GST Vidhi | GST Advance Ruling

Advance Ruling on GST Rate Applicability for Ongoing Real Estate Project Transfer

Background and Summary of the Case:

M/s. Godrej Residency Pvt. Ltd. (hereinafter "the Applicant") acquired an ongoing real estate project named "One Mahalaxmi" from M/s. Neelkamal Realtors Towers Pvt. Ltd. (hereinafter "the then-promoter") through a registered sale deed dated 24th December 2022. The acquisition included the transfer of the land, under-construction buildings, and the associated liabilities including customer advances.

The then-promoter had already opted to pay GST at the effective rate of 12% (with ITC) under Notification No. 3/2019-Central Tax (Rate) for this ongoing project by filing Annexure IV within the prescribed timeline.

The Applicant approached the AAR to seek clarification on whether it can opt for a lower 5% GST rate without ITC for new sales and whether the earlier promoter’s tax option is binding.

·       Ruling Authority: Maharashtra Authority For Advance Ruling

·       Ruling No.: GST-ARA-37/2023-24/B-15

·       Date of Ruling: 27 March 2025

·       Name of the Applicant: M/s. Godrej Residency Pvt. Ltd.

Questions Raised by the Applicant:

1.    What is the applicable rate of GST on sale of residential flats by the Applicant?

2.    Whether the GST option exercised by the earlier promoter is binding on the Applicant?

3.    Can the Applicant charge 5% GST without ITC for new sales?

4.    Can the Applicant charge 12% for old buyers and 5% for new buyers, and how will ITC be handled?

5.    Whether the one-time option under Notification No. 3/2019 is project-specific or promoter-specific?

Relevant Legal Provisions:

• Notification No. 3/2019-Central Tax (Rate) dated 29.03.2019 (amending Notification No. 11/2017-CT (Rate))
• Clause (if) of Sr. No. 3: Allows 12% GST with ITC on ongoing projects (post abatement for land)
• Clause 4(xx): Defines “Ongoing Project”
• CBIC Press Release dated 19.03.2019: Clarifies one-time option to continue at old rates for ongoing projects

Facts as per the Applicant:

• The project was initiated in 2011 by the then-promoter.
• Commencement certificate issued on 16.08.2011, completion certificate not issued, and some flats booked before 31.03.2019.
• The then-promoter exercised the 12% option with ITC via Annexure IV dated 07.05.2019.
• The Applicant took over project through registered conveyance deed on 24.12.2022.
• Applicant did not take over unutilized ITC from the then-promoter.
• RERA registration was updated to reflect Applicant as new promoter.

Applicant’s Submissions:

• The project qualifies as an “ongoing project” under the Notification.
• The option exercised by the previous promoter is binding on the entire project and cannot be altered by the new promoter.
• The intention of the law is to maintain uniform tax treatment for the entire life cycle of the project.
• GST at 12% with ITC must apply to both existing and new buyers.
• Relying on CBIC circulars and FAQs, project-based interpretation is valid and widely accepted in real estate jurisprudence.

Departmental (Jurisdictional Officer) Views:

• Confirmed that the project satisfies all four conditions of an “ongoing project”.
• Reiterated that the 12% effective rate (after 1/3 deduction for land) is applicable throughout the project.
• Emphasized that the one-time option is binding and cannot be altered by the new promoter.
• Applicant must charge 12% GST with ITC to both old and new buyers.
• The one-time option is qua the project, not the entity.

Findings and Observations of AAR:

• The definition of “ongoing project” is project-centric, not promoter-centric.
• The tax option exercised by the original promoter continues with the project even after transfer.
• Allowing different rates to new and old buyers would violate the objective of uniformity.
• Based on the precedent (e.g., Victoria Realtors ruling by Kerala AAR), the entire project must bear one tax rate.
• The option exercised under clause (if) is final for the entire project, and 12% GST with ITC must be charged throughout.

Advance Ruling and Answers:

Conclusion:

The Godrej Residency Pvt. Ltd. case reaffirms that in GST law for real estate, the one-time option for tax rate selection under Notification No. 3/2019 is binding for the entire project, not just the promoter. When a project is transferred mid-way, the new promoter inherits the same GST rate and conditions as chosen by the previous one.

Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.

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