Hundreds of builders have obtained notices from the GST department where it seeks to reverse their input tax credit. For the years 2017-18 and 2018-19, the notices were issued. For the unsold apartments, the council seeks builders to reverse the ITC during procuring building use (BU).
As the developers do not file the GST for the units sold being provided BU permissions, the council seeks them to not avail the ITC also for these apartments.
Tax expert said “The GST department has furnished notices to different developers who had availed excess ITC for 2018-19. The GST option at the old rates of 8% and/or 12% (with ITC) was available for the projects that were ongoing as of March 31, 2019. Any project that has started after April 1, 2019, is mandatorily needed to comply with the GST rate structure of 1% or 5% (without input tax credit).
As per the law, GST is not subject to be applied on the sale of units after they obtain permission from BU. In certain cases, the department has revealed that the developers availed complete ITC as they were qualified for the lower ITC.
In the same case, the council has provided the notices for the developers to reverse the ITC including the interest and penalties. He mentioned that the developers don’t have any information about the rules of ITC and when a developer has obtained the same notice then he must reverse the GST ITC along with the interest and the penalty.
After April 1, 2019, GST is 1% for affordable housing projects in which the carpet area of a residential apartment should not exceed 60 sq m in metropolitan cities or 90 sq m in towns and cities other than metropolitan cities. The gross amount levied should not be more than Rs 45 lakh. Nonaffordable housing projects draw 5% GST.
Tax expert said, “Also, to avail of the concessional rates of 1% and 5%, a minimum of 80% of the input and input services must be received from registered suppliers only.”
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Towards shortfall, the tax on the shortfall amount is liable to be paid via the developer under the reverse charge mechanism.
“Cement is to be received only from the registered supplier. If cement is received from an unregistered supplier, a 28% tax on the same is payable by the developer under the reverse charge mechanism. Such tax is to be paid in the month in which cement is received,” the tax expert said.
