Method to reverse ITC under rule 42 & 43 by a builder developer

[Rajesh Kumar]

Sir/ madam

Please share the simple method for the calculations of reversal of ITC by the builders and developers.
Second, let's a builder invoicing as

Value = 100

Discount =6%
now value = 94

Gst = 12%

now payable= 94*112%= 105

on objection by customers for charging 12% instead of 5%, he convinced that he is not collecting more amount from them as 100*105%= 105 also comes same.

he is dong this practice only to avail ITC as on charging 5% GST, ITC not available to him.

Is this practice is right ? Is ITC availabile to him?

[Rajagopalan Ranganathan]

Sir,

It is the choice of the builder to pay tax @5% without ITC or @12% with ITC. The customer will pay the price of the building as quoted by the builder. While determining the price the builder will take into account the fact of availing ITC or not.

[Rajesh Kumar]

Sir, as per provisions, if commencement of the project is after 01.04.2019, builder has to pay @5%, its mandatory. It's commencement is also after 01.04.2019. He is paying GST as per above calculations with ITC. Further he has submitted intimation to the department on 17.05.2019 but date was 10.05.2019. Is he have to reverse all ITC or any option to get relief?

Department is saying to

reverse all itc, pay @5% on taxable turnover in cash. Further also saying that he has collected more tax from the buyers , which required to return them I.e difference 12%-5%=7%

[Shilpi Jain]

In case there is delay in filing the declaration department can dispute if input tax credit is availed. So you may end up paying the extra GST collected from customer to the department and also reverse the input tax credit that has been availed, unless you challenge the compulsion of adopting the lesser rate with no ITC option in the courts

[Rajesh Kumar]

Sir/ madam

what is the Method to reverse ITC under rule 42 & 43 for a builder developer when some projects are completed (OC received) but some are incompleted ?

[Shilpi Jain]

There is a provision which states that if project wise bifurcation not available then on a reasonable basis the expense has to be bifurcation to the projects ( can do it on the basis of carpet area, though still there would be some hitches) and then rules ca n be applied for reversal.

AI Summary

ITC reversal obligations for builders: bifurcate project costs and reverse credit when opting for no-input-credit tax treatment. Developers required to adopt the lower-rate/no-ITC option for qualifying projects must reverse input tax credit if ITC was availed under a different rate. Departments may demand reversal, cash payment of tax under the no-ITC option on taxable turnover, and repayment to buyers of any excess tax collected. For mixed projects, allocate inputs and credits project-wise; where project-wise records are absent, apportion expenses on a reasonable basis (e.g., carpet area) and apply the reversal rules to compute attributable reversals and adjustments.