Reversal of Input Tax Credit by a builder

[Deepak Bubna]

Friends :

Nature of business : Construction and sale of flats

The Credit availed during FY 18-19 and FY 19-20 is Rs. 1.5 Crores in Total

Completion Certificate received during October 2020

Proportion of Carpet area of units unsold as on the date of CC = 30%

Credit available from April 2020-October 2020 : Rs. Nil

Credit availed from April 2020 -October 2020 :0

In the given scenario above, what should be the amount of input tax credit that is required to be reversed, if at all. Reference to section/notification and judgments will be of great help.

AI Summary

Builder Must Reverse 30% ITC for Unsold Flats Post-Completion, Citing Rule 42, 43 & Section 17(3) of CGST Act. A builder engaged in the construction and sale of flats queried about the reversal of input tax credit (ITC) after receiving a completion certificate in October 2020, with 30% of the units unsold. The total ITC availed during FY 18-19 and FY 19-20 was Rs. 1.5 crore. Respondents advised reversing 30% of the eligible ITC, referencing Rule 42 and 43 of the CGST Rules, 2017, and Section 17(3) of the CGST Act. They clarified that despite no ITC availed post-completion, reversal is necessary due to the proportion of unsold units.