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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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