More than 100 Days of GST,
are builders still in Dilemma?
Real Estate sector has been hit hard Post demonetization,
further RERA regulations have compelled them to be
more transparent and amidst all GST has been a real night
mare for them especially with regards to the Transitional
provisions concerning the said sector
This article makes an attempt to address pervasive queries
concerning real estate sector under the transitional
provisions
Q: Tax implication on under-construction flat sold pre – GST
Case study: A builder sold under-construction flat to Mr A
on 25th April 2017 & registered the agreement on the same
day by paying the VAT @ 1% on sale consideration of Rs
1,00,00,000/-As on 30th June 2017 the demand raised by
the builder was 35% (% completed) of sale consideration and
amount received from Mr A was Rs 10,00,000/-
Taxes paid as on 30th June 2017
VAT paid : Rs 1,00,000/- (1% on 1,00,00,000/-)
ST paid
: Rs 1,57,500/- (4.5% * 35%*1,00,00,000/-)
- As per Sec 142 (11) (c) where tax was paid on any supply
both under the VAT Act and under Chapter V of the Finance
Act, 1994, tax shall be leviable under this Act and the taxable
person shall be entitled to take credit of value added tax
or service tax paid under the existing law to the extent of
supplies made after the appointed day
Service tax
Since the liability to pay service tax was determined by
applying the Point of Taxation Rules, 2011 and if the builder
has raised the demand letter as per the agreement even
though the consideration is received post GST the same is
not leviable to GST as per the provisions of Sec 142 (11) (b)
MVAT
Amendment made in MVAT Act 2002 by insertion of new
section 42 (3B) in MVAT Act, 2002 which provides the
mechanism to calculate the VAT liability on the amount
received as on 30th June 2017 and any excess VAT paid
would be eligible as credit to be claimed in Form Tran 1
Thus the excess VAT of Rs 90,000/- [1,00,000/- less 1% *
10,00,000/- (amount received)] will be claimed in column
no 11 of Form Tran1
Q: Whether the builders are liable to pay tax again under
GST in cases where the Service Tax had already been paid/
payable on flats, as per earlier law?
No, builders are only liable to tax (GST) the supplies to the
extent provided post 01.07.2017. As per our case study GST
would be levied on Rs 65,00,000/- (65% * 1,00,00,000/-)
Q: Whether Credit of duties/taxes paid on the inputs (viz
steel, Cement, bricks etc.) lying in stock as on the appointed
day i.e. 01.07.2017 is allowed in respect of residential/
commercial complexes which are under construction as on
1.7.2017?
As per section 140 (3) of CGST Act, 2017 Credit of eligible
duties is allowed to the suppliers of construction services
(builders/developers who were availing abatement in
terms of Notification. No. 26/2012-ST dated 20 June, 2012)
in respect of the inputs lying in stock as on 01.07.2017
provided that the following conditions are fulfilled;
such inputs or goods are intended to be used for making
taxable supplies;
the said registered person is eligible for input tax credit on
such inputs as per GST law;
the said registered person is in possession of invoice or
other prescribed documents evidencing payment of duty
under CENVAT Credit Rules, 2004, in respect of such
inputs; and
such invoices or other documents were issued not earlier
than twelve months immediately preceding the appointed
day i.e., 1.7.2017.
Declaration in Form Tran 1
Credit of central duties - column no 7a
Credit of State Taxes - column no 7c
Q: Further can the builder take the ITC of inputs already
used for construction (i.e W-I-P)?
Section 140 (3) also allows credit for inputs held in semi-
finished In view of the same builder is also eligible to claim
the taxes paid on the inputs purchased which are already
used for construction provided such invoices should not be
prior to 01.07.2016
Q: Is it mandatory to file declaration in Form Tran 1
There is no mandatory requirement with regards to filling
of Form Tran 1, however all those registered taxpayers
intending to take the eligible ITC paid under existing law
have to mandatorily file it
Q: What is the last date for filling Tran 1
As per the latest order no 08/2017-GST dated 28th October
2017 issued on recommendation of GST council the due
has been extended till 30th November 2017
Note: Any GST related queries can be sent to
[email protected]
CA Mudit G. Bhansali
Disclaimer: The content of the article are solely for informational purpose. It does not constitute any recommendation and the author do not accept
any liabilities neither for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.
The views expressed herein above are based on the facts and personal interpretation of law which are subject to change from time to time.
14 | HELLOBIZ NOV 2017