#GST on Real Estate & Works Contract - A Complete Analysis# By SN Panigrahi

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SN Panigrahi is a Versatile Practitioner, Strategist, Energetic Coach, Learning Enabler.
He is an International-Corporate Trainer, Mentor & Author – PMP Trainer
He has diverse experience and expertise in Project Management, Contract
Management, Supply Chain Management, Procurement, Strategic
Sourcing, Global Sourcing, Logistics, Exports & Imports, Indirect Taxes –
GST etc.
He had done more than 150 Workshops on above
Published more than 500 Articles; More than 60 YouTube
Presentations & More than 70 SlideShares
He is an Engineer + MBA +PGD ISO 9000 / TQM with around 29 Yrs of
Experience
He is a certified PMP® from PMI (USA) and become PMI India
Champion
Also a Certified Lean Six Sigma Green Belt from Exemplar Global
Trained in COD for 31/2 Yrs. on Strategy & Leadership
GST Certified – MSME – Tech. Dev. Centre (Govt of India Organization)
ZED Consultant – Certified by QCI – MSME (Govt of India Organization)
Member Board of Studies, IIMM
Co-Chairman, Indirect Tax Committee, FTAPCCI
Empanelled Faculty in NI MSME
He has shared his domain expertise in various forums as a speaker & presented a number of papers in various national and
international public forums and received a number of awards for his writings and contribution to business thoughts.
SN Panigrahi
9652571117
snpanigrahi1963@gmail.com
Hyderabad

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Supply – As per para 5(b) of Schedule II of CGST Act, the following is ‘supply of service“:
•..(b) Construction of a complex, building, civil structure or a part thereof, including a complex or building
intended for sale to a buyer, wholly or partly, except where the entire consideration has been received
after issuance of completion certificate, where required, by the competent authority or after its
first occupation, whichever is earlier
As per para 6(a) of Schedule II of CGST Act, the following composite supplies shall be treated as a
supply of services, namely:
•..(a) works contract as defined in clause (119) of section 2
Construction of a complex, building, civil structure
works contract
Issuanceof
CompletionCertificate
oritsFirstOccupation
whicheverisEarlier
After CC or FO
Not Treated as Supply
GST Not Applicable
Before CC or FO
Treated as Supply
GST Applicable
Before After
Treated as
Supply of
Service

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Sale of land is out of the scope of the definition of Supply under GST, as the same has
been prescribed under Entry 5 of Schedule III of the CGST Act, 2017.
5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II,
sale of building
Neither Goods Nor Service : SCHEDULE III [Section 7]
Immovable Property
Not Goods
Sec 2(52) of CGST Act
Sale of Land
Entry 5 of Schedule III of
the CGST Act, 2017
Treated as
Neither Goods
Nor Services
No GST

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(a) consideration charged for aforesaid service; and
(b) amount charged for transfer of land or undivided share of
land, as the case may be.
Paragraph 2: In case of supply of service specified in column (3) of
the entry at item (i) against serial no. 3 of the Table above,
involving transfer of property in land or undivided share of land, as
the case may be, the value of supply of service and goods portion
in such supply shall be equivalent to the total amount charged
for such supply less the value of land or undivided share of
land, as the case may be, and the value of land or undivided
share of land, as the case may be, in such supply shall be
deemed to be one third of the total amount charged for such
supply.
Explanation .- For the purposes of paragraph 2, “total amount”
means the sum total of,-
Notification No. 11/2017- Central Tax (Rate) dated 28-06-2017
Sale of Flat /
Building
GST
Applicable on
Total Amount
(whole of the
Consideration
Charged)
(-)
one Third as
Land Value
=
Two-Third of
the Total
Amount

6
Undivided Portion of Land on
which the Complex or Building
is Constructed
Sale of Building
Services undertaken by the
applicant directly or through
other contractors
Goods which are used in
Construction activities
S. No. 3(i) of Notification No. 11/2017- Central Tax (Rate) dated 28-06-2017
Considered as
a Composite
Supply –
Prime Supply
being Super
Structure or
Building
GST
Applicable on
Total Amount
(whole of the
Consideration
Charged)
(-)
one third as
Land Value
=
Two-Third of the
Total Amount
It is observed that as per Section 7(2)(a) of the CGST Act, 2017, activities or transactions specified in Schedule III
of the said Act shall be treated neither as a supply of goods nor a supply of services. Further, Paragraph 5 of the
said Schedule III specifically covers sale of land. Hence, sale of land is not covered under the scope of supply
under GST.

SN Panigrahi 7
Affordable Housing
Other than
Affordable Housing
Commercial
Complexes
GST @ 12%
Effective Rate @ 8%
GST @ 18%
Effective Rate @ 12%
GST @ 18%
Effective Rate @ 12%
ITC Allowed

SN Panigrahi 9
The GST Council in its 33rd GST Council Meeting on February 24th,
2019, has given in principle approval to the new tax rates for Real
Estate Sectors, which are as under:
1. Affordable Housing: 1% without Input Tax Credit (ITC) as
compared to 8% with ITC currently.
2. Other than Affordable Housing: 5% without Input Tax Credit as
compared to 12% with ITC currently.
3. In the 34thMeeting of the GST Council recommended operational details on the earlier
recommendations on real estate sector.
GST New Rates for Real Estate Sector to be effective from 1stApril, 2019
New GST Rates

SN Panigrahi 10
03/2019-Central Tax
(Rate),
dt. 29-03-2019
Amend Notification No.
11/2017- Central Tax (Rate) –
Rates for Services
Notify GST rates of various services as
recommended by Goods and Services Tax
Council for real estate sector
04/2019-Central Tax
(Rate),
dt. 29-03-2019
12/2017- Central Tax (Rate)
Exemption – supply of TDR, FSI and Land
Premium
05/2019-Central Tax
(Rate), dt. 29-03-2019
Specified services - TDR, FSI and land premium to
be taxed under Reverse Charge Mechanism (RCM)
06/2019-Central Tax
(Rate), dt. 29-03-2019
Notify Certain Class of Persons by Exercising
Powers Conferred under Section 148 of CGST Act,
2017
Determines Consideration & Time of Supply
07/2019-Central Tax
(Rate), dt. 29-03-2019
Notify certain services to be taxed under RCM
under section 9(4) - RCM criteria to effect 80% of
inputs/input services from Registered persons.
08/2019-Central Tax
(Rate), dt. 29-03-2019
Rate for RCM @ 18% for Items other than –
Cement and Capital Goods
16/2019 – Central Tax
29th March, 2019
Central Goods and Services
Tax (Second Amendment)
Rules, 2019
Amendments in GST Rules (Rule 42 and Rule 43)

SN Panigrahi 11
S.No. Name of the Service Effective Rate (after
1/3
rd
abatement allow
ed for Land value)
in New Scheme from
01.04.2019
Effective Rates (after
1/3
rd
abatement allowed for
Land value)
in Old Scheme on or before
31-03-2019.
1. Construction of affordable residential
apartments by a promoter in a RREP / in REP
1% (No ITC)
a. 8 %
b. With Full ITC
2. Construction of residential apartments other than
affordable residential apartments by a promoter
in an RREP/ in REP, 5% ( NO ITC)
a. 12 %
b. With Full ITC
3. Construction of commercial apartments (shops,
offices, godowns etc.) by a promoter in an RREP.
Commercial Space
< 15% of Total Commercial Area
5% ( NO ITC)
a. 12 %
b. With Full ITC
4. Construction of commercial apartments (shops,
offices, godowns etc.) by a promoter in an REP
a. 12 %
b. With Full ITC
a. 12 %
b. With Full ITC

SN Panigrahi 12
New Scheme
w.e.f 1st Apr’2019

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RREP
REP
Affordable Housing
Other than
Affordable Housing &
Commercial
Commercial
Complexes
Before Completion
Certificate
After Completion
Certificate
Affordable Housing
Other than
Affordable Housing
Before Completion
Certificate
After Completion
Certificate
New Projects Ongoing Projects
Opt to Continue with
Old Rates
Opt for New Rates
SN Panigrahi
Residential
Real Estate
Project
(RREP)
Real
Estate
Project
(REP)

SN Panigrahi 14
Affordable Housing
Other than
Affordable Housing
+ Commercial
(<15% Carpet Area)
GST Rate
0.75% CGST + 0.75%
SGST = 1.5%
Without ITC
GST Rate
3.75% CGST + 3.75%
SGST = 7.5%
Without ITC
New GST Rate As per Notification
Notification No. 03/2019-Central
Tax (Rate); 29th March, 2019
GST Effective Rate
0.5% CGST + 0.5%
SGST = 1%
Without ITC
After Abatement of 1/3
of Value Towards Cost
of Land
GST Effective Rate
2.5% CGST + 2.5%
SGST = 5%
Without ITC
of Land
RREP
Residential
(Affordable Housing +
Other than
Affordable Housing)
Commercial
GST Rate
3.75% CGST +
3.75% SGST = 7.5%
Without ITC
GST Rate
9% CGST + 9% SGST
= 18%
With ITC
GST Effective Rate
2.5% CGST + 2.5%
SGST = 5%
Without ITC
of Land
GST Effective Rate
6% CGST + 6%
SGST = 12%
With ITC
of Land
REP
Builder has Not Opted
for Old Tax Rates

SN Panigrahi 15
S.No Description of
Construction
Type Applicable
Tax
(Effective
Rate)
Whether
ITC
Eligible
1 Affordable RREP 1% No
2 Other than Affordable RREP 5% No
3 Commercial
(Commercial Space
< 15% of Total Capet Area)
RREP 5% No
4 Affordable or Other than
Affordable - Residential
Other than RREP (REP) 5% No
5 Commercial Other than RREP (REP) 12% Yes

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Affordable Housing
Other than
Affordable Housing
GST Effective Rate
0.5% CGST + 0.5% SGST
= 1%
Without ITC
GST Effective Rate
2.5% CGST + 2.5% SGST
= 5%
Without ITC
Shall be available for,
i. all houses which meet the definition of affordable
houses as decided by GSTC (area 90 sqm in non- metros
/ 60 sqm in metros and value upto Rs. 45 lakhs), and
ii. affordable houses being constructed in ongoing
projects under the existing central and state housing
schemes presently eligible for concessional rate of 8%
GST (after 1/3rd land abatement).
Shall be applicable on construction of,-
i. All houses other than affordable houses in ongoing
projects whether booked prior to or after 01.04.2019.
In case of houses booked prior to 01.04.2019, new rate
shall be available on instalments payable on or after
01.04.2019.
ii. All houses other than affordable houses in new
projects.
iii. Commercial apartments such as shops, offices etc. in
a residential real estate project (RREP) in which the
carpet area of commercial apartments is not more than
15% of total carpet area of all apartments.
Residential Real
Estate Project (RREP)
Notification No. 03/2019-
Central Tax (Rate); 29th
March, 2019
Except the case where One
- Time Option to continue
to pay tax at the Old Rates
on ongoing projects is
opted
Before CC
or First
Occupancy
After CC or
First
Occupancy
No
GST

SN Panigrahi 17
Real Estate Project
(REP)
Residential Real
Estate Project
(RREP)
Any Type of
Construction Meant for Residential and or Commercial
Use
An REP in which the carpet area of the commercial
apartments is not more than 15 percent of the total carpet
area of all the apartments in the REP.

SN Panigrahi 18
Illustration
XYZ developers are constructing a project consisting of residential apartments, shops and
office spaces. The total carpet area of the project , i.e., REP is 1,00,000 square feet (sft.) out
of which the carpet area earmarked for shops is 8000 sft., and that of offices is 6000 sft.
Total carpet area of commercial space is 14000 sft ., or 14% (< 15%). Therefore the
Project Qualify as RREP
Since, the carpet area allocated for commercial space is less than 15%, the project can be termed as
RREP. If the same is more than 15%, then it is other than RREP (or Termed as REP).
Total Carpet Area : 1,00,000
Sq. Ft.
Out of which Carpet Area of
Shops : 8,000 Sq. Ft.
Commercial Office : 6,000
Sq. Ft.
Total Carpet Area of
Commercial Space : 14,000
Sq. Ft.
14% (< 15%)
Project Qualify as
RREP
Total Carpet Area : 1,00,000
Sq. Ft.
Out of which Carpet Area of
Shops : 12,000 Sq. Ft.
Commercial Office : 6,000
Sq. Ft.
Total Carpet Area of
Commercial Space : 18,000
Sq. Ft.
18% (> 15%)
Project Doesn't
Qualify as RREP
REP

SN Panigrahi 19
Residential Real
Estate Project (RREP)
“Real Estate Project" (REP) means the development of a building
or a building consisting of apartments, or converting an existing
building or a part thereof into apartments, or the development of
land into plots or apartments, as the case may be, for the purpose
of selling all or some of the said apartments or plots or building, as
the case may be, and includes the common areas, the development
works, all improvements and structures thereon, and all easement,
rights and appurtenances belonging thereto.
As per section 2(zn) of
the Real Estate
(Regulation and
Development) Act,
2016 [RERA]
Mean a REP in which the carpet area of the commercial
apartments is not more than 15% of the total carpet area of all
the apartments in the REP
- clause (xix) of paragraph 4 of Notification No. 11/2017-C.T. (Rate) and
8/2017-I.T. (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-2019.
The term "Real Estate Project (REP)" shall have the same meaning
as assigned to it in section 2(zn) of the Real Estate (Regulation and
Development) Act, 2016 [RERA]
- clause (xviii) of paragraph 4 of Notification No. 11/2017-C.T. (Rate)
and 8/2017-I.T. (Rate) both dated 28-6-2017 inserted w.e.f. 1-4-
2019.
Notification No. 03/2019-
Central Tax (Rate); 29th
March, 2019

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Non-Metropolitan Cities / Towns
Metropolitan Cities / Towns
Bengaluru, Chennai, Delhi NCR (limited to
Delhi, Noida, Greater Noida, Ghaziabad,
Gurgaon, Faridabad), Hyderabad, Kolkata
and Mumbai (whole of MMR).
Carpet Area
of up to
90 sqm
(968.751938
Sq. Ft.)
Carpet Area
of up to
60 sqm
(645.834625
Sq. Ft.)
Affordable Housing
Effective from 1stApril, 2019
A residential house / flat of carpet area of up to 90 sqm in non-metropolitan cities / towns and 60 sqm in
metropolitan cities having value up to Rs. 45 lacs (both for metropolitan and non-metropolitan cities).
Metropolitan Cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida,
Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR).
Affordable
Housing
Notification
No. 03/2019-
Central Tax
(Rate); 29th
March, 2019
Value up to
Rs. 45 Lacs

SN Panigrahi 21
Note: For arriving 45 Lakh rupees, the consideration charged by builder for
services provided, the value charged for transfer of land or undivided share
of land including lease or sub-lease and any other amount charged by
promoter from buyer including preferential location charges, development
charges, parking charges, common facility charges shall be added.
Rs 45 L
the consideration charged by builder for services provided
the value charged for transfer of land or undivided share of land including lease or sub-
lease
any other amount charged by promoter from buyer including preferential location
charges, development charges, parking charges, common facility charges

SN Panigrahi 22
The new tax rates of 1% (on construction of affordable) and 5% (on other than affordable
houses) shall be available subject to following conditions,-
a) Input tax credit shall not be available,
b) 80% of inputs and input services (other than capital goods, TDR/ JDA, FSI, long
term lease (premiums)) shall be purchased from registered persons.
On shortfall of purchases from 80%, tax shall be paid by the builder @ 18% on
RCM basis.
However, Tax on cement purchased from unregistered person shall be paid @ 28%
under RCM,
and on capital goods under RCM at applicable rates.
Residential Real Estate Project (RREP)
Conditions for the New Tax Rates

SN Panigrahi 23
Residential Real Estate Project (RREP)
Conditions for the New Tax Rates
Affordable
Housing
GST Rate 1%
Other Than
Affordable
Housing
GST Rate 5%
Conditions
 (a) Input Tax Credit shall Not be Available
 (b) In Each Project, 80% of Inputs and Input Services (other than capital goods, TDR / JDA, FSI,
long term lease (premiums)) shall be Purchased from Registered Persons.
 On shortfall of purchases from 80%, the builder shall pay Tax @ 18% on RCM basis.
 However, Tax on Cement Purchased from unregistered person shall be paid @ 28% under RCM
 On Capital Goods under RCM at Applicable Rates.
Applies to residential
and commercial
apartments which are
covered under RERA
The provisions do not
apply to construction
of single houses or
works contracts not
covered under RERA.
Compulsory
for New
Projects
Commenced
on or after
1-4-2019
Notification
No. 03/2019-
Central Tax
(Rate); 29th
March, 2019

SN Panigrahi 24
80% of value of input & input services, shall be received from registered person-For New
Projects and New Rates from 01.04.2019
 For calculating 80%, do not consider / include supplies of TDR, Long Term Lease, FSI,
Electricity, High Speed Diesel, Motor Spirit, Natural Gas.
 Cement purchased from URD suppliers shall be payable on RCM basis @ 28% on monthly
basis & on capital goods @ specified rate.
 Calculation shall be made for each Financial Year or Part thereof (year of receiving OC) In
case of shortfall of 80%, GST is to be paid on shortfall value on RCM basis @ 18% before the
month of June of subsequent year.
 Project wise details of RD & URD is to be maintained.
 inputs and input services on which tax is paid on reverse charge basis shall be deemed
to have been purchased from registered person.
 Example : Services on which RCM is paid, like GTA, security etc.; shall be considered
purchases from registered suppliers.
New Scheme Conditions
The new scheme of charging 5% / 1% with no ITC is mandatory for all new RREP.
It is also mandatory to new REP to the extent of residential units.

SN Panigrahi 25
80% of value of input & input services Following are excluded for this
calculation:
Grant of developmental rights
Long term lease of land
Floor space index
Value of electricity
Value of high-speed diesel
Motor spirit and natural gas
Salary to employees (neither a good nor a service as per clause 1 of
the Schedule III of CGST Act, 2017)
Land value (as per Schedule III, Entry No 5, of CGST Act, sale of land
is not a supply)

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Other than services by way
of grant of development
rights, long term lease of
land (against upfront
payment in the form of
premium, salami,
development charges etc.) or
FSI (including additional
FSI), electricity, high speed
diesel, motor spirit, natural
gas
Pay Tax @
18% on
RCM Basis
on Input &
Input
Services
other than
Cement
On Shortfall of
Purchases from 80%
To be Paid
On RCM
On Capital
Goods
under RCM
at
Applicable
Rates.
Tax on Cement
Purchased
from
Unregistered
person shall
be paid @ 28%
under RCM
On Monthly
Basis
80% of Inputs and Input Services – Shall be
Purchased from Registered Persons
Notification No. 03/2019-Central Tax (Rate); 29th March, 2019
Notification No. 07/2019- Central Tax (Rate); 29th March, 2019
Notification No. 08/2019- Central Tax (Rate); 29th March, 2019
Amended vide Notification No. 24/2019- Central Tax (Rate); 30th Sep, 2019
Inputs and Input Services on which Tax is Paid on Reverse Charge basis shall be Deemed to have been
Purchased from Registered Person
Cement should be
Purchased from
Registered Persons
only

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How to Calculate Shortfall
Other than Cement &
Capital Goods
80% of value of input & input services, shall be received from registered person. In case of shortfall of 80%, GST is to be
paid on shortfall value on RCM basis as Follows:
1. The promoter shall maintain project wise account of inward supplies from registered and unregistered supplier.
2. Input & Input Services Other than Cement
a. Calculate Tax Payments on the shortfall at the end of the Financial Year.
b. Submit the Details of Shortfall in the prescribed form Electronically on the common portal by end of the quarter
following the financial year.
c. The tax liability on the shortfall of inward supplies from unregistered person so determined shall be added to his
output tax liability in the month not later than the month of June following the end of the financial year
d. GST shall be Paid @ 18% on RCM Basis
e. However, On Capital Goods GST shall be paid at the Rate as Applicable on CG
f. First tax is to be paid on cement, if any, received from URP only after GST shall be paid for Other Items
3. For Cement : Tax on Cement Received from Unregistered Person shall be Paid in the Month in which Cement is Received.
Pay GST @ 18% on RCM Basis on Input & Input Services Received
from URP on Financial Year wise
Capital Goods GST @ Rate as Applicable on Such Capital Goods
Cement
GST @ 28% on RCM Basis shall be Paid in the Month in which Cement
is Received. First tax is to be paid on cement, if any, received from
URP only after GST shall be paid for Other Items
1.
2.
3.

SN Panigrahi 28
S.
No
Name of
Input
From
Registered
Dealer (in
Lakhs)
From Un-
Registered
Dealer
(in Lakhs)
First Pay GST
@28% on
Cement on RCM
Pay GST on Balance
Shortfall @ 18%
1 Steel 20
2 Cement 10 5 RCM 5 X 28%
3 Sand 5 5
5 X 18%
4 Bricks 10 5
5 Tiles 5 5
6 Sanitaryware 15 10
7 Paints 5
Total 70 30 Shortfall : 30 – 20 = 10 L
Examples for 80% fulfilment: (total value of inputs Rs 100 lacs)
There is Short fall (Total Purchase from URP Rs 30 L (-) 20% Allowed (Rs 20L) Shortfall becomes 10L)
Cement purchased from URD suppliers shall be payable on RCM basis @ 28% First on Monthly Basis i.e
GST on RCM basis shall be Paid for Rs 5 L @ Rate of 28%.
Then such value of cement to be added to the value of inputs procured from Registered dealer and verify
whether it satisfies the condition of 80%.
Now even after adjusting Rs 5L (Cement) still there is balance Shortfall of Rs 5L. On this Balance of Rs 5L
GST shall be paid @ 18% on RCM
Total purchases from
Registered Dealer is Rs 70
Lacs.
Calculation shall be made for
each Financial Year or Part
thereof (for other than
Cement) on project wise.
Averaging of all the inputs
(in case of more than one
project) shall not be done.
How to Calculate Shortfall - Example

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Advise to Builders
Comply with all the Provisions in the Law
Maintain Separate Records in Each Project Site and Account for all the Inputs/Input Services used
in the said Project.
Maintain Project wise Account of inward supplies from Registered and Unregistered Supplier.
Try to Ensure Minimum 80% of All Purchases from Registered Persons
Identify any Shortfall (<80% Purchases from RP) and Discharge Liability on shortfall on Annual
Basis
However for any Purchases of Cement from UR, Pay GST on RCM @ 28% on Monthly Basis
Shortfall for other than Cement, workout Financial Year wise & Project wise & Pay GST @ 18% on
RCM Latest by June of the following of Financial Year. For Capital Goods as per Rates Applicable.
Declaring ITC not availed every month as ineligible credit in GSTR3B [Row No. 4 (D)(2)]
ITC Should not be Availed

SN Panigrahi 30
Ongoing Projects

31
An ongoing project is nothing but a project which has commenced on or before 31st March,2019.
However, in addition to its commencement, it should meet all the following conditions:
(a) commencement certificate in respect of the project, where required to be issued by the competent authority, has
been issued on or before 31st March, 2019, and it is certified by any of the following that construction of the project
has started on or before 31st March, 2019:-
(i) an architect registered with the Council of Architecture constituted under the Architec ts Act,
1972 (20 of 1972); or
(ii) a chartered engineer registered with the Institution of Engineers (India); or
(iii) a licensed surveyor of the respective local body of the city or town or village or development or planning
authority.
(b) where commencement certificate in respect of the project, is not required to be issued by the competent
authority, it is certified by any of the authorities specified in sub-clause (a) above that construction of the project has
started on or before the 31st March, 2019;
(c) completion certificate has not been issued or first occupation of the project has not taken place on or before the
31st March, 2019;
(d) apartments being constructed under the project have been, partly or wholly, booked on or before the 31st March,
2019 i.e. (i ) part of supply of construction of which has time of supply on or before the 31st March, 2019 and (ii ) at
least one instalment has been credited to the bank account of the registered person on or before the 31st March,
2019 and (iii ) an allotment letter or sale agreement or any other similar document evidencing booking of the
apartment has been issued on or before the 31st March, 2019.
As seen from above, a project which has met all the above conditions is called an on going project.
Ongoing Project : Meaning

SN Panigrahi 32
Ongoing Project
a) Commencement Certificate Issued by the Competent Authority on or before 31st March, 2019
b) Where Commencement Certificate is not required to be issued, then Certificate from Competent
Authority that construction of the project has started on or before the 31st March, 2019
c) completion certificate has not been issued or first occupation of the project has not taken place on
or before the 31st March, 2019
All the Following Conditions shall be Fulfilled
d) Apartments being constructed under the project have been, partly or wholly, booked on or before
the 31st March, 2019

33
(i) an architect registered with the Council of Architecture constituted under the Architec ts
Act, 1972 (20 of 1972); or
(iii) a licensed surveyor of the respective local body of the city or town or village or
development or planning authority.
Competent Authority to Issue
Commencement Certificate

SN Panigrahi 34
S.No. Activity taken place on or before 31st March, 2019 Yes / No
1 Commencement certificate/building permission has been granted
2 The same is certified by architect /chartered engineer / Licenced
Surveyor
3 Site preparation for construction was completed
4 Excavation for foundation has started
5 At least a flat has been booked
6 Builder has entered into an agreement with the buyer
7 Builder has received some advance into his bank account
8 Builder has tax liability/time of supply
9 Completion certificate has not yet been issued.
In case, the answer to all the nine activities listed above is
“yes”, then only the project is to be treated as an ongoing
project.
Check List to Understand Whether A Project Is Ongoing Or Not

SN Panigrahi 35
M/s. ABC Builders are constructing residential apartments in Hyderabad.
They have received necessary permission from GHMC authorities before
31st March, 2019 to construct the said apartments.
Earthwork has been completed and excavation has commenced before 31st
March, 2019.
A flat was booked before 31st March, 2019 in respect of which M/s. ABC
Builders have entered into an agreement and the buyer has paid some
advance to the bank account of the builder and thus, builder has the tax
liability before 31st March, 2019.
Since the construction has not yet completed, no completion certificate was
issued by the competent authority.
Since all the conditions have met, the above project is an ongoing project.
Example : Whether the Project Ongoing

SN Panigrahi 36
On Going Projects : Two Options
Old Rates
ITC Allowed
New Scheme
ITC Not Allowed
Two Options
Opt for the Old Scheme in
Annexure-IV before 20th May’2019
By Default if Not Opted
How to opt for old tax rates:
The promoter who intends to opt for old tax rate has to comply with the following conditions:
i. The project shall qualify as an ongoing project
ii. Option has to be given separately for each project, in case, there are more than one project
iii. He has to submit the option to the jurisdictional Commissioner before 20th May, 2019 in Annexure-
IV specified in Notification No.3/2019-CTR
What if no option is given?
In cases where Annexure-IV is not furnished by the builder, It shall be deemed that the builder is following
new tax structure.
Developer
Ongoing Project

New Projects
Ongoing Projects
Started before 01.04.2019 &
Not Completed by
31.03.2019.
New Scheme
Compulsory for
Projects Commenced
on or after
1-4-2019
Two Options
Opt for Old
Scheme
of Tax i.e. with utilization
of ITC GST @ 12% or
18% (Net After Abatement
8% or 12%)
Submit declaration in
specified form to
jurisdictional
Commissioner before
20-5-2019
Opt for New Scheme
If the promoter does
not submit such
declaration, he is
deemed to have opted
for the new scheme.
No ITC
Allowed
No ITC
Allowed
Affordable
Housing
GST Rate
1%
Other
Than
Affordable
Housing
GST Rate
5%
SN Panigrahi
RREP REP
Affordable
Housing
GST Rate
1%
Other
Than
Affordable
Housing
GST Rate
5%
Residential
Housing
GST Rate
5%
Commercial
GST 12%
ITC
Allowed

SN Panigrahi 38
Annexure - I
Other Than RREP
(REP)
RREP
Annexure - II
Based on the outcome, the promoter has to reverse the credit in case he opted for
New Scheme. In case, the promoter is not having sufficient balance in his credit ledger,
he has to pay the differential amount through cash. In such cases where, the final
result of Annexure-I/II gives negative value, the promoter is allowed to take
fresh credit on the inputs received on or after 1st April, 2019. However, the same
shall not be utilized for discharging his tax liability of 5% or 1% .
Note to builders: To comply with the above provisions, the builders are advised to maintain
separate records in each site and account for all the inputs/input services used in the said
project. Try to procure all the inputs, especially cement from the registered supplier.
ITC Allowed
Continue to Pay
as per Old Rates
Opt for New SchemeOpt for Old Scheme
Forgo ITC Balance &
Reversal of Credit
On Going Projects : Options & Conditions

SN Panigrahi 39
Developer - Promoter Opting for Old
Scheme in Respect of Ongoing Project
Ongoing Project

SN Panigrahi 40
Why to Choose Old Tax Rates
Though the new tax rates are lower than the old ones, the
builder opting the old tax structure is having the facility for
availing ITC. In respect of certain projects, it may be
beneficial to continue with the said facility of ITC though tax
rate is high.
Those who are changing from old tax structure to new have
to forego the benefit of ITC besides requiring to reverse the
ITC

41
Ongoing Projects
Started before 01.04.2019 &
Not Completed by
31.03.2019.
Exercise One Time
Option in the Form
at Annexure IV to
Pay GST as per
Old Rates by the
20th of May, 2019
Affordable
Residential
Apartments
GST @ 12%
(8% After
Abatement of 1/3
of Value Towards
Land Cost
Commercial
Apartments
(in a REP other
than RREP)
Residential
Apartments
(other than
affordable)
GST @ 18%
(12% After
Abatement of 1/3
of Value Towards
Land Cost
Where the Option is Not
Exercised, then shall be
deemed as opted New
Scheme
Notification No. 03/2019-Central Tax (Rate);
29th March, 2019
Notification No.10/2019-Central Tax (Rate)
10th May, 2019
Notification No. 9/2019- Integrated Tax (Rate)
10th May, 2019
Opted to Continue
with Old Rates
Opted to Continue
with Old Rates
SN Panigrahi
Extends last date upto
20th of May, 2019 to pay
tax at the old rates of
12% / 8% with ITC

SN Panigrahi 42
Promoter opting to continue in the old scheme for ongoing
project:
a. Intimate the department by 20th May, 2019 in Annexure IV of his decision to continue in the existing
Scheme. The decision to be intimated separately for each of the project.
b. No need of working out for availment or reversal of credit at the time of such intimation
c. Continue charging tax @ 12% in case of residential apartment other than Affordable and 8% in case of
affordable apartments. Old definition of affordable apartments to continue.
d. Reverse the credit under Rule 42 / 43 for each tax period. Such
reversal has to be made based on the carpet area of the project.
e. Once the first occupation or occupation certificate /completeion certificate for the entire project, whichever
is earlier, takes place – identify the credit pertaining to the unsold inventory as on such date. Avail or reverse
the differential credit by comparing the credit to be reversed based on such computation viz a viz credit
reversed at the end of tax period.
f. The credit computation to be done separately for project wise wherein transition credits taken in
TRAN-1 and credit availed beginning from 1st July, 2017 till the date of OC to be taken. This requires
identification of credit for each of the project separately. (If credit records maintained GSTIN wise in the
earlier period, it has to be identified and reversed project-wise)

SN Panigrahi 43
 Intimate the department by 20th May, 2019 in Annexure IV of his decision to
continue in the existing Scheme. The decision to be intimated separately for each
of the project.
 No need of working out for availment or reversal of credit at the time of such
intimation
 Continue charging tax @ 18% in case of residential apartment and 12% in case
of affordable apartments (12% & 8% after Abatement of 1/3 towards Land Cost).
Old definition of affordable apartments to continue.
 Once the first occupation or completion certificate for the entire project,
whichever is earlier, takes place – identify the credit pertaining to the unsold
inventory as on such date. Avail or reverse the differential credit by comparing
the credit to be reversed based on such computation viz a viz credit reversed at
the end of tax period
Developer - Promoter Opting to Continue in
the Old Scheme for Ongoing Project

SN Panigrahi 44
Developer - Promoter Opting to Continue in
the Old Scheme for Ongoing Project
 Reverse the credit under Rule 42 / 43 for each tax period for credit
pertaining to the unsold inventory after CC. Such reversal has to be made
based on the carpet area of the project.
 The credit computation to be done separately for project wise wherein
transition credits taken in TRAN-1 and credit availed beginning from 1st July,
2017 till the date of OC to be taken. This requires identification of credit for
each of the project separately. (If credit records maintained GSTIN wise in the
earlier period, it has to be identified and reversed project-wise)

SN Panigrahi 45
Project Consists of 100 flats
Each Flat Costs 60 L
ITC available in credit ledger 400 L
Flats sold before Completion Certificate 70
Flats sold after Completion Certificate 30
Value of Supply Liable to GST ((60 lacks x 70) – 1/3 Abatement)
= 4200 L – 1/3 of 4200
2800 L
Intra State Tax (CGST + SGST) liability @ 12 %
Set-Off Using ITC
336 L
Balance ITC Available 64 L
Exempted Sales Value i.e., flats sold after CC (60 lacks x 30) 1800 L
Total Turnover : (60 X 70 + 60 X 30) 6000 L
ITC to be reversed due to exempted sales under Rule 42
= 400 / 6000 X 1800
120 L
Example – Ongoing Projects - Old Scheme

SN Panigrahi 46
Developer - Promoter Opting for New
Ongoing Project

SN Panigrahi 47
a. Intimate the department by 20th May, 2019 in Annexure IV of his decision to
migrate in new scheme. Alternatively, do not intimate the department which itself
would be presumed to be migration to new scheme.
b. Identify the eligibility credit at the time of migration to the new Scheme.
Such eligible credit to be computed based on computation methodology given
in Annexure I or Annexure II as the case may be.
c. If eligible credit > credit availed, avail the additional credit in the future period.
(But where to use such credit as utilization of credit not allowed under 5% scheme.
May be use for other ongoing projects where continued for the old scheme or for
liability under commercial apartments)

SN Panigrahi 48
d. If eligible credit < availed credit, reverse the extra availed credit by debit in electronics credit
ledgers or by payment through electronics cash ledger
e. Such computation to be made and disclosed latest in the GSTR-3B of the month of September,
2019.
f. Start charging tax @ 5% / 1% for all instalments in respect of which time of supply falls post
1.4.2019 and make compliance of 80% of purchase from registered persons.
g. At the time of first occupation or occupation certificate/completion certificate,– No need of any
credit reversal pertaining to the unsold area as the credit has already been reversed at the time of
migration to the new scheme and no new credits would have been taken.
Project-wise details to be submitted by 30th June of each year regarding the fulfilment of 80% of the
purchase from registered persons

SN Panigrahi 49
Explanation. –
1. The promoter shall maintain project wise account of inward supplies from
registered and unregistered supplier and calculate tax payments on the shortfall at the
end of the financial year and shall submit the same in the prescribed form
electronically on the common portal by end of the quarter following the financial year.
The tax liability on the shortfall of inward supplies from unregistered person so determined
shall be added to his output tax liability in the month not later than the month of June
following the end of the financial year.
2. Notwithstanding anything contained in Explanation 1 above, tax on cement received from
unregistered person shall be paid in the month in which cement is received.
3. Input Tax Credit not availed shall be reported every month by reporting the same as
ineligible credit in GSTR-3B [Row No. 4 (D)(2)].
Notification No. 03/2019-Central Tax (Rate)

SN Panigrahi 50
GSTR-3B [Row No. 4 (D)(2)]

51
Developer -
Promotor
Maintain Project wise
Account
Inward Supplies
From
Registered
From
Un-Registered
Calculate Tax Payments on the Shortfall at the end
of the Financial Year
Submit the same in the Prescribed form Electronically
on the common portal by end of the quarter following
the financial year
The tax liability on the shortfall of inward supplies
from unregistered person so determined shall be
Added to his Output Tax Liability in the month not
later than the month of June following the end of
the financial year
Tax on Cement Received from Unregistered Person
shall be Paid in the Month in which Cement is
Received.
Input Tax Credit not availed shall be reported every
month by reporting the same as ineligible credit in
GSTR-3B [Row No. 4 (D)(2)].
Maintain Project
wise Account
Notification No.
03/2019-Central Tax
(Rate); 29th March,
2019

SN Panigrahi 52
ITC transition policy for ongoing projects.
Transitional procedure in respect of accumulated ITC balance for
ongoing projects to be followed as per formula in Annex I & II of
3/2019.
Reversal of ITC in case of transitional period i.e. old rate of tax to
new rate of tax in case of on-going projects.
ITC Transition Policy for
Ongoing Projects

SN Panigrahi 53
Annexure I
REVERSAL OF CREDIT
Residential Real estate project (REP)

SN Panigrahi 54
REVERSAL OF CREDIT
Two Scenarios
Where % completion as on
31.03.19 is not zero or where
there is inventory in stock.
Where % completion as on
31.03.19 is zero but
Credit has been
Availed on Goods
and Services Prior
to
31.03.19.
Invoicing has been
done having Time of
Supply before
31.03.19 and no
Input Services or
Inputs have been
Received as on
31.03.19.

SN Panigrahi 55
Case : 1. Where % completion as on 31st March, 2019 is Not Zero
or where there is Inventory in Stock

SN Panigrahi 56
Reversal of Credit
Where % completion as on 31.03.19 is not zero or where
there is inventory in stock.
Objective : to find out Credit which is Attributable to the Supplies post 01st
April, 2019 and Reverse such Amount.
Total credit taken till 31.03.2019 (including Tran-1 credit, if any), whether utilized or not = T
Eligible Credit Attributable till 31.03.2019 = Te
Amout to be Reversed (Credit which is Attributable to the Supplies post 01st April, 2019)
= Tx
If we deduct such eligible credit (Te) f rom total credit availed, then we get the value of Tx which is
attributable to the supplies going to be made after 01.04.2019 and such credit is required to be
reversed by the builder.
Tx = T – Te
Te = Tr + Tc
Tr = Credit Pertaining to Residential Apartments for which ToS is prior to 31st March, 2019
Tc = Credit Pertaining to Commercial Apartments

SN Panigrahi 57
Te > T
Tx = T – Te
Note :
If, Te is greater than T, the value of Tx arrives in “Negative” which means the Builder has Taken Less Credit
than he was eligible.
Hence, he can take credit to that extent on the inputs / input services received on or after 1st April, 2019.
Te > T => Negative Value
=> Builder has Taken Less Credit
=> Builder Eligible to Take Credit on or After 1st
Apr’2020 to the Extent of Short Taken

SN Panigrahi 58
Example
Case - 1 Case -2
Total Credit Availed
till 31.03.2019 - T
100 L 100 L
Eligible Credit Te 60 L 120 L
Tx = T – Te 100 – 60 = 40 L 100 – 120 = - 20 L
Tx = positive, the
Builder has to Reverse
Rs 40 L
TX = Negative, Builder
can take Credit to the
Extent of Rs 20 L on
or after 1st April,
2019.

SN Panigrahi 59
Te = Tr + Tc
Tc = T X
Carpet Area of Commercial Apartments in REP
Total Carpet Area of Commercial and Residential Apartments.
Tr = (T) * F1* F2 * F3 * F4
F1 =
Carpet Area of Residential Apartments in REP
F2 =
Total Carpet Area of Residential Apartments Booked on or before 31st March, 2019
F3 =
Value of Supply of Construction of Residential and Commercial Apartments Booked on or
Before 31st March, 2019 which has Time of Supply on or before 31st March, 2019
Total Value of Supply of Construction of Residential and Commercial Apartments
booked on or before 31st March, 2019.
F4 =
% Completion of construction as on 31st March, 2019, as submitted to RERA.

SN Panigrahi 60
Illustration
For example, a project which has commenced during 2018 is consisting of 100 residential flats
each of 1000 Sft., carpet area. Hence, the proposed carpet area as per the permission is 1,00,000
Sft. The construction is still under progress and completion certificate has not yet been received.
The builder has not opted for old tax rate, i.e., he has not submitted the required Annexure-
IV. Hence, new guidelines would be applicable.
Out of the proposed 100 flats, 40 flats (carpet area of 40,000 Sft .) were booked prior to 31st
March,2019
Assuming each flat is Rs. 0.6 Crore, the value of bookings happened prior to 31st March,2019
would be Rs. 24 Crores (40 flats * 0.6 Crore/flat).
Out of the 24 Crs, the builder has received 4.8 Crs (i.e., 20% of booking value) prior to 31st
March,2019.
Let‟s assume that 20% of the construction is completed as on 31st March,2019
An amount of 1 Cr was availed towards ITC in respect of said project.
Find How much Amount the Builder to Reverse?

SN Panigrahi 61
Find How much Amount the Builder to Reverse?
Tx = T – Te
T = Rs. 1 Cr.
F1 = 1 since the project is pure residential and falls under the category of RREP.
Here, there is no need to calculate Tr separately, that means Te and Tr are same (Te = Tc +
Tr, as Tc = 0 as the project is RREP, Te= Tr) (Refer Annexure-II of Notification N0.03/2019-
CTR)
F2= 40,000/1,00,000 = 0.40
F3= 4.80/24 =0.2
F4= 1/20%=5
Te= T*F1*F2*F3*F4 =1*1*0.40*0.2*5 = 0.40 Cr.
Te= 0.40 Cr.
Tx = T – Te
= 1-0.4= 0.60 Cr.
Hence, the builder has to reverse 0.60 Cr. Either by debiting electronic credit ledger or
cash.

SN Panigrahi 62
Reversal of Credit
Case – 2
Where % completion as on 31st March 19 is zero but invoicing has been done having ToS before 31st
March 19 and no inputs and input services have been received as on 31st March 19:.

SN Panigrahi 63
Reversal of Credit
Since Invoice/Receipt vouchers have been done prior to 31st March
19, the builder would have paid tax in cash/other credits at old rate.
Since he has paid tax at old rate, credit to such an extent should
be given to the promoter.
Hence, credit which arrives post 1st April 2019 to 31st March
2020 has to be taken into consideration to arrive such credit
which is attributable to the invoicing happened at old rate.
The entire methodology as detailed in previous case, shall be applicable with few changes with
respect to T and F4. F4 will not be in existence since % completion is zero and one divided by
zero would lead to infinity. Hence, F4 is dropped from the formula. Instead of T (total credit), Tn is
being considered which is nothing but credit on goods and services availed during the
period 19-20. Hence, with the said two changes, Te can be calculated and can be availed.
F1, F2 and F3 would remain same and everything else also does not require any change.

64
Reversal of Credit
Tx = T – Te Where Tn is being considered which is nothing but credit on goods and services availed
during the period 19-20.
Te = Tr + Tc Where Tr = Credit Pertaining to Residential Apartments for which ToS is prior to 31st March, 2019
Tc = Credit Pertaining to Commercial Apartments
Tc = T X
Carpet Area of Commercial Apartments in REP
Tr = (T) * F1* F2 * F3
F1 =
Carpet Area of Residential Apartments in REP
F2 =
F3 =
Value of Supply of Construction of Residential and Commercial Apartments Booked on or
Before 31st March, 2019 which has Time of Supply on or before 31st March, 2019
Total Value of Supply of Construction of Residential and Commercial Apartments
booked on or before 31st March, 2019.

SN Panigrahi 65
Deemed Value of Te in Certain Situations
Situation: 1
Where %age completion of invoice > %age completion of project and difference is greater than
25% points, the value of %age invoicing shall be restricted to %age completion of project plus
25% points.
The logic behind this is simple, in absence of such deeming fiction, certain promoters might increase
F3 artificially, so that Te becomes higher and thereby avails such amounts as credit for utilisation post
01st April 19. Hence, the deeming substitution of %age completion of invoices has been proposed.
Let‟s say if percentage of completion as on 31.03.2019 is 20% and percentage of invoices out of the flats
booked as on 31.03.2019 is 60%. Hence, the difference is 40 (60-20). Since, this is more than 25, the value of
invoices / taxable supply prior to 31st March, 2019 shall be restricted to 45% (% Completion 20% + 25%) of
booking value.
Which is 45% of value of flats booked (Rs. 24 Crs.) = 10.80 Crs.
Then, F3 = 10.80 / 24 = 0.45.
Remaining parameters will be same.

SN Panigrahi 66
Deemed Value of Te in Certain Situations
Situation :2
Further, where value of invoices issued on 31st March,2019 exceeds the actual consideration
received on or prior to 31st March, 2019 by more than 25% of consideration actually received,
the value of such invoices for the purposes of determination of %age invoicing shall be deemed
to be actual consideration received plus 25% of actual consideration.
This is also to restrict artificial inflation of F3. There may be certain promoters who would like to raise
invoices stating that ToS was on 31st March,2019, but consideration might not be received. The law
states value of invoices should not exceed by more than 25% of actual consideration.
Let us take an example to understand. The same Promoter has raised invoices on 31st March, 2019 stating
ToS as said date and value of invoices is Rs. 20 Crore and actual consideration received is Rs. 15 Crs. Hence,
the value of invoices is 33% more than the actual consideration received.
Since, the difference has exceeded actual consideration by more than 25%, the %age of value of invoices for
the purposes of F3 shall be taken as 15 Cr + 25% of 15 Cr = 18.75 Cr.

SN Panigrahi 69
JOINT DEVELOPMENT
AGREEMENTS
(JDA’s)

SN Panigrahi 70
Joint Development Agreements or JDAs are a common feature in the real estate sector wherein
the Land Owner Transfers the Development Right of Land to the Real Estate Developer and
gets Flats, a Certain Amount of Revenue or a combination of both in return.
In JDA, the Developer enters into a Development Agreement with Landowner, whereby
 The Developer Acquires the Development Rights from Land Owner with respect to the
Land.
 The development right entitles the developer to Obtain various types of licenses and
approvals from the government authorities and Construct the Complex, Building or Civil
Structure on the Land.
 In return for the transfer of development rights by landowner, the Developer hands over the
Ownership Rights of certain percentage of the developed area ie Super Structures and
may also certain Amount.
 The Remaining Flats Retained by Developer and Sold to various Buyers
JOINT DEVELOPMENT AGREEMENTS

71
For Example,
Developer ABC Ltd enters into a agreement with land owner Mr. XYZ whereas
in lieu of this agreement a total of 100 residential units will be constructed by
ABC ltd on the land provided by Mr. XYZ whereas 40% of the units i.e. 40 units
shall be given to Mr. XYZ and rest 60 units shall be taken by ABC ltd.
Land owner gets 40 units of flats in lieu of the land given and Developer gets
60 units of flats in lieu of the construction work done.
Both can commercially sell the units in the open market.

JDA – Joint Development Agreements
Example:
Total 100 Flats :
Share: Land owner 40% and Developer 60%
Developer Retains 60 & Hands Over to Land Owner 40 Flats
Both can commercially sell the units in the open market.
Land Owner : 40 Flats Developer : 60 Flats
SNPanigrahi
Land
Owner
Developer
Transfer of Development Rights
Buildings / Flats

SN Panigrahi 73
 The Developer Acquires the Development Rights from Landowner with respect to
the Land
 The Development rights entitles the Developer to obtain various types of licenses
and approvals from the Government authorities and construct a complex, building,
civil structure on the land, either by himself, by acqiring material and labour
from Suppliers or getting work done through Works Contractors
 In return for the transfer of development rights by landowner, the Developer gives
the Landowner consideration in the form of Cash (Revenue Sharing)
or Construction Service for certain agreed number of apartments / offices / shops
(Area Sharing) allotted to Landowner or both
 The remaining apartments / Offices / Shops (hereinafter referred to as “Developers
Apartment”) are retained by Developer and sold to other Buyers
 Landowner may also sell Owners Apartment independently to Buyers or decide to
retain it for own use

SN Panigrahi 74
JDA
4 Types of
Transactions Nature of Supply Supplier Recipient Consideration
Transfer of Development
Rights (TDR)
Land
Owner
Builder
Non-
Monetary
Construction Services:
Constructed Buildings /
Flats
Builder
Land
Owner
Non-
Monetary
Sale of Flats to Third
Parties
Builder
End
Customer
Monetary
Sale of Flats to Third
Parties
Land
Owner
End
Customer
Monetary
JDA : 4 Types of Transactions
Transaction - 1
Transaction - 2
Transaction - 3
Transaction - 4

Land Owner Developer
Transaction -1 Transfer of Development Rights : Attracts GST @ 18%
Value of Supply : wholly or partly, in the form of Construction Service
Time of Supply : when either the Possession is Transferred
or the Rightful Area is Demarcated
Transaction – 2 Provides Construction Service : Attracts GST @ 18%
Value of Supply : Wholly or Partly in the Form of Development Rights
Time of Supply : when either the Possession is Transferred
or the Rightful Area is Demarcated
ITC
Allowed
ITC
Allowed
Sale of Flats by Either by Landowner or Developer to Third Parties
Before Completion
Certificate
After Completion
Certificate
GST Not Applicable
Credit to be Reversed
Proportionately
GST on Transfer of Development Rights (TDR) Prior to 1st
April, 2019
SN Panigrahi
 Notification No.
4/2018-Central Tax
(Rate), dated 25th
January, 2018
 In GST regime,
the Transfer of
Development
Rights (TDR) or
Floor Space
Index (FSI) is a
Taxable Supply.
Other than Affordable
Housing
Effective GST Rate
@ 12%
Affordable Housing
Effective GST Rate
@ 8%
Transactions 3 & 4

SN Panigrahi 76
Treatment of TDR/ FSI and Long Term Lease for projects
commencing after 01.04.2019
The following treatment shall apply to TDR/ FSI and Long term lease for projects commencing after
01.04.2019.
i. Supply of TDR, FSI, long term lease (premium) of land by a landowner to a developer shall be
exempted subject to the condition that the constructed flats are sold before issuance of completion
certificate and tax is paid on them. Exemption of TDR, FSI, long term lease (premium) shall be
withdrawn in case of flats sold after issue of completion certificate, but such withdrawal shall be limited
to 1% of value in case of affordable houses and 5% of value in case of other than affordable houses. This
will achieve a fair degree of taxation parity between under construction and ready to move property.
ii. The liability to pay tax on TDR, FSI, long term lease (premium) shall be shifted from land owner to builder
under the reverse charge mechanism (RCM).
iii. The date on which builder shall be liable to pay tax on TDR, FSI, long term lease (premium) of land under
RCM in respect of flats sold after completion certificate is being shifted to date of issue of completion certificate.
iv. The liability of builder to pay tax on construction of houses given to land owner in a JDA is also being shifted
to the date of completion.

SN Panigrahi 77
Treatment of TDR/ FSI and Long term lease for projects commencing
after 01.04.2019
Supply of TDR, FSI, long term lease (premium) of land by a landowner to a
developer shall be exempted subject to the condition that the constructed
flats are sold before issuance of completion certificate and tax is paid on
them.
Exemption of TDR, FSI, long term lease (premium) shall be withdrawn in
case of flats sold after issue of completion certificate, but such withdrawal
shall be limited to 1% of value in case of affordable houses and 5% of
value in case of other than affordable houses.
This will achieve a fair degree of taxation parity between under
construction and ready to move property.

78
Landowner
Developer /
Builder
Supply of Transfer of Development Rights (TDR)
Heading 9972
GST Exempted
To the Extent of Residential
Project only.
Builder shall be Liable to pay tax on TDR,
FSI, long term lease (premium) of land
under RCM in respect of Flats sold after
Completion Certificate
If Conditions not Fulfilled,
then Builder to Pay on RCM
CompletionCertificate
Before CC After CC
Treatment of TDR/ FSI and Long Term Lease for projects commencing
after 01.04.2019
Time of Supply
Date of Issue of CC
SN Panigrahi
Conditions
1. The constructed flats are sold before
issuance of Completion Certificate
and Tax is paid on them
2. The exemption is granted only to the extent
of development rights pertaining to
Residential Apartments.
3. Project having both Residential +
Commercial, then exemption shall be only
to the extent of tax payable on
development rights pertaining to
residential apartments
Builder to Pay on RCM
RCM @
18%
Limited to
Maximum
1% for Affordable
Housing
5% for Other than
Affordable
Housing

SN Panigrahi 79
Builder shall be liable to pay tax at the applicable rate, on reverse charge basis, on such
proportion of value of development rights or FSI (including additional FSI), or both, as is attributable to
the residential apartments, which remain unbooked on the date of issuance of completion certificate, or first
occupation of the project, as the case may be, in the following manner.
GST
Payable by
Developer
on RCM
Treatment of TDR/ FSI and Long Term Lease for projects
commencing after 01.04.2019
In case Exemption Conditions are Not Satisfied
GST payable on TDR or FSI
(including additional FSI) or both
for construction of the residential
apartments in the project but for
the exemption contained herein
Carpet area of the residential
apartments in the project which
remain unbooked on the date of
issuance of completion certificate
or first occupation
Total carpet area of the residential
apartments in the project
The tax payable in any case shall not exceed 5% of value of residential apartments remaining un-
booked on date of issuance of completion certificate. The liability to tax arises on the date of
issuance of completion certificate.

SN Panigrahi 80
FLOOR SPACE INDEX (FSI)
"Floor space index (FSI)" shall mean the ratio of a building's total floor area (gross
floor area) to the size of the piece of land upon which it is built - clause (xxxi) of
paragraph 4 of Notification No. 11/2017-C.T. (Rate) and 8/2017-I.T. (Rate) both
dated 28-6-2017 inserted w.e.f. 1-4-2019.
What is FAR/FSI in India and why is it amended time-to-time?
FSI stands for Floor Space Index also known as Floor Area Ratio (FAR). FSI means the ratio between
the area of a covered floor (Built up Area) to the area of that plot (land) on which a building stands. This
numeric value indicates the total amount of area (on all floors) you can build upon a plot.
What is 2.5 FSI?
F.S.I means Floor Space Index , the ratio of Land and the Built up area of Building in that land . In
1987 F.S.I was 1.5 in Hyderabad, but now it is more than 2.5. National Building Code like Indian Penal Code
Book , giving general Rules and regulations .
Buildings with different numbers of stories may have equal FAR values. Every city has a limited capacity or
limited space that can be used safely. Any use exceeding this limit sets unnecessary pressure on a city.
For a city or country, FSI/FAR value may be amended from time to time depending on the growth of each
city, improved land value, power, water, and sewer facilities.
FAR is feasible to differ because population dynamics, growth models, construction exercises, and the nature
of the land or space where a building is located differ. Industrial, residential, commercial, agricultural and
non-agricultural spaces have different safe loading factors, so they normally have different FARs.

SN Panigrahi 81
Maximum Amount
of Exemption
[GST payable on TDR or FSI (including additional FSI) or both for
construction of the project] x (carpet area of the residential
apartments in the project ÷ Total carpet area of the residential and
commercial apartments in the project )
Maximum
Amount of
Exemption
(including additional FSI) or
both for construction of the
project
Carpet Area of the Residential
Apartments in the Project
Total carpet area of the
residential and commercial
TDR : GST Exemption

SN Panigrahi 82
Value of TDR
Value of supply of service by way of transfer of development rights or
FSI by a person to the builder against consideration in the form of
residential or commercial apartments shall be deemed to be equal to
the value of similar apartments charged by the builder from the
independent buyers nearest to the date on which such
development rights or FSI is transferred to the promoter (Para
1A of Notification 4/2019–CTR).
Landowner
Developer /
Builder
Value of Supply of TDR, FSI
Value of Constructed Apartments
Handed over to Landowner
Say 100
Flats
Constructed
Say 40 Flats Handed over to Landowner
In Leu of Supply of TDR, FSI
Value of Supply of
TDR, FSI
=
Value of 40 Flats

SN Panigrahi 83
Value of Unsold Flats
The value of such unsold or un-booked flats at the date of
completion certificate, shall be deemed to be equal to value of
similar apartments charged by promoter nearest to the date of
issuance of completion certificate (Para 1B of Notification 4/2019–
CTR).
Time of supply
The liability to pay tax in respect of TDRs/FSI as mentioned above,
shall arise on the date of completion certificate / 1st occupation
whichever is earlier.

84
Example
Landowner Developer
Supply of TDR, FSI on 25th April, 2019
Say 100 Flats – 1 L
Sq. Ft. Constructed
Say 40 Flats Handed over to Landowner
In Leu of Supply of TDR, FSI
Third Party
Customer
Value of TDR = Value of Flat Sold (nearest to the date of TDR) Rs 1 Cr X 40 Flats Handed over to Landowner
= Rs 40 Cr
Developer to Pay GST on RCM = Rs 40 X 18% = Rs 7.2 Cr
Value Rs 1 Cr
/ Flat
Case - 1
Developer Sells All The Flats before issuance
of CC or 1st Occupancy
Exempted to Pay GST on RCM by
Developer on TDR
Flat Sold on
5th Dec’2019
Case - 2
Developer Not Sold 10 Flats before issuance
of CC or 1st Occupancy
Developer to Pay GST on RCM
Proportionately on Unsold
Say 100 Flats – 1 L Sq. Ft. Constructed – 10 Flats Remain Unsold ie 10 K Sq. Ft.
Developer to Pay GST on RCM = GST payable on Value of TDR / FSI
Carpet Area of Un-Sold Flats
Total Carpet Area of the Residential
Apartments= Rs 7.2 Cr X 10 / 100 = 0.72 Cr
However, the rate of tax in any case shall not exceed 5% of value of residential apartments remaining un-booked
on date of issuance of completion certificate. The liability to tax arises on the date of issuance of completion
certificate (as amended by 04/2019-CTR).

SN Panigrahi 85
Understand TDRs in Case of Mixed Projects
The exemption is available to the extent of residential project only. The exemption has to be
calculated as under:
Maximum
Amount of
Exemption
(including additional FSI) or
both for construction of the
project
Carpet Area of the Residential
Apartments in the Project
Total carpet area of the
residential and commercial
From the above, it is understood that the exemption is available to the extent of
residential apartments only. Hence, the builder has to pay tax on the value of TDRs
relating to commercial portion.
Note :
The tax payable on TDRs is 18%

SN Panigrahi 86
Whether Builder is Required to Pay Tax on
the Flats Allotted to the Land Owner?
Yes, the builder has to pay the tax. The liability to pay tax in respect of TDRs /
FSI, shall arise on the date of completion certificate / 1st occupation
whichever is earlier.
The Responsibility of Land Owner
The Land Owner is Required to Pay Tax on the Flats Sold by
him to the normal buyer (out of the flats received from builder as
per the development agreement.)
However, he is Eligible to Take the Credit of Tax paid by him to
the builder at the time of transfer / allotment of flats, subject to
condition that all the flats allotted to him shall be sold before
issuance of completion certificate or its first occupation whichever is
earlier.

SN Panigrahi 88
S.No. Category Effective GST Rate Conditions Remarks
1 Residential Projects - RREP
a. Affordable
1% No ITC Up to 15% carpet area
of commercial space
allowed. Rate will be
same as for residential
units.
b. Other than Affordable 5% No ITC
c. Commercial 5% No ITC
2 Mix Projects (Commercial and
residential projects) - REP
Where Commercial
space exceeds 15%
Commercial 12% Proportionate
ITC
Affordable & Other than Affordable 5%
3 Commercial Projects 12% With ITC
What are the rates of GST applicable on construction of
Residential Apartments & Commercial Space?

SN Panigrahi 89
What is an affordable residential apartment?
Carpet area upto 60 square meter in metropolitan cities and 90 square meter in
cities or towns other than metropolitan cities and the gross amount charged for
which, by the builder is not more than forty five lakhs rupees.
GST – 1%
What is an on-going project?

SN Panigrahi 90
What is a Residential Real Estate Project?
A “Residential Real Estate Project” means a „Real Estate Project” in which the carpet area of the commercial
apartments is not more than 15 per cent. of the total carpet area of all the apartments in the project.
Does a promoter/ builder have to purchase all goods and services from
registered suppliers only?
A promoter shall purchase at least eighty percent. of the value of inputand input services, from registered
suppliers. For calculating this threshold, the value of services by way of grant of development rights, long term
lease ofland, floor space index, or the value of electricity, high speeddiesel, motor spirit and natural gas used in
If value of purchases as prescribed above from registered supplier is less than
80%, what would be the applicable GST rate on such purchases?
Promoter has to pay GST @ 18% on reverse charge basis on all such inward supplies (to the extent short of
80% of inward supplies from registered supplier) except cement on which tax has to be paid (by the promoter on
reverse charge basis) at the applicable rate, which at present is 28% (CGST 14% + SGST 14%)

SN Panigrahi 91
What is the rate of GST applicable on transfer of development rights, FSI and long
term lease of land?
Supply of TDR or FSI or long term lease of land used for the construction of residential apartments in a
project that are booked before issue of completion certificate or first occupation is exempt.
Supply of TDR or FSI or long term lease of land, on such value which is proportionate to construction of
residential apartments that remain un-booked on the date of issue of completion certificate or first
occupation, would attract GST at the rate of 18%, but the amount of tax shall be limited to1% or 5%of
value of apartment depending upon whether the residential apartments for which such TDR or FSI is
used, in the affordable residential apartment category or in other than affordable residential
apartment.
TDR or FSI or long term lease of land used for construction of commercial apartments shall attract
GST of 18%.
The above shall be applicable to supply of TDR or FSI or long term lease of land used in the new projects
where new rate of 1% or 5% is applicable.

SN Panigrahi 92
Who is liable to pay GST on TDR and floor space index?
The promoter is liable to pay GST on TDR or floor space index supplied on or after 01-04-2019 on reverse
charge basis
At what point of time, the promoter should discharge its tax liability on
TDR.
The liability to pay GST on development rights shall arise on the date of completion or first occupation of the
project, whichever is earlier. Therefore, promoter shall be liable to pay tax on reverse charge basis, on
supply of TDR on or after 01-04-2019, which is attributable to the residential apartments that remain un-
booked on the date of issuance of completion certificate, or first occupation of the project.

SN Panigrahi 93
Land development corporation of Orissa has provided land on long term lease
for 99 years, for construction of a real estate project. As per the lease
agreement, promoter has to pay an upfront amount of Rs. 10 Crore and
annual / monthly licence fee of 5 lakhs. Does the promoter has to pay
GST on these amounts?
The liability to pay tax on Long term lease of land (30 years or more) received against consideration in
the form of upfront amount and periodic licence fee is on the promoter.
The promoter has to discharge tax liability on the same on RCM basis.
However, the upfront amount payable for the long term lease (known as premium, salami, cost,
price, development charges etc.) is exempt to the extent it is used for construction of
residential apartments that are booked before issuance of completion certificate or first
occupation.
Annual/ monthly rent or licence fee payable for long term lease is taxable under GST.

SN Panigrahi 94
Mode of Payment of Output Tax

SN Panigrahi 95
Transfer of DR/TDR/FSI for Construction of Residential apartments / Residential part
of Mixed Project (having both Residential and Commercial Apartments)
•Taxability:
• Transfer of DR/ TDR/ FSI used for sale of under construction residential units is exempt
• Taxable to the extent of unsold residential apartments on the date of issuance of completion certificate or first
occupation, whichever is earlier
•Person liable to pay Tax: Promoter – Developer (to be paid under RCM)
•Input Tax Credit of tax paid under RCM by Developer – ITC not eligible
•Time of Supply / Payment of Tax (In area sharing, revenue sharing or outright purchase of DR/TDR/FSI):
• Earlier of
• Issuance of Completion certificate; or
• First occupation of project
•Value of Supply (Value of DR/TDR/FSI):
• Area sharing: value of similar apartments charged by promoter from independent buyers nearest to the date of
transfer of DR/TDR/FSI;
• Revenue sharing: monetary consideration paid to the Landowner as revenue share;
• Outright purchase: value of monetary consideration paid for outright purchase
•GST Tax to be Paid:
• Lower of
• 18% on Value of DR/TDR/FSI in proportion to carpet area of such unsold residential apartments & all
commercial apartments to total carpet area of residential apartments & commercial apartments; or
• 1% / 5% of Value of such unsold apartments & all commercial apartments. Value of unsold apartments is
deemed to be equal to value of similar apartments charged by the promoter nearest to
the date of completion certificate or first occupation, whichever is earlier

SN Panigrahi 96
Transfer of DR/TDR/FSI for Construction of Commercial apartments
•Taxability:
• Fully taxable
•Person liable to pay Tax: Promoter – Developer (to be paid under RCM)
•Input Tax Credit of tax paid under RCM by Developer:
• For RREP (with Commercial portion less than 15%) – ITC not eligible
For REP – ITC attributable to Commercial portion can be claimed
For Commercial projects – ITC is eligible
•Time of Supply / Payment of Tax (In area sharing, revenue sharing or outright purchase of DR/TDR/FSI):
• Area Sharing: Earlier of:
• Issuance of Completion certificate; or
• First occupation of project
• Revenue Sharing:
• SRA Projects (continuous supply of service) – Periodical release of FSI;
• JDA projects – Date of transfer of DR/FSI irrevocably
• Outright purchase – Date of transfer of DR/TDR/FSI
•Value of Supply (Value of DR/TDR/FSI):
• Area sharing: value of similar apartments charged by promoter from independent buyers nearest to the
date of transfer of DR/TDR/FSI;
• Revenue sharing: monetary consideration paid to the Landowner as revenue share;
• Outright purchase: value of monetary consideration paid for outright purchase
•GST Tax to be Paid:
• 18% on Value of DR/TDR/FSI

SN Panigrahi 97
Changes in ITC Rules – Quick Gaze
1.All Monthly details of Builder Purchases to be reported in GSTR-3B or FORM GST DRC-
03 (provision made in Rules)
2.Basis for Exempted Service identification is Carpet Area of Exempted Units
3.Project Wise Measuring of ITC from 1.7.2017 to OC / CC (Sep Month of FY)
4.Where any capital goods used for the project have their useful life remaining on the
completion of the project, input tax credit attributable to the remaining life shall be
availed in the project in which the capital goods is further used

SN Panigrahi 98
ITC on lease rental of land on which
Hotel is being constructed for pre-
operative period
In re GGL Hotel And Resort Company Limited (GST AAR West Bangal)
Order Number 30/WBAAR/2018-19; 11/10/2018
Whether ITC is admissible on lease rental paid for the pre-operative period for the land on which a hotel
is being constructed?
RULING
Input Tax Credit is not available to the Applicant for lease rent paid during pre-operative period for the
leasehold land on which the resort is being constructed on his own account to be used for furtherance of
business, when the same is being capitalised and treated as capital expenditure.
This ruling is valid subject to the provisions under Section 103 until and unless declared void under
Section 104(1) of the GST Act

HSN Description of goods Rate
Chapter 72 Steel 18 per cent
2523 Cement 28 per cent
6802 Marble and granite 18 per cent
2515
Blocks of marble and
granite
12 per cent
Chapter 68
Sand lime bricks and fly
ash bricks
12 per cent
2505 & 2517
Natural sand, pebbles,
gravel
5 per cent
8428 Lifts and Elevators 28 per cent
Data provided by: BMR

SN Panigrahi 100
Preferential Location Service
(PLS) in a Real-Estate Project

SN Panigrahi 101
PLS helps buyers get directional advantage or floor rise, and attracts a preferred location charge (PLC)
that is levied for units that are better located than others in the same premises, such as the ones facing a
park, open area or even corner flats.
Tax liability
This levy is over and above the basic sales price (BSP). The new ruling makes it clear that PLS cannot
be associated with land. In other words, while the cost of the plot of land on which the construction is
done is exempt from GST, PLS is not tax-free.
Preferential location service (PLS) in a real-estate project cannot be treated as a part of
construction service, West Bengal Appellate Authority for Advance Ruling (AAAR-WB)
has ruled. It also ruled that the same would hold good for the right to use of parking
space.
In re Assistant Commissioner, State Tax, Park Street Charge, Kolkata (GST AAR West Bengal)
Appeal Case No. 09/WBAAAR/APPEAL/2019; 25/09/2019

SN Panigrahi 102
The case
AAR, in its ruling, had said that the company is providing service of construction of a dwelling unit in a
residential complex, bundled with services relating to the preferential location of the unit and the right to use
car parking space and common areas and facilities. “It is a composite supply, construction service being
the principal supply. Entire value of the composite supply is, therefore, to be treated, for the purpose of
taxation, as supply of construction service, taxable,” the authority said in its ruling dated May 2.
AAR Ruling- No higher GST on preferential location, car parking, common areas & facilities
AAAR-WB Modified the Ruling of AAR Ruling
construction service, West Bengal Appellate Authority for Advance Ruling (AAAR-WB) has
ruled. It also ruled that the same would hold good for the right to use of parking space.

SN Panigrahi 103
The rate of GST and abatement on value of construction service have been stipulated in notification no.
11/2017-Central Tax(Rate) dated 28/06/2017 [corresponding State Notification No. 1135-FT dated
28/06/2017]. The rate is provided in SI. No. 3 of the Table provided in the said Notification, which categorizes
three types of construction services, which are as follows :
(i) Construction of a complex, building, civil structure or a part thereof including a complex or building
intended for sale to a buyer, wholly or partly, except where the entire consideration has been received
after issuance of completion certificate, where required, by the competent authority or after its first
occupation, whichever is earlier. (Provisions of paragraph 2 of this notification shall apply for valuation of
this service).
(it) Composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services
Tax Act, 2017.
(iii) Construction services other than (i) and (ii) above.
It is clear from the said categorization that PLS should come under category no. 3(iii) as the other two
categories are clearly defined. Abatement to the extent of 1/3rd of the total amount charged for supply of the
service mentioned under SI. No. 3(i) of the Rate Notification has been allowed under para 2 of the said
Notification. No abatement has been provided for service mentioned under SI. No. 3(iii) of the said
Table.
Accordingly the Advance Ruling No. 01/WBAAR/2019-20 dated 02.05.2019 is modified to this effect and the
Appeal stands disposed of has above.

SN Panigrahi 104
AAAR-WB heard an appeal by the State Tax Department against ruling by Authority for Advance Rulings
(AAR) in the matter of Bengal Peerless Housing Development Company Limited. The key issue was
taxability of services relating to preferential location and right to use of car parking space.
After hearing both sides on appeal petition, the AAAR held that the very transaction mechanism of PLS is
that the builder charges a separate consideration from the buyer for choosing a particular
floor/location advantage. It is evident that PLS cannot be treated as
naturally bundled with construction service in the
ordinary course of business.
Thus, the abatement, which is allowed on construction service with respect to land on which construction is
done, cannot be extended to PLS as it is altogether a separate service having no association with land.
construction service, West Bengal Appellate Authority for Advance Ruling (AAAR-WB) has
ruled. It also ruled that the same would hold good for the right to use of parking space.

SN Panigrahi 105
GST payable on supply & installation of car parking system as works contract
Precision Automation and Robotics India Limited (GST AAR Maharashtra)
Advance Ruling NO.GST-ARA-39/2017-18/B-46; 13/06/2018
Issue- Whether the activity of supply and installation of ‘car parking system’ would qualify as immovable
property and thereby ‘works contract’ as defined in Section 2(119) of the CGST Act.
For ease of understating of the complex process of installation of car parking system, we have depicted the
same by way of a diagram:
Drawing & design of the car parking system is prepared according to the requirement of the customer
Manufacture, build, lest, dismantle, packing and supply steps
Building specific foundation (either in the basement of building or on land) as per the requirement of the car parking to be installed
Steel structure frame work (and/or RCC support) according to the car parking system is created and installed on the foundation
Various part:, such as pallets, control panel, side sliding suspension, operator panel, electrical systems are installed in the RCC structure
Safety features such as pallet overriding sensor, guiding sensor, car loading sensor and other safety equipments are installed
Testing is undertaken by the Company

SN Panigrahi 106
GST payable on supply & installation of car parking system as works contract
Precision Automation and Robotics India Limited (GST AAR Maharashtra)
Advance Ruling NO.GST-ARA-39/2017-18/B-46; 13/06/2018
The Company generally executes a composite contract with the customer which inter alia includes supply of
parts of car parking system as well as installation & commissioning services – which requires high technical
skill, mechanical and mechatronics knowledge, compliance with engineering specifications, knowledge of
safety requirements and other such regulations.
It is clear that under GST Regime the manufacturing of Car parking System is covered under HSN code 8428
and the installation and commissioning of the same is covered under SAC code 995466. In the instant matter
it is obvious that the applicant generally receive composite order for manufacturing and installation of car
parking system. Therefore, the same is to be considered as composite supply as defined under clause (30)
of Section 2 of Central Goods and Services Tax Act, 2017 The text of clause (30) of Section 2 of the said Act
is reproduced herein as under
Held- Since transaction of supply and installation of a ‘car parking system’ would qualify as
immovable property and thereby ‘works contract’ as defined in Section 2(119) of the CGST Act.

SN Panigrahi 108
So, different aspects of one a single activity were taxed by different laws. This caused a lot of
confusion regarding treatment and taxability which is why there were so many legal disputes inrelated to
works contracts.
Works
Contract
ServicesGoodsInvolves
Taxed
VAT
Taxed
Service Tax
New
Product
Created
Taxed
Excise Duty

SN Panigrahi 109
Works
Contract
Treated as Service
This means works contract will be treated as service and tax would be charged accordingly (not as
goods or part goods/part services).
This treatment of works contract as service and not as supply of goods will bring in much needed
clarification to the works contracts eliminating confusions over applicability of various taxes.
May Include
Transfer of Goods

110
Works Contracts has been defined in Section 2(119) of the CGST Act, 2017
as
“works contract” means a contract for building,
construction, fabrication, completion, erection, installation,
fitting out, improvement, modification, repair, maintenance,
renovation, alteration or commissioning of any immovable property
wherein transfer of property in goods (whether as goods or in
some other form) is involved in the execution of such contract.”

Works
Contract
A
composite
Contract
For
Works
(Services)
On
Immovable
Property
May
Involve
Transfer
of
Property
In Goods
Building Installation Maintenance
Construction Fitting out Renovation
Fabrication Improvement Alteration
Completion Modification Commissioning
Erection Repair
only includes 14 types
As per Para 6 (a) of Schedule II to the CGST Act, 2017, works contracts
as defined in section 2(119) of the CGST Act, 2017 shall be treated as a
supply of services.
Works
Contract
Defined
Sec 2(119)
CGST Act,
2017
Works
Contract
Treated as
Service

112
Para 6 (a) of Schedule II to the CGST Act, 2017 provides that works contract including transfer
of property in goods (whether as goods or in some other form) involved in the execution of a
works contract shall be deemed to be the supply of services and the provisions of GST such
as rate, valuation, time of supply etc would be applicable accordingly.
Now let us take an example of sale and installation of huge plant and machineries or Lift etc.,
wherein the principal supply is sale of machinery / lift and ancillary supply being the installation
activity. Therefore, as per Sec 8(a) of CGST Act, it shall be considered as Composite Supply,
supply of goods being the principal activity.
However, transaction of sale and installation of machineries / lifts shall also fit into the definition
of works contract and accordingly be deemed to be a supply of a service.

SN Panigrahi 113
Concept of centralized registration for all the projects will end and construction companies
having a site in multiple States would required to obtain registration in each State from where
the construction activity/ supplies are being undertaken even though the project is for a
very small period or for a small value. Registrations can be obtained permanently or
temporarily as casual taxable person.
Concept of Casual taxable person, section 2(20):
“casual taxable person” means a person who occasionally undertakes contracts in a State
or a Union territory where he has no fixed place of business;

114
Sec 12(3)(a) of IGST Act
Place of Supply for Services directly in relation to an immovable property, including services
provided by architects, interior decorators, surveyors, engineers and other related experts or
estate agents, any service provided by way of grant of rights to use immovable property or
for carrying out or co-ordination of construction work or any services ancillary to the above services
is location at which the immovable property is situated.
Place of
Supplier
Place of
Construction
Site
Place of
Supply
Transaction
Type
GST in
Invoice
Bangalore Hyderabad Hyderabad Inter-State IGST
Hyderabad Hyderabad Hyderabad Intra-State CGST + SGST
Tax Chargeability in respect to immovable property:
 Only CGST/SGST shall be charged.
 Credits shall also be of CGST / SGST, Except where there is ISD in different state
which distributes credits.

Builders’ contracts, i.e., construction of complex, have been considered as works contracts under
the GST; and are taxable as “services”.
Taxability: Vide entry no. 5 of the Schedule III of the CGST/SGST Act, Sale of land and, subject
to clause (b) of paragraph 5 of Schedule II, sale of building, is neither a supply of goods
nor service.
As per clause (b) of paragraph 5 of Schedule II, construction of a complex, building,
civil structure or a part thereof, including a complex or building intended for sale to a
buyer, wholly or partly, except where the entire consideration has been received after
issuance of completion certificate, where required, by the competent authority or
after its first occupation, whichever is earlier, is considered as service.
Thus, in short, Sale of land will not attract GST and sale of building, complex or part
thereof after obtaining completion certificate or after its first occupation will not attract
GST.
Sale of building before its first occupation or before issuance of completion certificate
will be taxed under GST, and shall be treated as supply of service.

SN Panigrahi 116
Schedule II 5(b)
construction of a complex, building, civil structure or a part thereof, including a complex or building intended for
sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of
completion certificate, where required, by the competent authority or after its first occupation, whichever is
earlier.
Explanation.—For the purposes of this clause—
(1) the expression "competent authority" means the Government or any authority authorised to issue completion
certificate under any law for the time being in force and in case of non-requirement of such certificate from
such authority, from any of the following, namely:—
(i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or
(iii) a licensed surveyor of the respective local body of the city or town or village or development or
planning authority;
(2) the expression "construction" includes additions, alterations, replacements or remodelling of any existing civil
structure;

SN Panigrahi 117
If the Entire Consideration is Received after the Date of Completion
Certificate, then the Transaction would not be liable to GST.
In re Sri. Harish Dharnia Vs Dr. Ravi Prasad M.P. (AAR Karnataka);
Advance Ruling No. KAR ADRG 32/2018; Date of Judgement/Order : 03/12/2018
M/s Bindu Ventures, (called as the ‘Applicant’ hereinafter). No. 2, Bindu Galaxy, 1st Main, West of Chord Road, Rajajinagar Industrial
Estate, Bengaluru – 560044, having GSTIN number 29AAPFB6663D1Z5, has filed an application for Advance Ruling. The Applicant is a
Partnership firm and is registered under the Goods and Services Act, 2017. The applicant has sought advance ruling in respect of the
following question:-
(a) Which date should be considered as the date of completion of the property – the date of receipt of necessary approvals from
BBMP / Karnataka Pollution Control Board / Karnataka Electricity Board or the date of receipt of completion certificate from a
registered Chartered Engineer?
The date of Occupancy Certificate issued by the competent authority, i.e. Bruhat Bengaluru Mahanagara Palike should be treated as the
date of completion of the construction.
(b) Whether the applicant is liable to pay GST on any amount received as consideration towards sale of completed offices, after
the date of completion, where part of the consideration was received prior to the date of completion as determined in question
(a) above?
If any part of the consideration is received before such date of completion, then the transaction would be considered as the supply of
services in terms of entry 5 of Schedule II to the GST Acts, and liable for GST.
(c) Whether the applicant is liable to pay GST on the consideration received as consideration towards the sale of completed
offices, where the entire consideration is received after the date of completion of construction as determined in question number
(a) above?
If the entire consideration is received after the date of completion, then the transaction would not be liable to GST.

118
The rate of GST for Works Contract service has been prescribed in serial
number 3 of Notification No. 11/2017-Central Tax (Rate) dated
28.06.2017 as amended by Notification No. 20/2017-Central Tax (Rate)
dated 22.08.2017 & notification no.24/2017-Central Tax (Rate) dated
21.09.2017 and is as under:
(i) Construction of a complex, building, civil structure or a part thereof,
including a complex or building intended for sale to a buyer, wholly or
partly, except where the entire consideration has been received after
issuance of completion certificate, where required, by the competent
authority or after its first occupation, whichever is earlier. (Provisions
of paragraph 2 of this notification shall apply for valuation of this
service)
9% CGST + 9%
SGST
(ii) composite supply of works contract as defined in clause 119 of
section 2 of Central Goods and Services Tax Act, 2017
9% CGST + 9%
SGST

119
(iii) Composite supply of works contract as defined in clause
(119) of section 2 of the Central Goods and Services Tax Act,
2017, supplied to the Government, a local authority or a
Governmental authority by way of construction, erection,
commissioning, installation, completion, fitting out, repair,
maintenance, renovation, or alteration of, –
(a) a historical monument, archaeological site or remains of
national importance, archaeological excavation, or
antiquity specified under the Ancient Monuments and
Archaeological Sites and Remains Act, 1958 (24 of 1958);
(b) canal, dam or other irrigation works;
(c) pipeline, conduit or plant for (i) water supply (ii) water
treatment, or (iii) sewerage treatment or disposal
6% CGST +
6% SGST
Cont…

120
(iv) Composite supply of works contract as defined in clause (119) of section 2 of the
Central Goods and Services Tax Act, 2017, supplied by way of construction, erection,
commissioning, installation, completion, fitting out, repair, maintenance, renovation, or
alteration of,-
(a) a road, bridge, tunnel, or terminal for road transportation for use by general
public;
(b) a civil structure or any other original works pertaining to a scheme under Jawaharlal
Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;
(c) a civil structure or any other original works pertaining to the “In-situ rehabilitation
of existing slum dwellers using land as a resource through private participation” under
the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana, only for existing slum
dwellers;
(d) a civil structure or any other original works pertaining to the “Beneficiary led individual
house construction / enhancement” under the Housing for All (Urban) Mission/Pradhan
Mantri Awas Yojana;
(e) a pollution control or effluent treatment plant, except located as a part of a
factory; or
(f) a structure meant for funeral, burial or cremation of deceased
6% CGST +
6% SGST
Cont…

121
(v) Composite supply of works contract as defined in clause (119) of section 2 of the Central
Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning,
or installation of original works pertaining to,-
(a) railways, excluding monorail and metro;
(b) a single residential unit otherwise than as a part of a residential complex;
(c) low-cost houses up to a carpet area of 60 square metres per house in a housing
project approved by competent authority empowered under the ‘Scheme of Affordable
Housing in Partnership’ framed by the Ministry of Housing and
6% CGST + 6%
SGST
Works Contract in
GST
Urban Poverty Alleviation, Government of India;
(d) low cost houses up to a carpet area of 60 square metres per house in a housing project
approved by the competent authority under-
(1) the “Affordable Housing in Partnership” component of the Housing for All (Urban)
Mission/ Pradhan Mantri Awas Yojana; (2) any housing scheme of a State Government;
(e) post-harvest storage infrastructure for agricultural produce including a cold storage for
such purposes; or
(f) mechanised food grain handling system, machinery or equipment for units processing
agricultural produce as food stuff excluding alcoholic beverages
Cont…

122
(vi) Services provided to the Central Government, State
Government, Union Territory, a local authority or a
governmental authority by way of construction, erection,
commissioning, installation, completion, fitting out, repair,
maintenance, renovation, or alteration of –
(a) a civil structure or any other original works meant
predominantly for use other than for commerce, industry, or
any other business or profession;
(b) a structure meant predominantly for use as (i) an
educational, (ii) a clinical, or(iii) an art or cultural
establishment; or
(c) a residential complex predominantly meant for self-use or the
use of their employees or other persons specified in
paragraph 3 of the Schedule III of the Central Goods and
Services Tax Act, 2017.
6% CGST +
6% SGST
(vii) Construction services other than (i), (ii), (iii), (iv), (v) & (vi)
above
9% CGST +
9% SGST
Cont…

SN Panigrahi 123
Works Contract involving predominantly earth work (that constitutes more than
75per cent, of the value of the works contract – GST @5%
Notification No. 39/2017 Integrated Tax rate against Serial No.-3 states as under:
(3) (4) (5)
(vii)Composite supply of works contract as defined
in clause (119) of section 2 of the Central Goods
and Services Tax Act, 2017, involving predominantly
earth work (that is, constituting more than 75per
cent, of the value of the works contract) provided to
the Central Government, State Government, Union
territory, local authority, a Governmental Authority or
a Government Entity.
5 Provided that where the services are
supplied to a Government Entity, they
should have been procured by the said
entity in relation to a work entrusted to it
by the Central Government, State
Government, Union territory or local
authority, as the case may be
It is evident that the work order should be for supply of services with material and when the major part
of the contract involves earth work i.e., more than 75% of the work involves earth work, the said work
order qualifies for the benefit of Serial No 3 of notification 39/2017 dated 13.10.2017 issued under the
GST Act, being Composite supply of works contract as defined in clause 119 of sec-2 of the CGST
Act, 2017, involving pre dominantly earth work i.e. constituting more than 75% of the value of work
in contract) provided to Central Government, State government, Union Territory, Local
authority, a government authority or a Government Entity. GST will be applicable at the rate of
5%.

SN Panigrahi 124
5% GST payable on Earth Work constituting more than 75% of work order
In re M/s. P.K. Agarwala (GST AAR Jharkhand)
AAR Order No. JHR/AAR/2018-19/01; 03/11/2018
The term Earth Work has not been defined under any GST provisions. After going through different definitions of
earth work, we find that Bulk earthworks include the removal, moving or adding of large quantities of soil or rock
from a particular area to another. They are done in order to make an area of suitable height and level for a
specific purpose.
The applicant M/s P. K. AGARWALA, has been rewarded works contract for raising of western site tailing dam at
Turamdih vide work order no.-T-964 dated 20.06.2017. In the aforesaid work order more than 75% of the work is
the nature of Earth work.
Further a “Government Entity” shall be defined as an authority or a board or any other body including a society,
trust, corporation which is –
i) Set up by an act of parliament or State legislative, or
ii) Established by any government, with 90% or more participation by way of equity or control, to carry out a
function entrusted by the Central government, State Government or Local Authority.
In the present instance 100% of the equity share is held by the President of India M/s Uranium Corporation of
India Ltd., Jadugoda.

SN Panigrahi 125
5% GST payable on Earth Work constituting more than 75% of work order
In re M/s. P.K. Agarwala (GST AAR Jharkhand)
AAR Order No. JHR/AAR/2018-19/01; 03/11/2018
The applicant sought Advance Ruling on the following questions/issues:
(i) Whether M/s Uranium Corporation of India Ltd. -Comes under the Purview of Government Entity.
(ii) What will be the rate of GST on the above attached work order.
By going through the definition, government entity means- (i) set up by an Act of Parliament or State Legislature,
or. (ii) established by any government, with 90% or more participation by way of equity or control, to carry out a
function entrusted by the Central Government, State Government or a local authority. In the instant case, the
100% equity of M/s Uranium Corporation of India Ltd is held by the President of India. Accordingly, M/s Uranium
Corporation of India Ltd. is a government entity.
RULLING
1. M/s Uranium Corporation of India Ltd has 100% of equity held by the President of India, hence, M/s Uranium
Corporation of India Ltd is a government entity.
2. The work order no. T-964 dt. 20.06.2017 awarded by M/s Uranium corporation of India Ltd, to applicant M/s P.
K. AGARWALA constitute of more than 75% of “earth Work”, the rate of GST would be 5%.

#GST on Real Estate & Works Contract - A Complete Analysis# By SN Panigrahi

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