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)
Sl. No
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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GST UPDATE ON NOTIFICATION ISSUED FOR GST RATE ON REAL ESTATE SECTOR W.E.F. 01.04.2019 PART-3

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