GST UPDATE ON ITC AVAILABILITY TO LANDOWNER PART-9:-

GST UPDATE ON ITC AVAILABILITY TO LANDOWNER PART-9:-

In earlier update, we have discussed about the taxability of land developed into plots for sale. In the present update, we seek to discuss the provision regarding input tax credit availability to the landowner with respect to notification no. 03/2019-Central Tax (Rate) dated 29.03.2019.
Before proceeding to discuss the issue, it is imperative to observe the provisions contained as regards the definition of ‘promoter’ given under section 2(zk) of the RERA which reads as follows:-
a. a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees; or
b. a person who develops the land into a project, whether or not the person also constructs structures on any of the plots, for the purpose of selling to other persons all or some of the plots in the said project, whether with or without structures thereon; or
c. any development authority or any other public body in respect of allottees of—

Buildings or apartments, as the case may be, constructed by such authority or body on lands owned by them or placed at their disposal by the Government; or
Plots owned by such authority or body or placed at their disposal by the Government, for the purpose of selling all or some of the apartments or plots; or

d. An apex State level co-operative housing finance society and a primary co operative housing society which constructs apartments or buildings for its Members or in respect of the allottees of such apartments or buildings; or
e. Any other person who acts himself as a builder, coloniser, contractor, developer, estate developer or by any other name or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale; or
f. Such other person who constructs any building or apartment for sale to the general public.
Explanation—For the purposes of this clause, where the person who constructs or converts a building into apartments or develops a plot for sale and the persons who sell apartments or plots are different persons, both of them shall be deemed to be the promotersand shall be jointly liable as such for the functions and responsibilities specified, under this Act or the rules and regulations made thereunder;”
The above cited definition is wide enough to consider ‘landowner’ in a Joint Development Agreement as promoter. Consequently, the landowner is also eligible to claim the benefit of concessional GST rate applicable to the developer. Now, the question arises is whether the developer and landowner can exercise different options for paying GST with respect to ongoing projects like developer paying tax at new concessional rate and the landowner paying tax at old rates? Well, the answer is ‘Yes’ because landowner is considered as promoter under RERA which is also squarely applicable to the notification no. 03/2019-Central Tax (Rate) dated 29.03.2019. However, the practical difficulties associated with opting different option by the landowner and developer will be discussed in suceeding paragraphs.
According to 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. Furthermore, as discussed in the preceding paragraph that there is no restriction on landowner as regards payment of tax under same scheme as that opted by the developer. Therefore, there may be four situations:-

Situation Number	Option Exercised by Developer	Option Exercised by the Landowner	Whether ITC admissible to the landowner?
1.	Pay GST at old rates 18%/12% with one third deduction of land value along with input tax credit facility	Pay GST at new concessional rates of 1%/5% without facility of ITC.	Yes, if the apartments are sold prior to completion certificate/first occupancy, whichever is earlier. There is exception for the landowner for availing credit in the notification if tax paid is equal to or more than the tax charged by the developer. However, since in this case, the tax paid by the landowner is not equal to/more than the tax charged by the developer, input tax credit cannot be taken by landowner.
2.	Pay GST at new concessional rates of 1%/5% without facility of ITC.	Pay GST at old rates 18%/12% with one third deduction of land value along with input tax credit facility	Yes, if the apartments are sold prior to completion certificate/first occupancy, whichever is earlier.
3.	Pay GST at old rates 18%/12% with one third deduction of land value along with input tax credit facility	Pay GST at old rates 18%/12% with one third deduction of land value along with input tax credit facility	Yes, if the apartments are sold prior to completion certificate/first occupancy, whichever is earlier.
4.	Pay GST at new concessional rates of 1%/5% without facility of ITC.	Pay GST at new concessional rates of 1%/5% without facility of ITC.	Yes, if the apartments are sold prior to completion certificate/first occupancy, whichever is earlier. There is exception for the landowner for availing credit if tax paid is equal to or more than the tax charged by the developer. Since, the tax charged by the landowner is equal to that charged by the developer, input tax credit may be availed by the landowner.

On the basis of above table, it is concluded that the landowner is eligible to avail input tax credit in situation number 2, 3 and 4 only. The landowner is not eligible to avail input tax credit in situation no. 1 and so we can conclude that the situation no. 1 will not be feasible to be adopted in practical life. This is for the reason that the landowner will be debarred from availing input tax credit in situation no. 1.

Moving the analysis further, it is worth noting that first proviso in the conditions to the notification no.03/2019-Central Tax (Rate) dated 29.03.2019, states that the tax shall be paid in cash by debiting electronic cash ledger only. It is submitted that this condition is applicable for all promoters including landowner and so it can be concluded that although the fourth proviso entitles landowner to avail input tax credit of the tax charged by the developer, there is restriction to utilise the said credit in discharging the tax liability under the notification no. 03/2019-Central Tax (Rate) dated 29.03.2019. One can say that the provision allowing input tax credit to the landowner is not lucrative in real sense as even in situation no. 4, landowner will have to discharge GST in cash. In our opinion, the restriction as regards payment of tax in cash should be removed for landowner if he has opted to pay tax under notification no. 03/2019-Central Tax (Rate) dated 29.03.2019, so that the true purpose of allowing the facility of input tax credit can be achieved because availability of input tax credit without facility to utilise is not facility in real sense.
This is solely for the educational purpose.
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GST UPDATE ON ITC AVAILABILITY TO LANDOWNER PART-9:-

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