A one-time option in GST for ongoing real estate projects

A one-time option has been given for on-going projects (not completed by 31 March 2019) to continue to pay tax at the existing GST rates (effective rate of 8 percent for affordable housing and 12 percent for others) and avail permissible credit of inputs taxes.

Complexity arises in interpreting the term 'ongoing project', particularly in cases where the construction is undertaken in a phase-wise manner consisting of cluster of buildings in a large township project. Absence of clear definition of 'ongoing project' would leave room for interpretation and may inv invite unwarranted disputes.

In order to clarify these issues, compiled FAQ has been issued by Government on 7th May 2019.

In this article, an effort has been made to further simplify the concept - 'outgoing projects ' for better understanding of all the stakeholders.

What is ongoing projects

Ongoing projects have been referred to as buildings where both construction and actual booking started before 1 April 2019 and which have not been completed by 31 March 2019.

Condition to be fulfilled for considering a project as an ongoing project

(a) Commencement certification for the project has been issued by the competent authority. Commencement Certificate'- means the commencement certificate or the building permit or the construction permit, (by whatever name called) issued by the competent authority to allow or permit the promoter to begin development works on an immovable property, as per the sanctioned plan.

(b) Commencement certificate may not be required in some places for commencing the project . In that case certificate from registered Architect, Chartered engineer or a licensed surveyor is required. The certificate will indicate that construction of the project has started on or before 31st March 2019. Without such certificate, project will not considered as outgoing project.

(c) Completion certification has not been issued As name suggests, ongoing project means work is on and the project has not completed. A project will not be considered as ongoing project if it get completion certificate from competent authority on or before 31st March 2019. Completion Certificate means the certificate, issued by the competent authority certifying that the real estate project has been developed according to the sanctioned plan, layout plan and specifications, as approved by the competent authority under the local laws.

(d) Earth work for site-preparation is completed and excavation has started before 31 March 2019.

(e) First occupation of the project has not taken place: Project will not be considered as ongoing project if occupied by even a single buyer on or before 31st March 2019.

(f) Booking of Apartments in project has started: If Apartments of the project have been partially or wholly booked on or before 31st March 2019 , it will be considered as ongoing project.