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Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

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

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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