ITC reversal by a builder

[Rajesh Kumar]

Sir/ Madam

A builder develops two projects. One is about to complete and received completion certificate in February 2021. Second is 25% completed. In first project 25 flats out of 100 remained unsold. However, 15 flats out of 25 unsold flats were booked before CC but later on cancelled that's they are also unsold now. The builder is availing ITC from the stating of both projects. Now he has to reverse ITC against the sale of 25 flares which are to be sold after CC.

1. What will be the method/ mathematical calculation of ITC reversal against unsold flats ?

2. Was ITC to be reversed on monthly basis when builder was unknown about the number of unsold flats at the time of CC?

3. What was the right time of reversal to avoid interest there on ?

4. Is project wise inventory of raw material to be maintained?

5. Was the calculation of reversal to be made on project wise availed ITC ?

Please guide

thanks and regards

AI Summary

ITC reversal for builders: allocate and reverse input credit for unsold units on project completion to reflect exempt supplies.
ITC reversal is required on completion or first occupation where flats become exempt; computation uses rule-prescribed formulas, with capital goods adjustments following a capital-asset formula and inputs allocated by project. For projects completed after the relevant date, reversal is calculated on the carpet area of unsold units; project-wise ITC records and stock maintenance are required. Reversal timing is on receipt of completion certificate or first occupation, with obligation to complete by the end of the financial year to limit interest. Advance receipts are treated as advances and refunded via voucher with tax adjustment or refund as applicable.