buyers?

What should be the impact of GST on flats and properties ready for sale and on property rentals? It’s to be seen whether the home loan is going to be more expensive due to GST. What will be the effect of GST on banks? The government has decided to reach relief to companies by extending the deadline of GST. There is an extension of deadline on filling in of forms of GST for the quarter of March to May 2020.

There won’t be any penalty for late payment of GST. There is a task force working under the ministry of finance on the nitty-gritty of the economic package to neutralize the effect of COVID 19 on the business community.

Some key aspects worth noting

Flat owners will be paying GST at the rate of 18% on maintenance charges if their monthly contribution to the welfare association is more than 7500. Residents welfare association will collect GST as monthly subscription or contribution charged from the individual members.

If the charges exceed Rs 7500 per month for each person, the amount will be taxable @18%. About the calculation of tax liability of a person who owns more than one flat in a housing society, the ceiling of 7500 will be applied separately for separate flats owned by the person. Residents Welfare Association can get an input tax credit for GST paid on capital goods like generator or pump and input services like repair and maintenance will also be affected.

There has been an announcement in the Union Budget that there will be a fully automated GST refund module. Instead of multiple ledgers of tax collection, there will be just one. The invoice details of GST on flats and GST on real estate will be done through a centralized system. There will be a transition plan at 5% for under-construction flats and 1% for the flats within affordable housing. The builders can choose the old tax system and the new tax rates for under-construction flats or buildings projects. It will resolve input tax credit (ITC) issues. There is a timeframe for transition given to real estate developers. A project with up to 15% commercial space shall be treated as residential property. It will take care of the disputes arising from the presence of facilities such as clubs in the society, restaurants and so on.

There are some additional announcements on GST on flats and GST on real estate

There is a new condition which says 80% procurement should be done by the developers from registered dealers to benefit from the composite scheme. Any shortfall in the purchase would be levied a tax @18%. Cement purchased from unregistered parties shall be imposed with 28% duty.

Affordable housing definition

The definition of affordable housing has been expanded. It has been expanded to avail benefits of GST. These benefits are for flats costing up to Rs 45 lakhs with an area of 60 sq meters carpet area in the metros like Delhi, Bengaluru, Chennai, Hyderabad, Mumbai and Kolkata. 60 sq meters in metros and 90 sq meters outside metros will be the benchmark for affordable housing that amounts to a 2BHK setup. It will come into effect from April 1 2019. Currently, there is no valuation threshold. The calculation of carpet area varies from project to project.

The intent of the GST

The GST will surpass central excise, service tax, VAT and other levies. It will create a uniform market for consumers. It is expected that the GST will boost the GDP growth and it will help check evasion of taxes. The states are supposed to pass GST laws.

Most developers were apprehensive of the new GST rate without ITC. They were apprehensive about the inputs they had gathered as part of their long-term purchase. The developers who go with the second option of new GST rates will not be able to hike property prices. Hike in rate was being apprehended by the buyers but the developers cannot raise the rate keeping in mind the fragile market of today. For the buyers, this new announcement doesn’t matter much because the lower GST will continue for them.