RCM on URD purchase

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Real estate developers must procure at least 80% of their project inputs and services from registered suppliers to claim Input Tax Credit (ITC). Failure to meet this threshold means paying 18% GST on the shortfall under the Reverse Charge Mechanism (RCM). Certain items like development rights, land leases, FSI, and utilities are excluded from this 80% calculation.

Pankaj Jogdhankar

Pankaj Jogdhankar (Querist)

24 March 2025 Hello, I’m a real estate developer.
I want to know as per 80:20 rule,
80% of project gst bills should take.
And 20% is applicable on service or goods ?
Then how rcm will calculate on this?
RCM on URD PURCHASE.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

24 March 2025 The 80:20 rule in real estate GST refers to a requirement that at least 80% of the inputs and input services used in a construction project must be procured from registered suppliers. This rule is crucial for developers to be eligible for Input Tax Credit (ITC) on their purchases.

Key Points about the 80:20 Rule:
Eligibility for ITC: To claim ITC, developers must ensure that 80% of their procurement is from registered suppliers. If they fail to meet this threshold, they are required to pay GST on the shortfall at a rate of 18% under the reverse charge mechanism (RCM).

Exclusions: Certain items are excluded from the calculation of the 80% threshold. These include:
Services related to the grant of development rights.
Long-term leases of land.
Floor Space Index (FSI).
Utilities such as electricity and fuels (high-speed diesel, motor spirit, natural gas) used in construction.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

30 September 2025 Good luck....

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