Reverse Charge Mechanism in GST- Real Estate Sector - GST Ready Reckoner - GST

Reverse Charge Mechanism in GST- Real Estate Sector RCM in case of Real Estate Project where Special Rates of Tax are applicable. As per N. No. 11/2017- Central Tax (Rate) dated 28.06.2017 Read with N.No 7/2019 dated 29-03-2019 as amended, the activities specified in the entry 3 of items (i), (ia), (ib), (ic), and (id) as:- Which construction project commences on or after 1 st April, 2019 or in an ongoing in a Residential Real Estate Project (herein after referred to as RREP) (i) Construction of affordable residential apartments by a promoter in a Residential Real Estate Project (herein after referred to as RREP) (ia) Construction of residential apartments other than affordable residential apartments by a promoter in an RREP (ib) Construction of commercial apartments (shops, offices, godowns etc.) by a promoter in an RREP Which construction project commences on or after 1 st April, 2019 or in an ongoing in a Real Estate Project (herein after referred to as REP) other than RREP, (ic) Construction of affordable residential apartments by a promoter in a Real Estate Project (herein after referred to as REP) other than RREP, (id) Construction of residential apartments other than affordable residential apartments by a promoter in a REP other than a RREP In respect of above entry no. 3 covered by items (i), (ia), (ib), (ic), and (id), above, on which the promoter has not exercised option to pay central tax on construction of apartments at the rates as specified for item (ie) or (if) below, as the case may be, in the manner prescribed therein, Such above specified apartment to be 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. When the liability to pay GST under RCM arises: Time of supply In case of Inputs or Input services (other than Cement and Capital goods) The value of input and input services received from registered suppliers during the financial year (or part of the financial year till the date of issuance of completion certificate or first occupation of the project, whichever is earlier) falls short of the said threshold of 80%., central tax shall be paid by the promoter on value of input and input services comprising such shortfall at the rate of 9% on reverse charge basis. Time of supply 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. In case of Cement purchase from unregistered person Where cement is received from an unregistered person, the promoter shall pay tax on supply of such cement at the applicable rates on reverse charge basis Time of supply - Tax under RCM on cement, received from unregistered person shall be paid in the month in which cement is received. In case of Cement purchase from unregistered person Where capital goods is received from an unregistered person, the promoter shall pay tax on supply of such capital goods at the applicable rates on reverse charge basis. Time of supply - Tax under RCM on capital goods received from unregistered person shall be paid in the month in which cement is received. Other common point for above The GST tax at the rate specified in vide Notification no. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended, shall be paid in cash, that is, by debiting the electronic cash ledger only. The registered person shall pay, by debit in the electronic credit ledger or electronic cash ledger, an amount equivalent to the input tax credit attributable to construction in a project, time of supply of which is on or after 1 st April, 2019 , which shall be calculated in the manner as prescribed in the Annexure I in the case of REP other than RREP and in Annexure II in the case of RREP. (For Annexures I and II Notification no. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended. All the provisions of the CGST Act 2017 shall apply to him as if he is the person liable for paying the tax under RCM under sec. 9(4) in relation to the supply of goods or services or both. The promoter shall maintain project wise account of inward supplies from registered and unregistered supplier and Input Tax Credit not availed shall be reported every month by reporting the same as ineligible credit in GSTR-3B. Payment of GST under RCM on the shortfall value of inward supplies from registered supplier at the end of the financial year, by real estate promoter/developer supplying construction of residential apartment etc.[ Instruction No. 3/2/2020 - GST, dated 24 th June 2020 ] A revised GST rate has been prescribed, w.e.f. the 1st April, 2019 on the supply of service by way of construction of residential apartment. (These rates have been prescribed Vide Notification no. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended. Person required to pay tax in accordance with the Notification no. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended on the shortfall from threshold requirement of procuring input and input services (below 80%) from registered person shall use the form DRC-03 to pay the tax electronically on the common portal within the prescribed period. Rate of Tax for the purpose of payment of RCM S. No. Nature Rate of GST as per Notification no. 1 All inputs other than capital goods and cement N.No. 01/2017-CT(R) dated 28 th Jun 2017 as amended by N.No. 08/2019-CT(R) [Entry no. 452Q of Schedule III] 2 Cement As per applicable rate as per N. No. 1/2017- Central Tax (Rate) dated 28.06.2017 as amended 3 Capital goods Applicable Rate 4 All inputs services As per Sr. No. 39 of N. No. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended Example Illustration 1: A promoter has procured following goods and services [other than capital goods and services by way of grant of development rights, long term lease of land or FSI] for construction of a residential real estate project during a financial year. Sl. No. Name of input goods and services Percentage of input goods and services received during the financial year Whether inputs received from registered supplier? (Y/ N) 1 Sand 10 Y 2 Cement 15 N 3 Steel 20 Y 4 Bricks 15 Y 5 Flooring tiles 10 Y 6 Paints 5 Y 7 Architect/ designing/ CAD drawing etc. 10 Y 8 Aluminium windows, Ply, commercial wood 15 Y In this example, the promoter has procured 80 per cent. of goods and services [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], from a GST registered person. However, he has procured cement from an unregistered supplier. Hence at the end of financial year, the promoter has to pay GST on cement at the applicable rates on reverse charge basis. Illustration 2: A promoter has procured following goods and services [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], for construction of a residential real estate project during a financial year. Sl. No. Name of input goods and services Percentage of input goods and services received during the financial year Whether inputs received from registered supplier? (Y/ N) 1 Sand 10 Y 2 Cement 15 Y 3 Steel 20 Y 4 Bricks 15 Y 5 Flooring tiles 10 Y 6 Paints 5 N 7 Architect/ designing/ CAD drawing etc. 10 Y 8 Aluminium windows, Ply, commercial wood 15 N In this example, the promoter has procured 80 per cent. of goods and services including cement from a GST registered person. However, he has procured paints, aluminum windows, ply and commercial wood etc. from an unregistered supplier. Hence at the end of financial year, the promoter is not required to pay GST on inputs on reverse charge basis. Illustration 3: A promoter has procured following goods and services [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], for construction of a residential real estate project during a financial year. Sl. No. Name of input goods and services Percentage of input goods and services received during the financial year Whether inputs procured from registered supplier? (Y/ N) 1 Sand 10 N 2 Cement 15 N 3 Steel 15 Y 4 Bricks 10 Y 5 Flooring tiles 10 Y 6 Paints 5 Y 7 Architect/ designing/ CAD drawing etc. 10 Y 8 Aluminium windows 15 N 9 Ply, commercial wood 10 N In this example, the promoter has procured 50%. of goods and services from a GST registered person. However, he has procured sand, cement and aluminum windows, ply and commercial wood etc. from an unregistered supplier. Thus, value of goods and services procured from registered suppliers during a financial year falls short of threshold limit of 80%. To fulfill his tax liability on the shortfall of 30%. from mandatory purchase, the promoter has to pay GST on cement at the applicable rate on reverse charge basis. After payment of GST on cement, on the remaining shortfall of 15%, the promoter shall pay tax @ [ 18% (9% + 9%) ] per cent. under RCM. what is the Self Invoicing? Self-invoicing is to be done when purchased from an unregistered supplier, and such purchase of goods or services falls under RCM. This is because your supplier cannot issue a GST-compliant invoice to you, and thus you become liable to pay taxes on their behalf. Hence, self-invoicing, in this case, becomes necessary.