Transitional credit of WIP

[Rajesh Kumar]

Audit of the builder was conducted, they made a para that they have transferred more itc then available in their stock as on 01.07.2017. On 01.07.2017 builder shown some inputs as WIP . So audit is being rejected the itc proportional to the input were WIP

is ITC of WIP was not available for trans1?

[Rajagopalan Ranganathan]

Sir,

According to Section 140 (6) of the Central Goods and Services Act, 2017-

"A registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished 11[goods held in stock on the appointed day, within such time and in such manner as may be prescribed, subject to] the following conditions, namely:––

(i) such inputs or goods are used or intended to be used for making taxable supplies under this Act;

(ii) the said registered person is not paying tax under section 10;

(iii) the said registered person is eligible for input tax credit on such inputs under this Act;

(iv) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of inputs; and

(v) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day."

Therefore you are eligible to take credit of inputs and input services utilised in WIP. You may bring this provision to the notice of audit. However, I think the audit objection should be based on some other stronger grounds because I presume the Departmental Officers are aware of this provision.

[KASTURI SETHI]

How can the builder transfer more ITC than available in the stock as on 30.6.17/1.7.17 ? Inputs contained in WIP is part of stock. Pl. read the para again and understand what is the factual object raised by the Audit wing of the department post the query again.

[Shilpi Jain]

Audit party is raising objection stating that building is immovable property and thereby transitional credit is not available which as per section 140 is available only w.r.t. goods.

However, this can be contested.

[CA Hemanth Kumar]

Yes for department when it comes to ITC they will say it as immovable property and ITC is not eligible.

When it comes to sale of same under constructed property they will say it as not completed, works contract service and u have to pay tax.

[Shilpi Jain]

So, on the grounds mentioned by Hemanth, one can argue that in case transition credit is being denied, then the stand of taxing incomplete building under GST and ST is not correct. This can get them in a fix!

AI Summary

Debate on GST transitional credit for WIP: Audit challenges excess ITC transfer; Section 140(6) eligibility discussed. A discussion on transitional credit for work-in-progress (WIP) under the Goods and Services Tax (GST) highlights an audit objection against a builder for allegedly transferring more input tax credit (ITC) than available in stock as of July 1, 2017. One participant cites Section 140(6) of the Central Goods and Services Act, 2017, arguing eligibility for ITC on inputs in WIP. Others note the audit's stance that building is immovable property, thus ineligible for transitional credit, but suggest this can be contested. The debate also touches on the inconsistency in tax treatment of incomplete buildings.