Transition Credit

[Vamsi Krishna]

We are into construction of residential flats and in the month of June'17 we have entered into JDA ( Joint development Agreement) with the land owners where in out of the total flats to be constructed few of them are ear marked/allocated.

This has taken place on 23rd Jun'17 and as per Rule 3 of point of taxation of ST, the liability arises on the services provided to the land owner at the time of receipt of advance in the form of Land/Development rights.

Since we have received the consideration (land/development rights) before construction of the flats, this is treated as ' Advance' and ST has been paid accordingly @ 4.5% (considering 70% abatement, 26/2012).

My query is As per sec.142(11)(c) of CGST act (Transition Provisions), is it mandatory to avail this ST paid as transition credit and pay GST @ 18% on the total value under GST.

The actual supply ie. construction of flats and sharing the final flats ( as agreed in JDA) to land lord will happen after 2-3 years.

Can any expert give clarity ?? If we have pay under GST 18% it will be huge outflow....

AI Summary

Construction Firm Seeks Guidance on Service Tax Transition Credit for Advances Under Section 142(11)(c) of CGST Act A construction company involved in a Joint Development Agreement (JDA) with landowners in June 2017 seeks clarity on whether service tax (ST) paid on advances received before construction should be claimed as transition credit under Section 142(11)(c) of the CGST Act, with GST subsequently applied at 18%. One respondent emphasizes the mandatory nature of claiming such credit as per the CGST Act and Rules, while another highlights that advances are subject to final assessment and GST applicability, noting that Section 12 is not relevant in this context.