Ag e nda 2 Wo rks c o ntra c t V/ S c o nstruc tio n c o ntra c ts - - PDF document

CA Rajat B Talati 16‐01‐2019 1

GST Issue s in Works Contra c t tra nsa c tion with re le va nt Adva nc e Rulling s

PRE SE NT AT I ON BY: CA RAJAT B T AL AT I T AL AT I & CO., CHART E RE D ACCOUNT ANT S MUMBAI ra ja t@ ta la tic o .c o m DT . 17.1.2019 ORGANI SE D BY T HE GOODS & SE RVI CE S T AX PRACT I T I ONE RS’ ASSOCI AT I ON OF MAHARASHT RA

Ag e nda

 Wo rks c o ntra c t V/ S c o nstruc tio n c o ntra c ts

 Na ture o f supply in c a se o f c o nstruc tio n o f c o mple xe s

 T

ra nsitio na l pro visio ns

 Cla ssific a tio n – ra te o f ta x – No tifie d pro je c ts  I

ssue s in

 re de ve lo pme nt pro je c ts  JDA

 Anti-pro fite e ring  Re le va nt Adva nc e Rulling

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CA Rajat B Talati 16‐01‐2019 2

I ntro duc tio n o f VAT & SE RVI CE T AX o n Co ntra c to r a nd Builde rs

 Se c .2(24) of MVAT

Ac t de fine s sa le s, a nd E xpla na tion 1(ii) inc lude s the following :

the tra nsfe r of prope rty in g oods (whe the r

a s g o o ds o r in so me o the r fo rm) invo lve d in the e xe c utio n o f a 13[14[wo rks c o ntra c t inc luding ], a n a g re e me nt fo r c a rrying o ut fo r c a sh, de fe rre d pa yme nt o r o the r va lua b le c o nside ra tio n, the b uilding , c o nstruc tio n, ma nufa c ture , pro c e ssing , fa b ric a tio n, e re c tio n, insta lla tio n, fitting

• ut, impro ve me nt, mo dific a tio n, re pa ir o r

c o mmissio ning of a ny mova ble or

immova ble prope rty;]  Se c .65(54) of Se r

vic e T a x Ac t de fine s works c ontra c t a s: “wo rks c o ntra c t” me a ns a c ontra c t

whe re in tra nsfe r of prope rty in g oods involve d in the e xe c ution of suc h c ontra c t is le via ble to ta x a s sa le of g oods a nd suc h c o ntra c t is fo r the

purpo se o f c a rrying o ut c o nstruc tio n, e re c tio n, c o mmissio ning , insta lla tio n, c o mple tio n, fitting o ut, re pa ir, ma inte na nc e , re no va tio n, a lte ra tio n

• f a ny mova ble or immova ble

prope rty o r fo r c a rrying o ut a ny o the r

simila r a c tivity o r a pa rt the re o f in re la tio n to suc h pro pe rty;

3

T AX ABI L I T Y PRE AND POST GST

Pa rtic ula rs VAT GST

T a x lia b ility 1% o n Ag re e me nt va lue o n da te o f re g istra tio n T ime o f Supply o f se rvic e I T C No I T C E lig ib le fo r I T C Co mpo sitio n Ye s No OMS Purc ha se Purc ha se d o n F ull ra te o f T a x, no I T C a va ila b le c a n ta ke c re dit o f I GST

CA Rajat B Talati

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CA Rajat B Talati 16‐01‐2019 3 Supply- Ba sic s

Supply

Supply of Goods a nd/

• r Se rvic e s

Conside ra tio n Ma de or a g re e d to be ma de In c ourse or furthe ra nc e

• f busine ss

Without Conside ra tio n (Sc h I) Import of se rvic e for c onside ra tion

CA Rajat B Talati

5

Supply Sa le T ra nsfe r Ba rte r E xc ha ng e L ic e nc e Re nta l L e a se

Supply Inc lude s…

CA Rajat B Talati

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CA Rajat B Talati 16‐01‐2019 4

SUPPL Y UNDE R GST

Co mpo site Co ntra c ts o f Ma te ria l a nd L a b o ur I n re la tio n to Mo va b le Pro pe rty Co mpo site supply [se c tio n 2(30)] Mixe d supply [Se c tio n 2(74)] I n re la tio n to I mmo va b le Pro pe rty Wo rks Co ntra c t [se c tio n 2(119)] Sc he dule I I e ntry 5(a ) Supply of Se rvic e s

CA Rajat B Talati

7 WORKS CONT ACT SE RVICE S [SE C 2 (119)]

wc

• Wo rks c o ntra c t me a ns a c o ntra c t.

wc

• Whe re in tra nsfe r o f pro pe rty in g o o ds is invo lve d.
• I

n the e xe c utio n o f suc h c o ntra c t.

wc

• a nd inc lude s c ontra c t for building , c onstruc tion, fa bric a tion,

c omple tion, e re c tion, insta lla tion, fitting out, improve me nt, modific a tion, re pa ir, ma inte na nc e , re nova tion,a lte ra tion or c ommissioning of a ny immova ble prope rty.

• of a ny immova ble prope rty

8

CA Rajat B Talati 16‐01‐2019 5

CONT ARCT F OR SUPPL Y & I NST AL L AT I ON OF E L E CT RI CAL E QUI PME NT .

?

• Co mpo site supply.
• Mixe d supply.
• Wo rks c o ntra c t se rvic e s.

why

• It is impo rta nt to de c ide .
• It will impa c t o n GST

Ra te to b e le vie d.

• IT

C to b e c la ime d.

Ac tio n

• Ca re ful e xa mina tio n o f c o ntra c t.
• Ide ntify c o mpo ne nts to suppo rt the de c isio n.
• Do c ume nta tio n

9

Co mpo site Supply

 I

t is a tra nsa c tio n whe re two o r mo re supplie s a re invo lve d.

 Suc h supplie s a re na tura lly b undle d a nd supplie d in c o mb ina tio n  in the o rdina ry c o urse o f b usine ss.  GST

le vie d on princ ipa l supply. Supply o f g o o ds (Princ ipa l Supply) T ra nsit insura nc e Na tura lly b undle d Co mpo site Supply

+

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CA Rajat B Talati 16‐01‐2019 6

Mixe d Supply

 I

t is a tra nsa c tio n whic h c o mprise s o f two o r mo re supplie s fo r a sing le pric e .

 Bo th the supplie s a re inde pe nde nt & e q ua lly impo rta nt  GST

le vie d o n princ ipa l supply.

 Supply a ttra c ting hig he st ra te of ta x will be c onside re d a s supply fo r GST

Mo vie tic ke ts F

• o d Co mb o

F

• r a sing le

pric e Mixe d Supply

+

11

Co ntinuo us Supply o f Se rvic e s de finitio n Se c .2(33) o f the CGST Ac t, 2017

 supply o f ser

vices whic h is

 pro vide d, o r agre e d to be pro vide d, c o ntinuo usly o r o n

re c urre nt basis, unde r a contr

act, fo r a

 per

iod exceeding thr ee months with pe rio dic payme nt

• bligatio ns and inc lude s supply o f suc h se rvic e s as the

Go ve rnme nt may, subje c t to suc h c o nditio ns, as it may, by no tific atio n, spe c ify

CA Rajat B Talati

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CA Rajat B Talati 16‐01‐2019 7

Wo rks Co ntra c t de finitio n Se c .2(119) o f the CGST Ac t, 2017

 Me ans a c o ntrac t fo r building, c o nstruc tio n, fabric atio n,

c o mple tio n, e re c tio n, installatio n, fitting o ut, impro ve me nt, mo dific atio n, re pair, mainte nanc e , re no vatio n, alte ratio n o r c o mmissio ning o f

 any immovable pr

• per

ty

 whe re in transfe r o f pro pe rty in go o ds (whe the r as go o ds

• r in so me o the r fo rm) is invo lve d in the e xe c utio n o f suc h

c o ntrac t;

CA Rajat B Talati

13

Wo rks c o ntra c t V. Co mpo site Co ntra c t

 PE

W E ng g . (P) L td dt. 21.12.2018 – We st Ba ng a lo re

 Re tro fitting o f a ir b re a k syste m o n wa g o n is a c o mpo site supply  Air b re a k syste m a re no t ‘ immo va b le pro pe rty’ it is no t wo rks c o ntra c t

 E

ife e l Hills & Da le s De ve lo pe rs (P) L td – AAR-MAH dt. 14.12.18

 Plumb ing c o ntra c t

 Ac tivitie s c a nno t b e divide d into two pa rts – supply o f g o o ds a nd se rvic e s; whic h a re

infa c t inse pa ra b le .

 I

t is wo rks c o ntra c t

 E

le c tric a l c o ntra c t is a lso c o mpo site c o ntra c t & is wo rks c o ntra c t

14

CA Rajat B Talati 16‐01‐2019 8

Wo rks c o ntra c t V. F ina nc ia l Mo de l

 Supe r We a lth F

ina nc ia l E nte rprise (P) L td AAR dt/ 6.8.2018 AAR-Orissa

 E

ne rg y pe rfo rma nc e c o ntra c t e nte re d into with munic ipa l c o rpo ra tio n fo r stre e t lig hting . Ope ra tio ns & ma inte na nc e fe e s c o lle c te d

 Is it e xe mpt? I

n te rms o f no tific a tio ns 12/ 2017 – C. T .(Ra te ) dt.28.6.17 (b e ing func tio n o f lo c a l a utho rity unde r Artile 243w o f c o nstitutio n o f I ndia ?  Co ntra c t invo lve s

 Re pla c e me nt o f lig ht b ulb s with e ne rg y e ffic ie nt L

E D lig hts

 Ma inta ining the sa me lig hting fixture s & re pla c ing the m whe re ve r L

E D la mps fa ils

 Sub missio n o f mo nthly e ne rg y sa ving re po rt, O&M fe e s c o lle c te d  T

• b e ha nde d o ve r to the munic ipa l c o rpo ra tio n a t the e nd o f pro je c t pe rio d i.e . 4 ye a rs

 Se tting mo nito ring syste m

15

Wo rks c o ntra c t V. F ina nc ia l Mo de l

(c o nt..)

He ld

 No t a ‘ pure la b o ur’ c o ntra c t a s ‘ invo lving supply o f a ny g o o ds’  Se c tio n 2(119) – te rms use d a s ‘ re pla c e me nt, fitting o ut, re pa ir &

mo nito ring ’ – use d in the c o ntra c t is indisputa b ly ‘ wo rks c o ntra c t’ .

16

CA Rajat B Talati 16‐01‐2019 9

Split Co ntra c t – Supply & Se rvic e

 Ca b le Co rpo ra tio n o f I

ndia L td AAR-MAH dt. 12.12.2018

 Se pa ra te c o ntra c t fo r

 T

e sting a nd supply o f e q uipme nt

 All o the r a c tivitie s re q uire d to b e pe rfo rme d fo r c o mmissio ning o f the pro je c t inc luding

tra nspo rta tio n insura nc e e tc

 Cro ss fa ll b re a c h pro visio n

 He ld:

 Co mpo site supply o f wo rks c o ntra c t

 Also re fe r: E

mc o L td – AAR- MAH dt. 10.12.2018 a nd Skippe r L td AAR We st Be ng a l dt. 26.11.2018) –

17

Sc he dule I I : Ac tivitie s to b e tre a te d a s Supply o f Se rvic e s

• Sr. No. 2

L a nd a nd Building (a ) a ny le a se , te na nc y, e a se me nt, lic e nc e to

• c c upy la nd is a supply o f

se rvic e s; (b ) a ny le a se o r le tting o ut

• f the b uilding inc luding a

c o mme rc ia l, industria l o r re side ntia l c o mple x fo r b usine ss o r c o mme rc e , e ithe r who lly o r pa rtly.

18

• Sr. No. 5

(a ) re nting o f immo va b le pro pe rty;

(b) c onstruc tion of a c omple x, building , c ivil struc ture or a pa rt the re of,

e xc e pt whe re the e ntire c o nside ra tio n ha s b e e n re c e ive d a fte r issua nc e o f c o mple tio n c e rtific a te o r a fte r its first o c c upa tio n, whic he ve r is e a rlie r.

• Sr. No. 6

Composite supply

T he fo llo wing c o mpo site supplie s sha ll b e tre a te d a s a supply o f se rvic e s, na me ly:—

(a ) works c ontra c t a s de fine d in c la use (119) of se c tion 2;

CA Rajat B Talati 16‐01‐2019 10 E xe mptio ns pro vide d fo r Se rvic e s (No tific a tio n No . 12/ 2017 da te d 28th June , 2017)

Sr . No.10 (He a ding 9954)

• pure la b o ur

c o ntra c ts unde r the Ho using fo r All (Urb a n) Missio n o r Pra dha n Ma ntri Awa s Yo ja na .

• Sr. No.11

(He a ding 9954)

• pure la b o ur

c o ntra c ts pe rta ining to a sing le re side ntia l unit o the rwise tha n a s a pa rt o f a re side ntia l c o mple x.

• Sr. No.12

(He a ding 9963/ 9972)

• re nting o f

re side ntia l dwe lling fo r use a s re side nc e .

19

Ra te s o f T a x unde r GST

20

Notific a tion No. 11/ 2017

• dt. 28.6.2017

Ra te of T a x for Se rvic e s Sr.No.3 (i)- Construc tion of Comple x (ii)Composite supply of works c ontra c t 18% (CGST +SGST ) Notific a tion no. 20/ 2017

• dt. 22.8.2017

Notific a tion no.24/ 2017 dt.21.9.2017 Notific a tion no.31/ 2017 dt.13.10.2017 Notific a tion no.46/ 2017 dt.14.11.2017 Notific a tion no.1/ 2018 dt.25.01.2018

Ame ndme nt to No tific a tio n No . 11 (iii)(a ) histo ric a l mo nume nt, a rc ha e o lo g ic a l site , e tc (iii)(b ) c a na l, da m or othe r irrig a tion works

(iii)(c )pipe line , c onduit or pla nt

(iv)(a ) a ro a d, b ridg e , tunne l, e tc (iv)(b )Ja wa ha rla l Ne hru Na tio na l Urb a n Re ne wa l Missio n o r Ra jiv Awa a s Yo ja na (iv)(c )/ (d )Housing for All (Urba n) Mission/ Pra dha n

Ma ntri Awa s Yoja na (iv)(da )c onstruc te d unde r Sc he me of Afforda ble Housing – E WS 12%

(CGST +SGST )

CA Rajat B Talati 16‐01‐2019 11

Ra te s o f T a x unde r GST ….c o ntd

21

(iv)(db)house s c onstruc te d or a c quire d unde r CL SS for E WS/ L IG/ MIG- 1/ MIG- 2 (iv)(e )/ (f)pollution c ontrol or e fflue nt tre a tme nt pla nt e xc e pt a s pa rt of fa c tory/ a struc ture me a nt for fune ra l, buria l or c re ma tion of de c e a se d (v)(a ) ra ilwa ys, inc luding ,monora il a nd ,me tro (v)(b)Sing le re side ntia l unit (v)(c )(d)(da ) low- c ost house s up to a c a rpe t a re a

• f 60 sq.mt, housing for a ll, PMAY (Sc he me of

Afforda ble Housing ) (v)(e )post- ha rve st stora g e infra struc ture & c old stora g e Re sidua l Ra te

• f T

a x

Ra te o f T a x fo r Se rvic e s (xii)Othe r Co nstruc tio n Se rvic e s 18% (CGST +SGST )

T DS

T DS to b e de duc t b y Ce ntra l Go ve rnme nt o r Sta te Go ve rnme nt, L

• c a l a utho rity, Go ve rnme nt a g e nc ie s, Suc h

pe rso ns o r c a te g o ry a s no tifie d b y the Go ve rnme nt - mo re tha n 2.5la kh 1%CSGT +1%SGST & 2% I GST

Sub - c o ntra c to r- ra te o f ta x

 Whe re pa rt o f the c o nstruc tio n is q ua lifying a s ‘ Affo rda b le ho sing ”

a nd the re ma ining no t.

 Wha t ra te o f GST

a pplic a b le ? 12% o r 18%

 Ho w to c o mpute ?  Sho uld it b e pro po rtio na te ?

 Re fe r No te - dt. 25.1.2018 No tific a tio n 1/ 20118 CGST

• Ra te

 Co nstruc tio n se rvic e s - Affo rda b le ho using –Pa ra 3(v)(d a )

 AAR- MAH – Pra ja pa ti De ve lope rs dt 3.7.2018

22

CA Rajat B Talati 16‐01‐2019 12 Ra te o f T a x fo r Sub -Co ntra c to rs

No tific a tio n No . 1/ 2018-Ce ntra l T a x (Ra te ) dt.25th Ja nua ry 2018

 Co ntra c to r pro viding the fo llo wing se rvic e s to Ce ntra l Gove rnme nt, Sta te

Gove rnme nt, Union te rritory, a L

• c a l Authority, a Gove rnme nta l Authority or

a Gove rnme nt E ntity sha ll b e le via b le to ta x a t the b e lo w g ive n ra te s:-

23

Pa rtic ula rs T a x Ra te

E ntry (iii)- (a )histo ric a l mo nume nt, a rc ha e o lo g ic a l site , e tc o r (b )c a na l, da m o r

• the r irrig a tio n wo rks; (c ) pipe line , c o nduit o r pla nt e tc . OR

E ntry (vi)- (a )c ivil struc ture o r a ny o the r o rig ina l wo rks o the r tha n fo r c o mme rc e , industry, o r a ny o the r b usine ss o r pro fe ssio n o r (b ) struc ture fo r use a s (i) a n e duc a tio na l, (ii) a c linic a l, o r(iii) a n a rt o r c ultura l e sta b lishme nt; o r (c )a re side ntia l c o mple x pre do mina ntly me a nt fo r se lf-use o r the use o f the ir e mplo ye e s 6% E ntry (vii)- works c ontra c t invo lving pre domina ntly e a rth work (tha t is, c o nstituting mo re tha n 75pe r c e nt. o f the va lue o f the wo rks c o ntra c t) 2.5%

• However, a Sub‐Contractor providing the above services to the Main Contractor shall

also be taxable at the above given rates vide Notification No. 1/2018‐Central Tax (Rate) dt.25th January 2018

Summa ry o f Wo rks Co ntra c t Ra te

I f the wo rks c o ntra c t is c o ve re d b y e ntry no . ‘ iii’ to ‘ vi’ o f HSN 9954

6% CGST + 6% SGST 9% CGST + 9% SGST

I f the wo rks c o ntra c t is no t c o ve re d b y e ntry no . ‘ iii’ to ‘ vi’ o f HSN 9954

Ge ts c o ve re d unde r re sidua ry e ntry no . ‘ xii’ o f HSN 9954

CA Rajat B Talati 16‐01‐2019 13

Who is Go ve rnme nta l Autho rity?

 No tific a tio n no . 31 o f Ce ntra l T

a x (Ra te ), 2017 da te d 13th Oc to b e r 2017 de fine s Go ve rnme nta l Autho rity a s unde r:

Gover nmental Author ity me ans an autho rity o r a bo ard o r any o the r bo dy; (i) set up by an Act o f Parliame nt o r a S tate L e gislature ; o r (ii) established by any Go ve rnme nt, with 90% o r mo re partic ipatio n by way o f e quity o r c o ntro l, to car r y out any function entr usted to a munic ipality unde r Artic le 243 W o f the Co nstitutio n o r to a Panc hayat unde r Artic le 243 G o f the c o nstitutio n.

Go vt Co ntra c t – no n- c o mme rc ia l purpo se

 A2Z I

nfra E ng g . L td – Chha tisg a rh AAR dt.29.11.2018

 I

f the a c tivity o f a sta te funde d a utho rity is limite d to funding the pro je c t &

 I

t is to b e use d pre do mina ntly fo r c o mme rc ia l purpo se s

 Co nc e ssio na l ra te a s pe r 24/ 2017 – CT

(Ra te ) no t a va ila b le

26

CA Rajat B Talati 16‐01‐2019 14

Ac tivitie s e ntruste d b y Go vt to e ntity

 Shre e ji I

nfra I ndia (P) L td – Ma dhya Pra de sh AAR dt.26.10.2018

 Go vt e ntity – c o nc e ssio na l ra te  Co nstruc tio n o f re side ntia l q ua rte rs fo r wo rke rs / sta ff b y M P Po we r Ge ne ra tio n Co . L

td

 T

he c o nstruc tio n o f q ua rte rs no t re la te d to the a c tivity o f g e ne ra tio n o f e le c tric ity e ntruste d b y the Sta te Go vt.

 Wo rks c o ntra c t ta xa b le @ 18%

27

E PC c o ntra c ts & GST

 E

PC c o ntra c t fo r se tting up o f so la r po we r g e ne ra ting syste m

 Wo rks c o ntra c t ta xa b le @ 18% (SAC9954)  [AAR Ma ha ra shtra - Girira j Re ne wa ble s Pvt. L

• td. vs Ma ha ra shtra Sta te Adva nc e d Ruling No.

GST

• ARA- 01/ 2017/ B- 01 da te d 17th F

e b 2018]

 supply is c o nside re d a s a wo rks c o ntra c t

 Co mpo site c o ntra c t fo r the supply a nd insta lla tio n ha s to b e tre a te d a s wo rks c o ntra c t a s

no t a c ha tte l is so ld a s a c ha tte l.

 So la r Po we r Pla nt c a nno t b e shifte d fro m o ne pla c e to a no the r witho ut disma ntling the

sa me .

 Dra ft c o ntra c t pro vide d b y de a le r spe c ifie s tha t 60-70% is princ ipa l supply o f pho to vo lta ic

mo dule . But the re a re no do c ume nta ry e vide nc e s. T he re fo re , this is no t a c c e pta b le .

28

CA Rajat B Talati 16‐01‐2019 15

E PC c o ntra c ts & GST [c o nt..]

 AAAR Ma ha r

a shtr a – F e r mi Sola r F a r ms Pvt. L

• td. Vs Ma ha r

a shtr a Sta te Adva nc e d Ruling No. MAH/ AAAR/ SS- RJ/ 07/ 2018- 19 da te d 4th Se p 2018}

 T

he a ppe lla nt re q uire d c la rific a tio n fo r ra te o f ta x fo r two se pa ra te c o ntra c t i.e fo r supply so la r po we r g e ne ra ting syste m a nd supply o f insta lla tio n.

 Also whe the r c o nc e ssio na l ra te is a pplic a b le fo r sta nda lo ne pa rts (witho ut supply

• f PV mo dule s).

 de c ide d a s fo llo ws:

 Se tting up a nd o pe ra tio n o f so la r pho to vo lta ic pla nt is ‘ wo rks c o ntra c t’ in te rms o f c la use

(119) o f the se c .2 o f the GST Ac t

 Ra te o f ta x fo r the c o mpo site ‘ wo rks c o ntra c t’ is no tifie d in the no tific a tio n no 11/ 2017 o f

the SGT Ac t dt a nd ra te o f ta x is @ 9% SGST .  Sola rdire c t India – AAR – Ra ja stha n dt. 20.10.2018  F RIZO India (P) L td – AAR – Ra ja stha n dt. 20.10.2018

29

E PC c o ntra c ts & GST [c o nt..]

 Also re fe r:  MP HC – Be le c tric Photovoltic India (P) L

td 2019- VIL

• 07- MP dt. 2.1.2019

 “Disc ussio n o n ‘ so la r Po we r Ge ne ra ting Syste m – Syste m c o me s into

e xiste nc e o nly whe n it is inte g ra te d with a ll pla nts & ma c hine ry.

 Supply o f sub -sta tio n e q uipme nt a s a pa rt o f so la r g e ne ra ting syste m is

e lig ib le fo r c o nc e ssio na l ra te o f VAT .

30

CA Rajat B Talati 16‐01‐2019 16

I nput T a x Cre dit (Blo c ke d Cre dits)Se c . 17(5) o f CGST Ac t, 2017

Cla use (c )

 wo rks c o ntra c t se rvic e s whe n

supplie d fo r c o nstruc tio n o f a n immo va b le pro pe rty (o the r tha n pla nt a nd ma c hine ry) e xc e pt whe re it is a n input se rvic e fo r furthe r supply o f wo rks c o ntra c t se rvic e ;

Cla use (d)

 g o o ds o r se rvic e s o r b o th re c e ive d b y

a ta xa b le pe rso n fo r c o nstruc tio n o f a n immo va b le pro pe rty (o the r tha n pla nt o r ma c hine ry) o n his o wn a c c o unt inc luding whe n suc h g o o ds

• r se rvic e s o r b o th a re use d in the

c o urse o r furthe ra nc e o f b usine ss.

31

Explanation.––For the purposes of clauses (c) and (d), the expression “construction” includes re‐construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

Sto c ks

• Sto c k in ha nd
• Sto c k he ld o f/ b y

a g e nt

• Go o ds se nt o n

Jo b Wo rk Cre dit Ba la nc e s

• C/ f in re turn
• Una va ile d I

T C o n Ca pita l g o o ds

• Cre dit o n Go o ds he ld

in Sto c k

• Cla ime d a s re fund
• Cre dit o n

g o o ds/ Se rvic e in tra nsit

Transition to GST : Available?

32

CA Rajat B Talati 16‐01‐2019 17

Transition to GST : credit Available?

 As pe r  Pro visio ns – Se c .140(3)- Se c 140 (6) –

 a s pe r VAT

/ CE NVAT re turn

 F

ixe d ra te o r F ixe d Amt in lie u o f ta x pa ya b le

 Sto c k in ha nd

 I

nput g o o ds

 Se mi- finishe d g o o ds  F

inishe d g o o ds

33

Se c 142 (11) – to the e xte nt



No ta x unde r GST – Se c 142(11)(a )

 On g oods- to the e xte nt ta x wa s le via b le unde r the VAT

Ac t



No twithsta nding the time o f supply o f g o o ds- se c 12 

No ta x unde r GST – Se c 142(11)(b )

 On se rvic e s - to the e xte nt ta x wa s le via b le unde r the Cha pte r V o f the F

ina nc e Ac t , 1994 – Se rvic e ta x la ws



No twithsta nding the time o f supply o f Se rvic e s - se c 13 

No ta x unde r GST – Se c 142(11)(c )

 Whe re ta x wa s pa id both unde r VAT a nd Se rvic e ta x la ws 

T a x sha ll b e pa ya b le unde r GST



T a xa b le pe rso n to a va il c re dit o f VAT

• r Se r ta x pa id unde r the e xisting la w



T

• the e xte nt o f supplie s ma de a fte r AD a nd suc h c re dit sha ll b e c a lc ula te d – a s pre sc rib e d



Inte rna l Circ ula r No . 23A o f 2018 dt 1.9.18 fo r Ve rific a tio n o f T ra n-1 c re dit u/ s 140(6) & 142(11)(C) o f SGST Ac t – Ma h GST Autho rity



F No 381/ 274/ 2017, 27 F e b 2018 – WIP – T ra nsitiona l c re dit not a va ila ble

34

CA Rajat B Talati 16‐01‐2019 18

Ve xe d I ssue s in ta xa tio n o f Builde rs a nd De ve lo pe rs

35

De ve lo pme nt Rig hts v/ s T ra nsfe ra b le De ve lo pme nt Rig hts

 T

ra nsfe r of De ve lopme nt Rig hts is the rig ht g ive n b y the o wne r o f the la nd to the de ve lo pe r to

c o nstruc t pro pe rty upo n the la nd, whe re a s T

ra nsfe ra ble De ve lopme nt Rig hts (T DR) ha s to b e

purc ha se d fro m the o pe n ma rke t fo r purpo se o f c o nstruc ting a dditio na l a re a o n the la nd.

36

Sec.2(9A) of MRTP Act, 1966 defines “Development Right” as: right to carry out development or to develop the land or building or both and shall include the transferable development right in the form of right to utilise the Floor Space Index of land utilisable either

• n the remainder of the land partially

reserved for a public purpose or elsewhere, as the final Development Control Regulations in this behalf provide Regulation 34 of DCR, 1991 defines “Transfer of Development Right” as: In certain circumstances, the development potential of a plot of land may be separated from the land itself and may be made available to the owner of the land in the form of Transferable Development Rights (TDR). These Rights may he made available and be subject to the Regulations in Appendix VII hereto.

CA Rajat B Talati 16‐01‐2019 19

Re de ve lo pme nt o f So c ie tie s

 Mode l a nd T

ra nsa c tio ns unde r Re de ve lo pme nt

 T

he re a re 3 pa rtie s invo lve d, the E xisting F la t Owne rs(E F O), L a nd Owne rs & the De ve lo pe r.

 E

F O re linq uish the ir rig hts upo n the la nd, i.e . tra nsfe r the De ve lopme nt

Rig hts to the de ve lo pe r

 & the de ve lo pe r in turn c o mpe nsa te s the m b y g iving a ne wly

c o nstruc te d fla t with a dditio na l a re a plus mo ne ta ry c o nside ra tio n if a ny.

 2 supplie s a re invo lve d  tra nsfe r o f de ve lo pme nt rig hts  po sse ssio n o f ne w fla ts  the se a re c ove re d unde r Ba rte r, he nc e ta xa ble unde r GST

.

 Also , RCM ma y b e a pplic a b le a s E

F O a re unre g iste re d pe rso ns.

37

Re de ve lo pme nt pro je c t –Ba rte r- De ve lo pe r side

 On Ne wly c o nstruc te d F

la t (F

• r E

xisting Are a fre e o f c o st) –

Taxable at 18% GST [works contract services]

On the construction cost? Or 110% of Construction cost? Stamp duty valuation? Open market value?

 On Ne w F

la t (F

• r Additio na l Are a fre e o f c o st) ‐ Taxable at 18%

GST [works contract services]– same as above

 T.O.S. for Barter is when possession/rights is transferred through

allotment letter/ conveyance deed. [Noti 4/2018 – CT rate 25..1.2018]

 Flats sold to outside buyers ‐ Taxable at 18% GST subject to 1/3rd Land

• Dedn. (subject to receipt of CC/OC)

38

CA Rajat B Talati 16‐01‐2019 20

Re de ve lo pme nt o f So c ie tie s

 Va lua tion [Se c .15 of CGST

Ac t,2017]

 I

n c a se o f Ba rte r, it ha s to b e do ne a s pe r Rule 30 o f CGST Rule s a t 110% o f Co st. 18% (CGST +SGST ) to b e le vie d.

 Va lue to b e c o nside re d is Co st o f Co nstruc tio n fo r Ba rte r.  F

• r a dditio na l a re a / sa le to o utside b uye rs, tra nsa c tio n va lue

(T .V.) ha s to b e a do pte d a fte r pro viding L a nd Co st De duc tio n o f 1/ 3rd o f T .V.

39

Ca nc e lla tio n o f Ag re e me nt

 Co nside r a n e xa mple whe re VAT

& ST ha s b e e n pa id, a nd the fla t is c a nc e lle d unde r GST .

 Re ve rsa l o f ta xe s is a llo we d till e a rlie st o f:  Due da te o f re turn fo r Se pt. o f the ne xt ye a r (i.e .20th Oc t. o f ne xt ye a r)  Da te o f filing o f Audit Re po rt  Due da te o f filing Annua l re turn, i.e . 31st De c e mb e r o f ne xt ye a r  Cir

c ula r

• No. 151 / 2 / 2012- STa lso sta te s tha t “the builde r/

de ve lo pe r wo uld be e ntitle d to take c re dit unde r rule 6(3) o f the S e rvic e T ax Rule s, 1994 ( to the e xte nt he has re funde d the o riginal amo unt). I f the builde r/ de ve lo pe r re se lls the flat be fo re the issuanc e o f c o mple tio n c e rtific ate , again tax liability wo uld arise .

 Ho we ve r, if the re a re a ny Ca nc e lla tion Cha rg e s re ta ine d b y the

de ve lo pe r, it will b e ta xa b le witho ut la nd de duc tio n a nd diffe re nt SAC.

40

CA Rajat B Talati 16‐01‐2019 21

I T C Re ve rsa l o n Sa le a fte r re c e ipt o f O.C.

 I

T C re ve rsa l ne e d to b e do ne b y fo llo wing Rule 42 o f CGST Rule s, 2017

 Que stio n a rise s whe the r re ve rsa l o f who le pro je c t-wise I

T C ne e ds to b e do ne ? ?

 Rule 42 sta te s tha t re ve rsa l o f “I

T C in a T a x Pe rio d” ne e ds to b e do ne , i.e . I T C

• f the ta x pe rio d in whic h suc h re ve rsa l ha s to b e e ffe c te d (mo nth/ q ua rte r)

 Co lle c to r o f Ce ntra l E

xc ise vs. Da i Ic hi Ka rka ria L

• td. 1999 (112)E

L T 353- a lso sta te s tha t “c re dit ne e d no t b e re ve rse d if sub se q ue ntly the fina l pro duc t is e xe mpte d fro m duty a nd whe n the c re dit ha s b e e n ta ke n le g a lly”

 Se c .17(5) (c ) & (d) ta lks a b o ut no n-a va ilme nt o f I

T C o n c o nstruc tio n o f immo va b le pro pe rty (o the r tha n P&M) fo r o wn use

 Supplie s a fte r OC – is it ‘ o wn use ’ ? Re q uire s re ve rsa l?

41

Anti-Pro fite e ring me a sure [Se c .171(1) o f CGST Ac t,2017]

 Se c .171(1) - “Any re duc tio n in ra te o f ta x o n a ny supply o f g o o ds o r se rvic e s o r the

b e ne fit o f input ta x c re dit sha ll b e pa sse d o n to the re c ipie nt b y wa y o f c o mme nsura te re duc tio n in pric e s.”

 Old Ac ts ha d c e rta in disa llo wa nc e s o f ta xe s pa id due to whic h full input ta x c re dits

we re no t a va ila b le . Ho we ve r, GST e nsure s se a mle ss flo w o f c re dits, whic h e nsure s tha t the re is no b lo c ka g e o f c re dits whic h wo uld le a d to inc re a se in c o sts.

 He nc e , a ny suc h b e ne fit de rive d must b e pa sse d o n to the re c ipie nt a nd no t

re ta ine d b y the wo rks c o ntra c to r/ de ve lo pe r.

 Pl. re fe r to Pre ss re le a se da te d 15.6.2017 - Ministry o f F

ina nc e -GOI

 I

n c a se o f M/ s Pyra mid I nfra te c h Pvt. L td [2018(9) T MI 1107 – Na tio na l Anti-Pro fite e ring Autho rity] o rde r is pa sse d.

42

CA Rajat B Talati 16‐01‐2019 22

Disc la ime r: the ta xa tio n o f b uilde rs a nd De ve lo pe rs unde r GSTla w is full o f mo re tha n o ne inte rpre ta tio ns a nd re a de r is a dvise d to ta ke a c o nside re d po sitio n.

T HANK YOU !!

CA Rajat B Talati

43