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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 NOTIFICATION ISSUED FOR GST RATE ON REAL ESTATE SECTOR W.E.F. 01.04.2019 PART-3

GST UPDATE ON NOTIFICATION ISSUED FOR GST RATE ON REAL ESTATE SECTOR W.E.F. 01.04.2019 PART-3
GST UPDATE ON NOTIFICATION ISSUED FOR GST RATE ON REAL ESTATE SECTOR W.E.F. 01.04.2019 PART-3
 
In the earlier update, we had discussed the provisions contained in Annexure I for computation of input tax credit on inputs and input services attributable to the construction of residential portion in a Real Estate Project (REP) in case of ongoing project which has time of supply on or after 01.04.2019. In the present update, we explain the provision with the help of an illustration.
 
Sl. No   Details of a REP (Res + Com)    
       
1 No. of apartments in the project   100 Units
2 No. of residential apartments in the project   75 Units
3 Carpet area of the residential apartment   70 Sqm
4 Total carpet area of the residential apartments C2 * C3 5250 Sqm
5 value of each residential apartment   0.60 Crore
6 Total value of the residential apartments C2 * C5 45.00 Crore
7 No. of commercial apartments in the project   25 Units
8 Carpet area of the commercial apartment   30 Sqm
9 Total carpet area of the commercial apartments C7 * C8 750 Sqm
10 Total carpet area of the project (Resi + Com) C4 + C9 6000 Sqm
11 Percentage completion (Pc) as on 31.03.2019 [as declared to RERA or
determined by chertered engineer]		    
20%		  
12 No of residential apartments booked before transition   40 Units
13 Total carpet area of the residential apartments booked before transition C12 * C3 2800 Sqm
14 Value of booked residential apartments C5 * C12 24 Crore
15  
Percentage invoicing of booked residential apartments on or before 31.03.2019		    
60%		  
16 Total value of supply of residential apartments having t.o.s. prior to transition C14 * C15 14.4 Crore
17 ITC to be reversed on transition, Tx= T- Te      
18 Eligible ITC (Te)= Tc + Tr      
19 T (*see notes below)   1 Crore
20 Tc= T x (carpet area of commercial apartments in the REP/ total carpet area of
commercial and residential apartments in the REP)		 C19 * (C9/ C10) 0.125 Crore
21 Tr= T x F1 x F2 x F3 x F4      
22 F1 C4 / C10 0.875  
23 F2 C13 / C4 0.533  
24 F3 C16 / C14 0.600  
25 F4 1/ C11 5  
26 Tr= T x F1 x F2 x F3 x F4 C19 * C22 * C23 * C24 * C25 1.400 Crore
27 Eligible ITC (Te)=Tc + Tr C26 + C20 1.525 Crore
28 ITC to be reversed/ taken on transition, Tx= T- Te C19 - C27 -0.525 Crore
 
29 Tx after application of cap on % invoicing vis-a-vis Pc      
30 % completion   20%  
31 % invoicing   60%  
32 % invoicing after application of cap(Pc + 25%) C11+25% 45%  
33 Total value of supply of residential apartments having t.o.s. prior to transition C14*C32 10.80 Crore
34 F3 after application of cap C33/C14 0.45  
35 Tr= T x F1 x F2 x F3 x F4 (after application of cap) C19 * C22 * C23 * C34 * C25 1.05 Crore
36 Eligible ITC (Te)=Tc + Tr (after application of cap) C20 + C35 1.18 Crore
37 ITC to be reversed / taken on transition, Tx= T- Te (after application of cap) C19 - C36 -0.18 Crore
 
38 Tx after application of cap on % invoicing vis-a-vis Pc and payment realisation      
39 % invoicing after application of cap(Pc + 25%)   45%  
40 Total value of supply of residential apartments having t.o.s. prior to transition C33 10.80 Crore
41 Consideration received   8.00 Crore
42 Total value of supply of residential apartments having t.o.s. prior to transition
after application of cap vis-a-vis consideration received		 8 cr + 25% of 8 Cr 10.00 Crore
43 F3 after application of both the caps C42 / C14 0.42  
44 Tr= T x F1 x F2 x F3 x F4 (after application of both the caps) C19 * C22 * C23 * C43 * C25 0.97  
45 Eligible ITC (Te)=Tc + Tr (after application of both the caps) C20 + C44 1.10  
46 ITC to be reversed / taken on transition, Tx= T- Te (after application of both the
caps)		  
C19 - C45		  
-0.10		 Crore
           
 
The calculation is self explanatory as per the provisions discussed in our earlier update. However, one point that is worth observing is that paragraph 3 of the notification starts with non-obstante clause wherein it overrides the provisions contained in paragraph no. 2 of the notification. The final computation as per paragraph no. 2 of the notification is mentioned at serial no. 28 of the table. However, the situations prescribed at paragraph no. 3(i) and 3(ii) are also illustrated in the above example. The value of Tx in situation 3(i) is mentioned at serial no. 37 of the table while that covered by situation 3(ii) is mentioned at serial no. 46 of the table. If we discuss the computation covering situation no. 3(i) wherein the percentage invoicing (60%) is more than percentage completion (20%), it is found that the % of invoicing is to be taken as (20%+25%)= 45%. This will result in re-computation of F3 and Tx to be -0.18 Crores meaning that the developer promoter is eligible to avail the credit of 18 Lakhs in situation no. 3(i). Similarly, F3 is individually re-computed in situation 3(ii) with Tx as -0.10 Crores, it means that the developer promoter is eligible to avail the credit of Rs. 10 Lakhs in situation no. 3(ii). Now, the illustration of the notification assumes that the situation 3(i) and 3(ii) are mutually exclusive but it is possible that the developer is covered by both the situations. Accordingly, it is not clear as to the situation that is to have precedence while computing the value of Tx. Moreover, it is also not suggested that which Tx is to be considered finally by the developer promoter if he is covered by both situations 3(i) and 3(ii). The revenue authorities will definitely insist for the Tx with the lowest value as in the present case, the Tx indicates availment of credit by the developer promoter whereas the assessee will chose the Tx with highest value. A suitable clarification is expected by the government so that unnecessary dispute is avoided in future.   
This is solely for the educational purpose.
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