1. HALF DAY WORKSHOP ON NEW AMENDMENTS IN GST
Recent Amendment in GST including decision taken in 33rd & 34th GST Council Meeting with Special Focus on Real Estate Sector

2. Press Release – 34th GST Council Meeting held on 19th March, 2019 – Operational Details
Discussion purely based on Press Release in absence of Notifications.
Affordable Housing 1%
Construction of Houses other than Affordable Houses 5%

3. Present GST Rates in Construction Sector
The general rate of GST on construction and works contract service is 18%.
However, in case of construction of complex, the builder charges an amount which is inclusive of land or undivided share of land. In that case, the land value is taken as one third (33.33%) of the total amount (i.e. value including land value) and GST is payable on balance amount. Thus, effectively GST rate is 12%.- Notification No. 11/2017-CT (Rate) and No. 8/2017-IGST (Rate).
For 8 types of Affordable housings where the tax rate is 12%, the effective Rate of 8% after deducting 1/3rd Value for the Land Portion involved.

4. One Time Option to Promoters of Ongoing Projects
Time Period has not been prescribed till date to exercise the option.
The option shall be exercised once within a prescribed time frame and where the option is not exercised within the prescribed time limit, new rates shall apply.
to continue to pay tax at the old rates (effective rate of 8% or 12% with ITC) on ongoing projects (buildings where construction and actual booking have both started before ) which have not been completed by

5. Ongoing Projects vs. New Projects – Para 2 and 6 of Press Release
1. Construction started on or before 01st April,2019,
2. Bookings started prior to 01st April,2019
3. Construction completed post 01st April, 2019
New Projects:
1. Construction started on or after 01st April,2019,
2. Bookings started post 01st April,2019
What about multi phase projects?
Project not defined in GST Law. Separate Completion Certificate and Registration under RERA may be considered as a project.

6. New GST Rates
New rate of 1% without input tax credit (ITC) on construction of affordable houses shall be available for:
(a) all houses which meet the definition of affordable houses as decided by GST Council (area 60 sqm in metros / 90 sqm in non- metros and value up to Rs. 45 lakhs), and
(b) 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).
It seems that the area criteria is by mistakenly swapped as 90 sqm in metros / 60 sqm in non- metros in Press Release dated 19th March 2019)

7. Affordable Housing
1. A civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awas Yojana [w.e.f ]
2. a civil structure or any other original works pertaining to the "ln-situ“ redevelopment of existing slums using land as a resource, under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana (Urban)[w.e.f ]
[The wording during to were as follows - 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.]

8. Affordable Housing
3. 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 [w.e.f ] 4. a civil structure or any other original works pertaining to the "Economically Weaker Section (EWS) houses" constructed under the Affordable Housing in partnership by State or Union territory or local authority or urban development authority under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana (Urban) [w.e.f ] 5. a civil structure or any other original works pertaining to the "houses constructed or acquired under the Credit Linked Subsidy Scheme for Economically Weaker Section (EWS)/Lower Income Group (LIG)/Middle Income Group-1 (MIG-1)/Middle Income Group-2 (MIG-2)" under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana (Urban) [w.e.f ] 6. 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 Urban Poverty Alleviation, Government of India [w.e.f ]. 7. low cost houses up to a carpet area of 60 square metres per house in a housing project approved by the competent authority under i..the "Affordable Housing in Partnership" component of the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana ii. any housing scheme of a State Government [w.e.f ]. 8. low-cost houses up to a carpet area of 60 square metres per house in an affordable housing project which has been given infrastructure status vide notification of Government of India, in Ministry of Finance, Department of Economic Affairs vide F. No. 13/6/2009-INF, dated the 30th March, 2017 [w.e.f ]

9. Calculation of Rs. 45 Lacs
It must be noted that presently a flat may qualify for concessional rate as "affordable housing", however the concessional rate may not be applicable w.e.f. 1st April 2019 owing to the condition of Rs. 45 lakhs. What about inclusion of other charges like Mant. Charges while computing the limit of Rs. 45 Lacs?
What about the rate of GST on infrastructure charges, preferential location charges etc?
New rate of 1% (without ITC) on construction of affordable housing will also be applicable to the affordable houses being constructed in ongoing projects under the existing the Central and State housing schemes i.e. projects which are presently eligible for concessional rate of 8%.
In case of sale of flat, demand notices are raised as per milestones specified in the agreement. As per section 31(5) demand notices are to be raised on or before the milestone specified in the agreement. What about Time of Supply in case a milestone is achieved in March 2019, and a payment from customer is received on or after 1st April 2019?

10. 5% GST without ITC
New rate of 5% without input tax credit shall be applicable on construction of:
(a) all houses other than affordable houses in ongoing projects whether booked prior to or after In case of houses booked prior to , new rate shall be available on instalments payable on or after
(b) all houses other than affordable houses in new projects.
(c) 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.

11. Conditions for New Tax Rates
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 18% on RCM basis. However, Tax on cement purchased from unregistered person shall be 28% under RCM, and on capital goods under RCM at applicable rates.

12. Example of 80% Shortfall
Suppose total cost of input and input service is Rs.100 crore, out of which Rs. 70 crores (70%) is towards purchases from registered persons. Thus, there is a shortfall of Rs. 10 crores. Suppose Rs. 30 crores purchases received from unregistered persons can be bifurcated as follows:
(a) Purchase of cement = Rs. 6 crores
(b) Professional services and works contract service = Rs. 24 Crores
The shortfall of Rs. 10 crores must be bifurcated in the above ratio. Thus, cement shortfall is 20% (6 cr. / 30 cr.) So out of Rs. 10 crores shortfall, 28% will be applicable on Rs. 2 crores and 18% RCM will be applicable on balance Rs. 8 crores. The above calculation is to be done at the time of receipt of OC i.e. the date when total project cost can be computed.
Press release is silent on whether the 80% condition needs to be fulfilled for each month or for the financial year or at the end of the project, notification has to be awaited for clarity.
Even the dealer opted for composition is also registered under the GST, the same shall be part of the 80% of the purchases from the registered dealer.

13. Effect due to Changes in Tax Rates
Particulars
Before 01st April,2019
On or After 01st April, 2019
Residential – Other than Affordable
Affordable Housing
Other than Affordable
Land Cost
100
Construction Cost without GST 60
GST on Input and Input Services (generally 18%)
10.80
ITC Available -
Effective Construction Cost
160
170.80
Profit Mark up (15%) 24
25.62
Sales Price including Land (Without GST)
184
196.42
GST
22.08
14.72
9.82
1.96
Price for Buyer
228.16
198.72
206.24
198.38

14. Transition for ongoing projects opting for the new tax rate
Ongoing projects (buildings where construction and booking both had started before ) and have not been completed by opting for new tax rates shall transition the ITC as per the prescribed method.
The transition formula approved by the GST Council, for residential projects (refer to para 4(ii)) extrapolates ITC taken for percentage completion of construction as on to arrive at ITC for the entire project. Then based on percentage booking of flats and percentage invoicing, ITC eligibility is determined. Thus, transition would thus be on pro-rata basis based on a simple formula such that credit in proportion to booking of the flat and invoicing done for the booked flat is available subject to a few safeguards.
For a mixed project transition shall also allow ITC on pro-rata basis in proportion to carpet area of the commercial portion in the ongoing projects (on which tax will be 12% with ITC even after ) to the total carpet area of the project. Treatment of TDR/ FSI and Long term lease for projects commencing after

15. 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.
The liability to pay tax on TDR, FSI, long term lease (premium) shall be shifted from land owner to builder underthe reverse charge mechanism (RCM).

16. TDR/ FSI and Long term lease for projects commencing after 01.04.2019
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.
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. Decisions from para 7.1 to 7.4 are expected to address the problem of cash flow in the sector. Amendment to ITC rules: 8. ITC rules shall be amended to bring greater clarity on monthly and final determination of ITC and reversal thereof in real estate projects. The change would clearly provide procedure for availing input tax credit in relation to commercial units as such units would continue to be eligible for input tax credit in a mixed project.

17. Amendment to ITC Rules
ITC rules shall be amended to bring greater clarity on monthly and final determination of ITC and reversal thereof in real estate projects. The change would clearly provide procedure for availing input tax credit in relation to commercial units as such units would continue to be eligible for input tax credit in a mixed project.

18. ITC – Transitional Phase
As per para 5 of the press release, if the builder opts for new tax rate (in an ongoing project), the company will be entitled to only proportionate credit i.e. based on percentage of completion of construction, percentage of booking of flats and percentage of invoicing.
Suppose, the builder has availed ITC of Rs.10 crore upto which is closing balance as at As on that date, building is 40% complete. We have to wait for the mechanism but it might be suggested that the percentage of completion shall be based on cost incurred vis-à-vis total projected cost of the building.
Thus, total credit for the entire building will be Rs. 25 crores (i.e. Rs. 10 crores /40 *100).
Suppose, builder has sold 140 flats out of total 200 flats. Thus, 70% of the flats are sold as on Further 60% of the total invoicing has been done for such sold flats as on
Thus, total credit available to the builder will be Rs crores i.e. (Rs. 25 crore* 70% * 60%). Since the builder has availed Rs.10 crores credit till date, there is no need to reverse any credit.
In the above example, suppose only 20 flats were sold out of total 200 flats (i.e.10%). The credit available to the builder will be Rs. 1.5 crores (i.e. Rs. 25 crores*10% * 60%).
If the closing balance is less than Rs. 1.5 crores, then there is no clarity whether builder will have to pay the balance in cash.
ITC of goods and services received on or after will not be eligible to the company.
Hence, it is advised that all vendors must be asked to raise invoice for supplies up to March-2019 bearing invoice date on or before Further, as far as possible, all the credits up to March 2019 must be claimed in GSTR-3B of March 2019 itself. Many times, it has been observed that the accounts/tax team receives the invoice from project/accounts payable team after a lapse of 1 or 2 months. The invoice dated March 2019 may be received and booked in say May Although, the credit of the same should ideally be allowed, however the department may deny the same.

19. Which Option to be exercised?
Net GST Outflow needs to be determined.
New ITC Rules yet to be notified. ITC will have to be reduced to the extent of projected reversal of input tax credit for unsold flats after OC as per new rules.
If available credit plus projected credit is more than 7% of the projected demand, then it is beneficial to go for old tax rate. If the credit available is lower than 7% of the future demands, it is advisable to go for new tax rate.

20. Examples
1. Lets say total consideration to be received from booking holders is Rs. 100 Crores. 12% GST rate will attract GST Liability of Rs. 12 Crores. If the Customer pays only Rs. 5 Crores and available ITC + to be availed ITC is Rs. 7 Crores or more, Old Option shall be beneficial.
2. Lets say in the above example, Rs. 50 Crores is to be received post Completion Certificate and ITC to be proportionately reversed is Rs. 8 Crores, total GST Liability would be Rs. 14 Crores and assuming a collection of only Rs. 2.5 Crores from customers but available ITC is Rs Crores or more, old option shall be more beneficial.
In the following cases it may be beneficial to exercise the new option of GST Rates:
a. Higher Value of Land
b. Low Construction Cost as compared to the Sales Value
c. Project being in the initial stages of construction.

21. Anti Profiteering
The denial of Input Tax Credit will increase the cost of consideration to the builders.
Therefore, this will increase the cost of construction.
Similar, provisions were made in respect of restaurants where tax rate was reduced from 18% to 5% on supply of food. Some of the restaurants increased price of the eatables. The National Anti-Profiteering Authority in the case of M/s N. P. Foods (Franchisee Subway India) by order No. 9/2018 dated has held that the due to denial of credit, there is increase in the cost of production. Hence, the price can be increased. There is no profiteering in such cases while increasing the price.

22. Exemption from Registration up to Rs. 40 Lacs
A new exemption has been granted with respect to registration. A lot of confusion prevails among the trade regarding a new limit of Rs. 40 Lacs for registration to be made effective from 01st April, 2019.
A person shall not be required to get himself or itself registered under GST or shall be required to surrender / cancel registration w.e.f 01st April, if a person is exclusively involved in supply of goods (not services) and whose aggregate Turnover in the financial year does not exceed Rs. 40 Lacs vide Notification No. 10/2019-CT dated 07th March, However, the exemption from registration shall not be applicable in below cases:
(a) persons required to take compulsory registration under section 24 of the said Act.
(b) persons engaged in making supplies of the following goods:
Ice cream and other edible ice, whether or not containing cocoa.
Pan masala
3 Chapter 24 All goods, i.e. Tobacco and manufactured tobacco substitutes
(iii) persons engaged in making intra-State supplies in the States of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, Uttarakhand; and
(iv) persons exercising option under the provisions of sub-section (3) of section 25 i.e voluntary registration, or such registered persons who intend to continue with their registration under the said Act.

23. Composition Scheme for Suppliers of Service
6% GST (i.e CGST-3% and SGST-3%) can be paid on the first supplies of goods or services or both up to an aggregate turnover of Rs. 50 Lacs made in a financial year if the aggregate turnover in the preceding FY was Rs. 50 Lacs or less if the following conditions are satisfied (The Notification is optional in nature):
A person must be registered and his aggregate turnover in the preceding Financial Year must be Rs. 50 Lacs or less.
He should not be eligible to avail the benefit of Composition Levy Scheme.
A person should not be involved in making any supply not leviable to GST.
A Person should not be involved in making any inter-state taxable supply.
A Person should not be a casual taxable person or a non resident.
A Person should not be involved in making any supplies through e-commerce operator required to collect TCS.

24. Composition Scheme for Suppliers of Service
A person should not be engaged in making supplies of the following goods:
Ice cream and other edible ice, whether or not containing cocoa.
Pan masala
3 Chapter 24 All goods, i.e. Tobacco and manufactured tobacco substitutes
If more than one registration exists, all registrants must avail the benefit of this Notification.
Tax cannot be collected from the recipient. Also, the benefit of Input Tax Credit shall not be available.
Instead of Tax Invoice, Bill of Supply should be issued and Bill of Supply should contain ‘taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated , not eligible to collect tax on supplies.’
In case of RCM, normal rate shall apply.

25. Free Samples and Gifts
It is a common practice among certain sections of trade and industry, such as, pharmaceutical companies which often provide drug samples to their stockists, dealers, medical practitioners, etc. without charging any consideration. As per sub clause (a) of Section (1), ‘Supply’ includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Therefore, the goods or services or both which are supplied free of cost (without any consideration) shall not be treated as “supply” under GST (except in case of activities mentioned in Schedule I of the said Act. Accordingly, it is clarified that samples which are supplied free of cost, without any consideration, do not qualify as “supply” under GST, except where the activity falls within the ambit of Schedule I of the said Act.
ii. Further, clause (h) of sub-section (5) of section 17 of the said Act provides that ITC shall not be available in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. Thus, it is clarified that input tax credit shall not be available to the supplier on the inputs, input services and capital goods to the extent they are used in relation to the gifts or free samples distributed without any consideration. However, where the activity of distribution of gifts or free samples falls within the scope of “supply” on account of the provisions contained in Schedule I of the said Act, the supplier would be eligible to avail of the ITC.

26. Buy one get one free offer:
i. Sometimes, companies announce offers like ‘Buy One, Get One free‟ For example, ‘buy one soap and get one soap free’ or ‘Get one tooth brush free along with the purchase of tooth paste.’ As per sub-clause (a) of sub- section (1) of section 7 of the said Act, the goods or services which are supplied free of cost (without any consideration) shall not be treated as “supply” under GST (except in case of activities mentioned in Schedule I of the said Act). It may appear at first glance that in case of offers like “Buy One, Get One Free”, one item is being “supplied free of cost” without any consideration. In fact, it is not an individual supply of free goods but a case of two or more individual supplies where a single price is being charged for the entire supply. It can at best be treated as supplying two goods for the price of one.
ii. Taxability of such supply will be dependent upon as to whether the supply is a composite supply or a mixed supply and the rate of tax shall be determined as per the provisions of section 8 of the said Act.
iii. It is also clarified that ITC shall be available to the supplier for the inputs, input services and capital goods used in relation to supply of goods or services or both as part of such offers.

27. Discounts including ‘Buy more, save more’ offers
i. Sometimes, the supplier offers staggered discount to his customers (increase in discount rate with increase in purchase volume). For example- Get 10 % discount for purchases above Rs. 5000/-, 20% discount for purchases above Rs. 10,000/- and 30% discount for purchases above Rs. 20,000/-. Such discounts are shown on the invoice itself.
ii. Some suppliers also offer periodic / year ending discounts to their stockists, etc. For example- Get additional discount of 1% if you purchase pieces in a year, get additional discount of 2% if you purchase pieces in a year. Such discounts are established in terms of an agreement entered into at or before the time of supply though not shown on the invoice as the actual quantum of such discounts gets determined after the supply has been effected and generally at the year end. In commercial parlance, such discounts are colloquially referred to as “volume discounts”. Such discounts are passed on by the supplier through credit notes.
iii. It is clarified that discounts offered by the suppliers to customers (including staggered discount under “Buy more, save more‟ scheme and post supply / volume discounts established before or at the time of supply) shall be excluded to determine the value of supply provided they satisfy the parameters laid down in sub-section (3) of section 15 of the said Act, including the reversal of ITC by the recipient of the supply as is attributable to the discount on the basis of document (s) issued by the supplier.
iv. It is further clarified that the supplier shall be entitled to avail the ITC for such inputs, input services and capital goods used in relation to the supply of goods or services or both on such discounts.

28. Secondary Discounts
These are the discounts which are not known at the time of supply or are offered after the supply is already over. For example, M/s A supplies packets of biscuits to M/s B at Rs. 10/- per packet. Afterwards M/s A re-values it at Rs. 9/- per packet. Subsequently, M/s A issues credit note to M/s B for Rs. 1/- per packet.
ii. The provisions of sub-section (1) of section 34 of the said Act provides as under: “Where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed.”
iii. Representations have been received from the trade and industry that whether credit notes(s) under sub-section (1) of section 34 of the said Act can be issued in such cases even if the conditions laid down in clause (b) of sub-section (3) of section 15 of the said Act are not satisfied. It is hereby clarified that financial / commercial credit note(s) can be issued by the supplier even if the conditions mentioned in clause (b) of sub-section (3) of section 15 of the said Act are not satisfied. In other words, credit note(s) can be issued as a commercial transaction between the two contracting parties.
iv. It is further clarified that such secondary discounts shall not be excluded while determining the value of supply as such discounts are not known at the time of supply and the conditions laid down in clause (b) of sub-section (3) of section 15 of the said Act are not satisfied.
v. In other words, value of supply shall not include any discount by way of issuance of credit note(s) as explained above in para 2 (D)(iii) or by any other means, except in cases where the provisions contained in clause (b) of sub-section (3) of section 15 of the said Act are satisfied.
vi. There is no impact on availability or otherwise of ITC in the hands of supplier in this case.

29. Extension of non-requirement to pay IGST and Compensation Cess
Amendment to FTP vide Notification No. 57/ DGFT dated 20th March, has given further exemption from payment of IGST and Compensation Cess on procurements under Advance Authorization, EPCG and EOU scheme up to 31st March, It shall be noted that Rule 96(10) of CGST Rules, 2017 prohibits exports in such cases on payment of IGST option and hence, exports mandatorily needs to be under LUT option without payment of IGST.

30. Time Limit Extension – ITC 04 and continuation of Filing of GSTR-3B and GSTR-1
Extended up to 30th June, 2017.
The new GST returns would be implemented on a pilot basis from April 1, 2019 and will be made mandatory from July 1, 2019 according to the decision of the GST Council. Since the new returns would be run on a pilot basis, the existing return formats (i.e. GSTR-3B) and GSTR-1 will be continued to be filed for the first quarter of FY vide notification no. 13/2019- Central Tax and 12/2019-Central Tax and 11/2019-Central Tax all dated
Thus, GSTR-3B due dates will be as follows:
April 2019 – 20th May, 2019
May 2019 – 20th June, 2019, and
June 2019 – 20th July, 2019
The due date for filing GSTR-1 will be as follows:
April 2019 – 11th May, 2019
May 2019 – 11th June, 2019, and
June 2019 – 11th July, 2019
The due date for filing GSTR-1 to be filed on quarterly basis by a person having aggregate turnover less than Rs Crores in FY for the period April 2019 to June 2019 shall be 31st July, 2019.

31. Thanking You all CA Dhruvank Parimal Parikh Naresh & Co. (Partner)