GST UPDATE ON FAQ’S RELEASED ON REAL ESTATE AMENDMENTS PART-10:-

GST UPDATE ON FAQ

In earlier update, we have discussed about the provision regarding input tax

credit availability to the landowner with respect to notification no. 03/2019-

Central Tax (Rate) dated 29.03.2019. In the present update, we wish to discuss

certain clarifications given vide Circular No. 354/32/2019-TRU dated

07.05.2019. Before proceeding to discuss the FAQs, it is pertinent to highlight

that the clarification has disclaimer that the answers provided do not have

force of law and the content of the notification will have precedence over the

answers given for the FAQs. It is submitted that the FAQs cover certain aspects

which are not explicitly covered by the notifications issued by the CBIC. In such

a situation, the hapless assessees are still in delimma as regards the

applicability of the clarification issued on various practical aspects. It is also

worth noting that the update seeks to discuss only important FAQs that have

practical application rather than the general FAQs mentioned in the

clarification.

Question no. 9 If the value of purchases as prescribed above from the

registered supplier is less than 80%, what would be the applicable GST rate on

such purchases?

Answer: Promoter has to pay GST @ 18% on reverse charge basis on all such

inward supplies (to the extent short of 80% of inward supplies from registered

supplier) except cement on which tax has to be paid (by the promoter on

reverse charge basis) at the applicable rate, which at present is 28% (CGST

14% + SGST 14%)

We have mentioned in our GST Update on Real Estate Part-4 that from

harmoniously reading the provisions of the notification, it appears that the

developer will be required to pay GST on cement under reverse charge at the

applicable rate of 28% on all purchase of cement from unregistered dealers

and the clause of 80% purchase from registered persons is not to be applied

for purchase of cement. It is submitted that the answer given to the question

no. 9 also indicates that the developer is required to pay GST at 18% only with

respect to shortfall in case of inputs OTHER THAN cement for which GST at the

rate of 28% will be payable on entire purchases made from unregistered

persons. Therefore, we can conclude that the interpretation taken by us in our

update is in conformity with the view taken by the CBIC.

Question no. 10 In case of new rate of 5% / 1%, whether the conditions of

payment of tax through Cash Ledger, payment of tax under RCM subject to

80% limit, non-availing of Input Tax Credit, reversal of credit, maintenance of

project wise account, reporting of ITC not availed in corresponding GSTR-3B

etc. are required to be complied mandatorily by the Developer ?

Answer: Yes. All the specified conditions against clause (i) to (id) of Sl. No 3 of

Notification No. 11/2017-CTR are mandatory.

We had discussed in our GST Update on Real Estate Part-9 that the definition

of promoter given under section 2(zk) of the RERA is wide enough to cover the

landowner within its ambit and so the landowner is also eligible to avail the

benefit of concessional rate of GST prescribed by the Notification No. 3/2019-

Central Tax (Rate) dated 29.03.2019. However, as per Fourth Proviso to the

conditions stated in the notification no. 03/2019-Central Tax (Rate) dated

29.03.2019, the clause (ii) allows the landowner to avail input tax credit of the

tax charged by the developer provided the landowner sells the apartments

before completion certificate/first occupancy, whichever is earlier and pays tax

not less than that charged by the developer. We had pointed out that although

the landowner is allowed to avail the input tax credit of the tax charged by the

developer but due to restriction of discharging tax liability in cash only,

practically the landowner may not be able to avail the intended benefit of

input tax credit. As such, there is confusion as regards utilisation of input tax

credit by the landowner. However, if the FAQ no. 10 is observed, it is found

that it states that the conditions of payment of GST in cash, complying with the

condition of procurement of 80% inputs/input services from registered

supplier etc. is to be mandatorily complied by the developer. It does not

mention the term ‘promoter’ and so it can be inferred that the landowner can

pay GST by utilising input tax credit even if the option to pay GST under

notification no. 3/2019-Central Tax (Rate) is exercised. It is to be noted that

although the contents of the circular do not have legal sanctity but still they

can be basis of bonafide belief of the assessee.

The other important questions will be discussed in our next update.

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