Audit of builders

[Rajesh Kumar]

Sir/ Madam

Please share the links of detailed points to be kept in mind while auditing a builder and developer. Calculation of reversalable ITC, Identification of advances and other payments on which GST payble, Expenses on which GST payble, Calculation of GST on sale of developed plots, verification of Trans 1.

What are the GST evasion prone areas for builder and developer and how adjust them.

New task, please guide.

thanks in advance.

[Altamush Zafar]

Major issues for builder:

1) ITC taken through Tran-1 especially interpretation of stock in semi finished goods

2) Invoicing and paying GST before receipt

3) Receiving advances and their adjustments

4) Reversal of ITC in case of completed projects before April 2019

5) Transition into FY 2019-20

6) Landowner and developer agreements pre FY 2019-20 and post 2019-20

7) Treatment of developed plots.

8) Reverse charge mechanism for raw materials from unregistered persons

There are many more since real estate since beginning was not compatible with GST or rather I should say that GST was not compatible with real estate. Regular amendments were brought and gray areas still exists.

Engage a professional having experience in the industry for more detailed insights.

[Shilpi Jain]

The best way to go about this is to first understand and acquaint oneself of the various provisions applicable to this industry.

Once this is clear, rest all would be in place.

[KASTURI SETHI]

Sh.Rajesh Kumar Ji,

Agreed with both experts. I add as under :-

First and foremost point to be taken care of by the auditee is that his/her behaviour with the auditors must be polite, disciplined and submissive. Tone and tenor both matter a lot. These guidelines are meant not only for you but for all the auditees.

[Ganeshan Kalyani]

Sir, pls find link - https://www.taxtmi.com/article/detailed?id=9298

AI Summary

GST audit of builders highlights compliance risks in Input Tax Credit transition, advances treatment, and reverse charge liabilities. Primary audit concerns for builders under GST include correct claim and reversal of Input Tax Credit via Tran-1, treatment of semi finished inventory, invoicing and tax point issues when GST is declared before receipt, identification and adjustment of advances, reversal of ITC for completed pre GST projects, transition reconciliations, treatment of developed plots, and application of reverse charge for supplies from unregistered persons; auditors should verify TRAN 1 and related contractual allocations between landowners and developers.