Since GST has been implemented from 01st July, 2017 GST council has been regularly revising the rates of GST on various goods and services based on the recommendations and considering the impact of GST rates on the cost of goods or services in the hands of user. Though benefits available in the form of free flow of credit reduces cost to a great extent, but still in case of services such benefits fails to cover up the other related cost which calls for revision in GST rates.
We are summarizing the changes in GST rates applicable on various construction services including services provided to Government or provided by Real Estate Builders or Works Contractor etc. Earlier all construction services were taxable @ 18% but then it got changed twice and now there are two GST rates on such services i.e. 12% and 18%. Given below are the categories of construction or works contract services those are taxable @ 12% under GST:
I) Composite supply of works contract supplied to the Government, a local authority or a Governmental authority by way of construction, erection, commissioning, installation, completion, repair, maintenance, renovation, or alteration of –
(a) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity;
(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
(d) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;
(e) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or(iii) an art or cultural establishment; or
(f) 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.
II) Composite supply of works contract 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.
III) Composite supply of works contract 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 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-
(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;
(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.
It is clear from the above list that services those are to be used by general public or by the Government for specific purposes have been subsidized under GST and rest other construction or works contract services are taxable @ 18%. It means GST @ 18% will be charged on the booking of commercial or residential space with a Real estate developer, therefore, any payment due to developer against the under construction property shall attract 18% of GST which is jumped from 4.5% of service tax earlier. However, due to additional input tax credit under GST available to developer, it may reduce such burden by reducing its prices.