RCM ON EXTERNAL DEVELOPMENT CHARGES (EDC) paid by BUILDER TO LOCAL AUTHORITY

[ROHIT GOEL]

Dear Experts,

A real estate developer is developing a residential housing project in Punjab. The approval for the same has been granted by the Govt authority and as per the Punjab Govt guidelines and notifications, Builder is liable to pay EDC or External Development Charges to Local Municipal Corporation. This EDC is a compulsory levy collected by Local Authority and in effect not a service being received.

However, GST Department is of the view that same is in nature of service received from Local Authority and therefore assessee is liable to deposit RCM on this.

What is the view of experts as per applicable law as well as any previous precedents under GST/Service tax regime?

AI Summary

Debate on GST Applicability: Experts Argue EDC in Punjab is Levy, Not Service Under Reverse Charge Mechanism A real estate developer in Punjab is required to pay External Development Charges (EDC) to the local municipal corporation, which the GST Department considers a service subject to reverse charge mechanism (RCM). However, experts argue that EDC is a compulsory levy, not a service, and thus not liable for GST under RCM. They reference exemptions under GST laws and previous rulings, suggesting that EDC payments fall outside the scope of GST as they are neither a supply of goods nor services. The discussion emphasizes the legal interpretation that EDC is a levy, not a consideration for services.