GST Rate Reduced to 8% for Affordable Housing Units Under 60 Sqm
Maharashtra AAR ruled that flats under 60 square metres qualify for a reduced 8% GST rate if 50% project FSI covers small units.
- Ruling
- NO.GST-ARA- 02/2018-19/B- 58 dated 03/07/2018
- Dated
- 03 Jul 2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Prajapati Developers asked if small flats in their project get lower GST
- Projects using 50% or more FSI for small units qualify as affordable housing
- Flats under 60 square metres get effective 8% GST rate after land deduction
- Flats larger than 60 square metres in the same project pay standard GST
- Lower rate applies only to construction services supplied after January 25 2018
In short
Prajapati Developers asked the Maharashtra Authority for Advance Ruling (AAR) whether construction services for their residential project 'Prajapati Magnum' qualified for a reduced GST rate under Notification No. 01/2018-Central Tax (Rate). The project used 73% of its total floor space index (FSI) for flats under 60 square metres carpet area. The developer wanted to confirm if buyers of these smaller units could get the benefit of the concessional tax rate.
What has changed
How it worked before
Before this ruling, builders were uncertain if mixed projects containing both large and small flats could claim affordable housing GST benefits. Many assumed that having larger flats in the same building complex might disqualify the entire project from lower tax rates.
What has changed
The authority ruled that if at least 50% of a project's total FSI is used for dwelling units with a carpet area up to 60 square metres, the project qualifies as affordable housing. Construction services for flats up to 60 square metres qualify for the concessional rate of 6% CGST plus 6% SGST, which equals an effective 8% GST rate after deducting one-third for land value. However, flats exceeding 60 square metres in the same project remain liable to GST at the normal standard rate. This benefit applies strictly to supplies made after January 25, 2018.
Who this affects
Real estate developers constructing residential projects in India that contain a mix of small units up to 60 square metres carpet area and larger units.
An example
A builder in Navi Mumbai constructs a project where 60% of the total FSI is used for flats under 60 square metres, and the remaining 40% is for larger flats. Based on the logic of this ruling, the builder can charge an effective 8% GST on the smaller flats supplied after January 25, 2018. Buyers of the larger flats in the same complex would be charged the standard GST rate. The builder does not need a separate certificate from external authorities to claim this classification.
What you should do
Builders with similar projects should calculate whether at least 50% of their total FSI is used for units under 60 square metres. Keep architectural plans and carpet area calculations ready to substantiate the tax rate applied. Note that an advance ruling binds only the applicant, so you must confirm your tax treatment with a professional or apply for your own ruling before changing your GST billing.
If you do nothing
If you apply the lower GST rate to flats larger than 60 square metres or to non-qualifying projects, tax officers can demand the short-paid tax during an audit. You will be required to pay the tax difference along with mandatory interest at 18% per year and potential penalties. You may also face customer disputes if you are forced to re-collect unpaid tax from buyers later.
The terms explained
- Floor Space Index (FSI)
- The maximum allowed construction area that can be built on a specific plot of land.
- Carpet Area
- The net usable floor space inside an apartment, excluding the thickness of inner walls, balconies, or verandas.
- Input Tax Credit
- The GST a business pays on purchases and services, which can be deducted from the GST owed on sales.
The ruling in detail
Authority for Advance Ruling
Prajapati Developers
NO.GST-ARA- 02/2018-19/B- 58 dated 03/07/2018 · Maharashtra
Questions before the authority
- Whether the construction services provided under the project "Prajapati Magnum" qualifies for the reduced CGST rate of 6% as provided in Sl. No 3 - item (v)- sub item (da) vide Notification 01/2018- CT (Rate) dated 25.01.2018?
Facts
The applicant is developing a residential project named "Prajapati Magnum" in Dronagiri, Navi Mumbai, comprising 5 wings and 352 flats. Approximately 73% of the total FSI consumed in the project is utilized for flats having a carpet area below 60 square metres. The applicant sought an advance ruling on whether the construction services for this project qualify for the concessional CGST rate of 6% under Notification No. 01/2018-Central Tax (Rate).
Ruling
| Question | What the authority ruled |
|---|---|
| Qualification of construction services under project 'Prajapati Magnum' for reduced CGST rate of 6% under Notification No. 01/2018-CT (Rate) | Answered in the affirmative as discussed above. Benefit applies only to flats with carpet area up to 60 sq. metres for supplies effected after 25.01.2018. |
The Authority ruled that the construction services for units with a carpet area up to 60 square metres qualify for the **concessional CGST rate of 6%** (effective 8% GST after 1/3rd land deduction). This benefit is restricted to supplies effected after 25.01.2018 for flats with carpet area not exceeding 60 sq. metres. Flats exceeding 60 sq. metres carpet area in the same project remain liable to GST at the **normal applicable rate**.
Reasoning
Notification No. 01/2018-Central Tax (Rate) inserted sub-item (da) under item (v) of Sl. No. 3 of Notification No. 11/2017-Central Tax (Rate), extending the concessional rate to low-cost houses up to 60 sq. metres in affordable housing projects granted infrastructure status. Department of Economic Affairs Notification F. No. 13/6/2009-INF defines an affordable housing project as one using at least 50% FAR/FSI for dwelling units with carpet area up to 60 sq. metres. TRU clarification dated 07.05.2018 confirmed that any housing project meeting this 50% FSI criteria qualifies as an affordable housing project without requiring a certificate from any external authority. Because 73% of the project's FSI was used for units below 60 sq. metres, construction services for those qualifying units are eligible for the reduced rate.
Provisions relied on
- Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017
- Notification No. 20/2017-Central Tax (Rate) dated 22.10.2017
- Notification No. 01/2018-Central Tax (Rate) dated 25.01.2018
- Department of Economic Affairs Notification F. No. 13/6/2009-INF dated 30.03.2017
- TRU Clarification F. No. 354/52/2018-TRU dated 07.05.2018
- Section 2(119) of the CGST Act, 2017
- Section 171 of the CGST Act, 2017
For the practitioner
Confirms that ongoing residential projects where at least 50% of total FSI is consumed by units up to 60 sq. metres carpet area qualify as affordable housing eligible for the **concessional GST rate of 8%** (effective rate after land deduction). It establishes that the concessional rate applies strictly on a **unit-by-unit basis** to qualifying flats supplied after 25.01.2018, while larger units remain subject to standard GST rates.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/maha-gst-ara-02-b-58_dt._03.07.18_prajapati_developers_1.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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