Real estate companies that opted for lower GST rates of 1 percent and 5 percent from April 1, 2019, but could not procure 80 percent of the total supplies from registered dealers, will have to pay tax on the shortfall in such procurement by June 30.

The GST Council had allowed real estate players to shift to 5 percent GST rate for residential units and 1 percent for affordable housing without the benefit of input tax credit (ITC) from April 1, 2019.

However, they were mandated to procure at least 80 percent of the inputs from registered dealers.

Any shortfall in the procurement would be subject to goods and services tax (GST) to be paid by real estate developers at the rate of 18 percent on supplies used as inputs or input services and 28 percent for cement.

In an instruction to Principal Chief Commissioners of Central Tax on June 24, the Department of Revenue said it has been decided that in case of shortfall from the said threshold of 80 percent, the promoter/developer shall pay the tax on the value of input and input services comprising such shortfall and this tax shall be paid through a prescribed form electronically on the common portal by the end of the quarter following the financial year. Accordingly, for the financial year 2019-20, tax on such shortfall is to be paid by June 30, 2020.

The revenue department said it had received requests seeking details of prescribed form on which the said tax amount has to be reported.

The issue referred by the trade has been examined. It has been decided that Form GST DRC-03, as already prescribed, shall be used for making the payment of such tax by promoter/developer.

Accordingly, person required to pay tax in accordance with the said notification on the shortfall from threshold requirement of procuring input and input services (below 80 percent) from registered person shall use the form DRC-03 to pay the tax electronically on the common portal within the prescribed period.