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Cus - Export of non-basmati rice - Notification 20/2023 insofar as it denies the benefit of the transitional arrangement as contained in para-1.05 of the FTP 2023, is bad in law: HCCus - Refund of SAD - 102/2007-Cus - Areca Nut and Supari are one and the same - Objections with regard to name, nature and status of importer or buyers or the end use of goods purchased by them etc. are extraneous: HCCX - Interest on Refund - Since wrong order annexed by petitioner in paper book, Bench is unable to proceed further - Petition is dismissed with liberty to file a fresh one: HCGST - No E-way bill - When petitioner imports machinery and after Customs clearance, transports same to his own factory, it cannot be said that such a transportation would fall within the definition of term 'supply' - Penalty imposable under second limb of s.129(1)(a): HCGST - Fix responsibility on officers who allowed BG to lapse - Petitioner not justified in not renewing BG - Cost of Rs.15 lacs imposed, to be paid to PM Cares Fund: HCGST - Since the parties agree that petition can be disposed of on the basis of records available before Appellate Authority, petitioner is directed to enclose all documents filed before Appellate Authority in a compilation, in form of a paper book: HCWrong RoadST - Whether any service is used for personal consumption or not is certainly question of fact and being question of fact, no substantial question of law arises: HCGovt proposes to amend Geographical Indication of Goods Rules; Draft issued for feedbackST - If what has been paid as tax is without authority of law, Revenue should refund the same - Denial of credit would result in the whole exercise being tax neutral: HCWarehousing Authority notifies several agri goods to be stored in only registered warehousesST - Even if the petitioner may have a case on merits, it is best left to be decided by the Appellate Authority under the hierarchy prescribed under the FA, 1994: HCUS FDA okays Eli Lilly Alzheimer’s drugGST - Petitioner challenges jurisdiction of assessing officer - Petitioner is entitled to file an appeal u/s 107 by availing an alternate efficacious remedy: HCFive from Telangana killed in car accident on Pune-Solapur HighwayGST - Existence of an alternative remedy is a material consideration but not a bar to the exercise of jurisdiction: HCHush money case against Donald Trump - Sentencing deferred to Sept 18GST - It is open to a trader to take goods by whichever route he opts, unless the law otherwise requires, destination point being intact: HCDeadly hurricane Beryl smashes properties in JamaicaGST - Conclusion that taxable person is providing a service to supplier while taking the benefit of a discount by facilitating an increase in the volume of sales of such supplier is ex facie erroneous and contrary to the fundamental tenets of GST law: HCIsrael claims 900 militants killed in Rafah since May monthGST - Order expressly records that personal hearing notice was returned with endorsement 'no such person at address' - Since petitioner has shifted to a new premises, it is just and necessary to provide an opportunity to contest demand: HC116 die in stampede at UP ’Satsang’I-T- Application for revision of order dismissed in limine on grounds of delay; case remanded for re-consideration: HCWe are deepening economic ties with India, says US officialI-T- As per Section 119(2)(b), power to condone applications relate to claims for amount exceeding Rs 50 lakhs are to be considered by CBDT; however it is impermissible for CBDT to pass order on merits: HC8 Dutch engineers build world’s longest bicycle - 180 feet, 11 inchesI-T- Additions framed u/s 68 for unexplained income & u/s 69 for unexplained expenditure not tenable where complete transactional details are furnished & not doubted: HCRailways earns Rs 14798 Crore from Freight loading in June monthI-T- Delay in filing ITR is per se insufficient reason to estimate assessee's profit @15% on turnover, more so where audited financial report is filed in timely manner: ITATMoD inks MoU to set up testing facilities in Unmanned Aerial System in TN Defence Industrial CorridorI-T- For invoking section 69A, assessee should be found to be owner of any money, bullion, jewellery or other valuable article & which is not recorded in the books of account: ITATGovt proposes Guidelines for ethical approach to Coal MiningI-T- TDS credit can be allowed based on AIS, where details pertaining to TDS, advance tax & other payments are reflected in Form 26AS: ITATVaishnaw to inaugurate Global IndiaAI Summit 2024I-T- Lending money with the primary intention of earning interest can be considered a business activity, but nature and manner of lending, as well as the frequency, should be taken into account: ITAT
 
Treading GST path - XL - GST for ongoing constructions

 

DECEMBER 27, 2017

By G Natarajan, Advocate, Swamy Associates

HOW to pay GST for an ongoing residential project, after 01.07.2017?

Prior to 01.07.2017, builders were following any one of the following methods.

(i) After excluding UDS value from total value - Service Tax was being paid under Works Contract Service on 40 % of such value. Predominantly, this method was followed in South India, where the UDS land is sold in favour of the buyer and a separate construction agreement is entered into, both having individual value break ups. The construction agreement by itself would be a works contract.

(ii) As per Notification 26/2012,

(1)

(2)

(3)

(4)

"12

Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority

30

(i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004.

(ii) The value of land is included in the amount charged from the service receiver.

This method was meant for cases, where stage wise payments are received from the buyer during the stage of construction and upon completion of construction, the flat is sold and registered in favour of the buyer. No separate value would be available for UDS land in this type of model. In such cases, ST was being paid on 30 % of the gross amount charged.

Both the methods were being followed by builders across the country.

So, now the question is, how a builder, who has followed either method (i) or method (ii) above prior to 01.07.2017, should discharge his GST liability post 01.07.2017, where part of the amount has been received prior to 01.07.17 and the balance after 01.07.2017?

The rates available under GST are:

S.No. 3(i) of Notification 11/2017

3

Heading 9954

(Construction services)

(i) Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier. (Provisions of paragraph 2 of this notification shall apply for valuation of this service)

9

2. In case of supply of service specified in column (3) of the entry at item (i) against serial no. 3 of the Table above, involving transfer of property in land or undivided share of land, as the case may be, the value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, as the case may be, and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply.

Explanation . - For the purposes of paragraph 2, "total amount” means the sum total of, -

(a) consideration charged for aforesaid service; and

(b) amount charged for transfer of land or undivided share of land, as the case may be.

S.No. 3(ii) of Notification 11/2017

(ii) composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act, 2017.

9

It may be noted that under S.No. 3 (i), after excluding one third of total value as land value, GST can be paid on the balance two third value @ 18%, which effectively works out to 12 %.

Under S.No. 3 (ii), GST is payable at 18 % on the total value minus value of UDS.

Case I. A builder who was paying ST on 30 % of the total value including UDS value prior to 01.07.2017.

Case II. A builder who was paying ST on 40 % of the construction value, under WCS prior to 01.07.2017.

First, it may be noted that unlike the position prior to 01.07.2017, which required an element of sale of complex to claim 70 % abatement, the wordings under Notification 11/2017 is different. To reproduce, " Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer”. So a mere construction, where UDS is sold separately, is also entitled to claim under this, thereby leaving no uncertainty in this regard. It appears that the options under 3 (i) and 3 (ii) are two options simultaneously available to a builder.

It may be observed that under 70 % abatement under Service Tax, which is akin to 3 (i) of Notification 11/2017 under GST, a notional value is considered as land value and excluded from the levy. Prior to 01.07.2017, the rate of abatement was higher @ 70%, as goods value also needs to be excluded, whereas under GST the abatement is 1/3, as goods value is also liable to GST.

It may be further observed that in case where part of the liability has already been discharged under ST regime (for ongoing projects), if the option under 3 (ii) is opted, on the total amount realised after 01.07.2017, which represents the value of works contract, GST would be payable @ 18 %. In such cases, assuming that the value towards UDS would have been received already, the amounts received after 01.07.2017 would only be towards works contract. But, if option under 3 (i) is opted, GST is payable on 2/3 of the amounts received after 01.07.2017. It may be noted despite the fact that the value of UDS would have been received prior to 01.07.2017, under 3 (i), out of the total amount received, only 2/3 is liable to GST. So, in respect of ongoing projects, the GST liability on the amounts received after 01.07.2017 would be effectively 12 % (18 % on 2/3 of the amount received) under 3 (i), but it would be 18 % on the amounts received after 01.07.2017 under 3 (ii).

Hence, whatever be the method followed by the builder prior to 01.07.2017, post 01.07.2017, GST is payable on two third of the amounts received after 01.07.2017 (thus effectively 12 % under S.No. 3 (i).

Example:

Total flat value : Rs.50 lakhs.
UDS Value : Rs.10 lakhs.
Amount received prior to 01.07.17 : Rs.20 lakhs.
Amount received after 01.07.2017 : Rs.30 lakhs.
ST paid under Case I prior to 01.07.17 : Rs.20 lakhs x 30 % x 15% = Rs.90,000
ST paid under Case II prior to 01.07.17 Rs.10 lakhs x 40 % x 15% = Rs.60,000
GST payable under 3 (i) : RS.30 lakhs X 2/3 x 18 % = Rs.3,60,000
GST payable under 3 (ii) : Rs.30 lakhs x 18 % = Rs.5,40,000

It is concluded that irrespective of the method followed prior to 01.07.2017, in respect of ongoing projects, the builder can pay GST on two third of the amounts received after 01.07.2017 @ 18 % (effectively 12 %).

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)

 RECENT DISCUSSION(S) POST YOUR COMMENTS
   
 
Sub: Doubt on applicability of valuation under Para 2

Sir, I have different view in the subject matter which I post for your perusal.
It is mentioned in the above article that in case-II, ST @15% is paid on 40% of amount of Rs. 10 lakhs (Rs. 20 lakhs less Rs 10 lakhs towards UDS of Land) (how UDS land value is ascertained?) and on the balance amount of Rs. 30 lakhs received after 1.7.2017 also GST@ 12% (18% on 2/3rd value) is to be paid. But it appears to me that it is not correct. As per sl.no. 3(i) of Notfn No. 11/2017-CT(R), GST rate is 9% (with addition of equal SGST total GST would be 18%) and as per Para.2 of said notification which reads as follows:
“2. In case of supply of service specified in column (3) of the entry at item (i)……….at serial no. 3 of the Table above, involving transfer of property in land or undivided share of land, as the case may be, the value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, as the case may be, and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply.
Explanation.–For the purposes of paragraph 2, “total amount” means the sum total of,-
(a) consideration charged for aforesaid service; and
(b) amount charged for transfer of land or undivided share of land, as the case may be.”
The amount of Rs. 30 lakhs received after 1.7.2017 do not inclusive of land value as land value was already realized prior to 1.7.2017. Hence, scope of the supply for which subject Rs. 30 lakhs is charged , do not involve ‘transfer of property in land or undivided share of land’ and therefore valuation under para.2 is not applicable. Accordingly, valuation shall be in terms of Section 15 for payment of tax and GST payable @ 18% on Rs. 30 Lakhs. Even if it is considered that para.2 is applicable, the taxable value would be equal to 2/3rd of Rs 40 lakhs (Rs 30 lakhs plus Rs.10 Lakhs). But still it appears to me that taxable value should be Rs. 30 lakhs only. Please re-examine the issue.


Posted by mallikarjun reddy c
 

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