ITC OF GST CHARGED BY DEVELOPER ON CONSTRUCTION SERVICE

[NAMAN DOKANIA]

1. When do Developer charges GST on Flats given to landlord at the price of the first booking?? At the time of Date of AGREEMENT or on the date of completion certificate??

2. If It is on the date of completion certificate, then how can we plan so that the landowner can take the input tax credit of the gst charged by the builder??

[Rajagopalan Ranganathan]

Sir,

According to para 1A of Notification No. 12/2017-D.T. (Rate) dated 28.6.2017 as amended "Value of supply of service by way of transfer of development rights or FSI by a person to the promoter against consideration in the form of residential or commercial apartments shall be deemed to be equal to the value of similar apartments charged by the promoter from the independent buyers nearest to the date on which such development rights or FSI is transferred to the promoter. gst is payable by the developer on the price charged by the him from the independent buyers nearest to the date on which such developement rights nor FSI is transferred to the promoter.

In view of the above, consideration of date of completion certificate for determining the value of flats given to the land owner will not arise.

Therefore

[NAMAN DOKANIA]

Sir, My Question pertains whether the builder i.e. Developer will charge GST on flats given to Landowner on the date of completion certificate or on the date of Agreement? Please re-iterate on this point please.

[Shilpi Jain]

The liability to pay is on completion though there is no bar on the developer from discharging the liability before this date by issuing a tax invoice to enable the landowner to take credit. This is also a proposed clarification in the 43rd council meeting.

[Rajagopalan Ranganathan]

Sir,

If the flats are given to land owner after obtaining completion certificate no gst is payable by the developer. gst is payable only under construction flats handed over to the land owner.

[ABHISHEK TRIPATHI]

Dear Sh. Naman Ji,

GST will be charged in accordance with section 12. In your case, It may be the date of invoice or date of payment.

Now coming to ITC, you may take ITC in accordance with Section 16/17, there is no bar on ITC subject to these provisions.

Note: If you have unsold flat(s) at the time of getting the completion certificate then you have to reverse the ITC proportionately. Usually, many developers don’t reverse the proportionate ITC.

[ABHISHEK TRIPATHI]

Correction: Few developer don't reverse ITC.

[Shilpi Jain]

For the units handed over to the landowner, whether it is done before or after completion would not affect the taxability. It would be liable. Also the developer can discharge this liability on the date of completion. Clarity is brought by the amendment that the liability can be discharged even before the completion date

AI Summary

GST on developer-supplied flats: valuation and timing rules govern liability, and early invoicing can enable input tax credit. GST applies to apartments transferred to a landowner in consideration for development rights, with value deemed equal to the price charged to independent buyers nearest to the date of transfer. The developer's tax liability is ordinarily linked to completion, but the developer may discharge the liability earlier by issuing a tax invoice so the landowner can claim Input Tax Credit. ITC is available subject to standard conditions, and developers may be required to reverse proportionate ITC for unsold units on completion, though such reversals are not uniformly followed.