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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
 
Fulfilling the condition of 80% purchase from registered Persons - Builder dilemma

JULY 14, 2020

By CA Anish Goyal & CA Kushal Rathi

THE effective GST rates on residential projects were reduced from 12% and 8% to 5% and 1% for non-affordable and affordable housing segment. The reduced rate of GST is based on the condition that the input tax credit should not be claimed by the developers and the amount of not availed input tax credit must be reflected in GSTR-3B. Further, an additional condition has been imposed that atleast 80% of inward supplies must be from registered persons in a financial Year.

Although the GST rates on outward supplies are reduced but this has effectively increased the cost of projects due to non-availability of input tax credit. In addition to the increased cost an additional burden has been cast on the developers that at least 80% of inward supplies must be from registered persons, consequently, maximum 20% of inward supplies can be from unregistered person. The proviso in this regard of condition reads as under:

"Provided also that eighty percent of value of input and input services, [other than services by way of grant of development rights, long term lease of land (against upfront payment in the form of premium, salami, development charges etc.) or FSI (including additional FSI), electricity, high speed diesel, motor spirit, natural gas], used in supplying the service shall be received from registered supplier only."

If value of supplies from registered person is less than 80% then promoter (builder/developer) has to pay GST @18% on reverse charge basis on shortfall inward supplies. From total inward supplies received during the Financial Year, atleast 80% should be from registered person. For computing 80% of the total inward supplies received during the financial year, let us examine some of the inward supplies, which needs to be considered in total inward supplies or not:

Sr. No.
Nature of inward supplies
Must be included in total value?
Reasons
1. Value of services by way of grant of development rights No This expense has been specifically excluded in the condition itself of Sr.No.3 of Not. No. 11/2017- Central Tax (Rate) dt. 28.06.2017 as amended vide Not No. 03/2019 - Central Tax (Rate) dt. 29.03.2019. Thus, can be excluded from total inward supplies.
2. Long term lease amount paid for land No
3. Floor space index (including additional FSI) No
4. Value of electricity, high speed diesel, motor spirit and natural gas used in construction of residential apartment in a project No
5. Salary and Wages including daily wages No These are neither supply of goods or service as per Clause (1) of Sch. III of CGST Act, 2017. Therefore, salaries and wages paid by promoter to his employees can also be excluded for computing the 80% limit.
6. Interest on secured loan from Financial Institution (Bank, NBFC etc.) registered under GST No The primary condition this that 80% of value of input and input services shall be received from registered supplier. Interest paid to Financial Institutions registered under GST can be excluded for computing the 80% limit.
7. Interest on unsecured loan paid to unregistered person. Yes Yes, as interest on unsecured loan is exempted vide Sr. No. 27 of Notification No. 12/2017- CT (R) dt. 28.06.2017 and inward supplies of exempted goods/services shall be included in the value of supplies from unregistered person. Therefore, the amount of interest paid to unregistered person has to be included for computing 80% limit.
8. Interest on Partners Capital Yes

Interest on partner's capital is merely an appropriation of Profit under the Income Tax Act, 1961. There is plethora of judgments in this regard. Ideally, it must not be included for computing the limit of 80%.

However as per CBIC's released FAQ's - Part-II, inward supplies of exempted goods/services shall be included in the value of supplies from unregistered person. Thus, it has to be included for computing the limit of 80%.

Hope the CBIC, clarifies this matter immediately to avoid future litigation.

9. Cement purchased from unregistered person No If cement is purchased from unregistered person, GST under RCM at applicable rate is required to be discharged, presently @ 28%. Inward supplies on which RCM is paid will be deemed to be received from Registered persons.
10. Incremental Charges (IC) paid to local Authority No Incremental Charges is paid to local authority as a charge for developing the area around the project. Local Authorities are generally registered under GST. For instance, Surat Municipal Corporation (SMC) is registered under GST, thus, amount paid to SMC should not be considered for computing 80% limit.

Further, recently, the CBIC had issued an Instruction no. 3/2/2020-GST dt. 24.06.2020, stating that tax on shortfall for the F.Y 2019-20 is to be paid by 30th June 2020 by filing FORM GST DRC-03 electronically. With the law of the land being so, there is no option but to discharge this tax liability under Reverse Charge Mechanism.

[The authors are Partners, M/s Goyal Rathi & Associates, Chartered Accountants and the views expressed are strictly personal.]

(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: 80 percent procurement from registered person

if some body is supplying exempted services then value of supplies by it should not be included as supplies from the unregistered person for construction related projects.

interest on unsecured loan can never be considered as services from unregistered person. he or she who has given unsecured loan can never be registered as its always an exempt income.

status of being unregistered due to exempt supplies should not be a reason to consider that supplies from unregistered person while calculating 20 percent portion in case of procurement by builders

Posted by Navin Khandelwal
 

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