The Authority for Advance Ruling, Maharashtra in the case of M/S. GODREJ RESIDENCY PVT. LTD. vide Case No.- GST-ARA-37/2023-24/B-157 dated 27.03.2025, has ruled that when a new builder takes over an under-construction housing project, they must follow the same GST rate that the previous builder (old promoter) had chosen.

Facts of the Case: In this case, the applicant enters into agreements for the sale of under-construction residential or commercial properties with prospective buyers. The applicant has entered into an agreement with Neelkamal Realtors Towers Private Limited (hereinafter referred to as ‘the then-promoter’) for purchasing the project land with the existing structure thereon and all the identified liabilities including the liability of amounts collected from customers of the project through a conveyance deed. The project was initiated in 2011 and registered under RERA in August 2017.

The then-promoter had already sold certain under-construction flats prior to conveyance (24.12.2022) and collected consideration from buyers. GST liability on such supplies had been discharged under the applicable rate (12% effective) post-exercise of option under Sr. No. 3 (if). The applicant has not received the consideration in respect of such earlier supplies. The previous promoter opted to pay GST at the old rate of 12% (18% less 1/3rd abatement for land) with ITC, by exercising the one-time option in Annexure IV on 07.05.2019.

The applicant seeks clarity on whether they can now opt for a lower rate of 5% without ITC for new sales or are bound by the earlier choice.

Issue: Whether the applicant is bound by the option exercised by the then-promoter of payment of GST at the effective rate of 12% with input tax credit or can the applicant discharge GST at the effective rate of 5% without input tax MI credit under the Notification no. 3/2019-Central Tax (Rate) dated 29.03.2019, for sale of residential premises of the Project and also for premises already sold by the then-promoter? Whether the applicant can discharge GST @5% to the existing as well as new customers? Whether one-time option given under Notification no. 3/2019-Central Tax (Rate) dated 29.03.2019 is qua the project or the promoter?

AAR’s Rulings: The AAR, Maharashtra ruled that the applicant must continue paying GST at 12% with ITC, same as exercised by the original promoter. The project is treated as a single, indivisible taxable entity with regard to the GST rate, regardless of change in promoter. The option exercised by the original promoter binds the project irrespective of ownership transfer. The term “the promoter” in Notification is interpreted with respect to the project, not to the legal person.

However, the Maharashtra AAR emphasised that the 2019 notification’s one-time option is ir. revocable and project-centric. Citing CBIC guidelines and a Kerala AAR precedent, it ruled that ongoing projects retain their GST classification even if promoters change. The authority noted the project met all “ongoing” criteria – commencement before 31 March 2019, partial bookings by that date, and no completion certificate.

The decision bars the applicant from adopting dual rates, ensuring ITC continuity for all buyers. It also highlights that unutilised ITC from Neelkamal Realtors remains non-transferable, requiring applicant to manage compliance under the existing framework. Thus, Dual rates (12% for old buyers, 5% for new buyers) not permissible. The GST treatment must be consistent across the life of the project.

Prior to 1 April 2019, builders were allowed to charge 12% GST on under-construction flats with the benefit of input tax credit (ITC). However, a new GST provision introduced on 1 April 2019, offered a lower 5% GST rate for residential flats but without ITC. For ongoing projects, builders were given a one-time option to either continue with the 12% rate with ITC or switch to the 5% rate without ITC. In this case, the previous builder had opted for the 12% GST rate with ITC. 

Since, the applicant is required to charge GST at 12%, ITC on inputs and input services is fully allowed.

Relevant provisions and key Notifications

1. Notification No. 3/2019-CT (Rate), dated 29.03.2019: Introduced new GST rates of 1% for affordable and 5% for other residential units without ITC, effective from 01.04.2019. Allowed a one-time option to continue under the old rate (8%/12%) with ITC, if exercised by 10.05.2019 (later extended to 20.05.2019), for “ongoing projects”.
2. Definition of “Ongoing Project” (Clause xx of Para 4 of Notification 11/2017-CT(R)): A project is ongoing if Commencement certificate issued on or before 31.03.2019, Completion certificate not issued by 31.03.2019 and at least one apartment booked before 31.03.2019.

3. Entry 3(if) of Notification 11/2017-CT(R): Applicable to ongoing residential projects where the old rate was opted. GST at effective rate of 12% (18% – 1/3rd for land) with ITC eligibility.