- A developer engages various contractors for putting up the Building.
A percentage of contractor’s Bill is kept as “retention money” which will be paid after long duration. Similarly some portion of Bill is not paid and kept as “hold” money for defective work which will be paid after defect is set right
Both the above could be outstanding for more than 180 days.
Does it mean the developer has to reverse the Input Credit already availed on above two components.
Developer Queries GST Input Credit Reversal for Retention Money; Suggests Paying GST to Contractors, Seeks Advance Ruling for Clarity A developer inquires about reversing Input Credit under GST for retention and hold money kept from contractors' bills, which can be outstanding for over 180 days. The response suggests paying the GST portion of the retention to the contractor and obtaining an acknowledgment receipt. This aligns with the GST Act's aim for seamless credit movement and avoids arbitrage. It advises defining consideration terms in the work order, stating that GST on retention money discharges the bill's consideration. It also recommends seeking an advance ruling from GST authorities to avoid litigation, costing 10,000. (AI Summary)
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