Rule 42 reversal on flat sale considering 1/3 value as sale of land

[Suresh Yadav]

Builder sold flat to buyers and paid GST accordingly. As 1/3 of value of supply is considered as value of land as per Notification 11/2017-CGST-rate.

Now Department asks ITC reversal as per Rule 42 for this 1/3 value of land as considering as exempt supply as per Section 17(3)(explanation).

Is there any remedy of this??

AI Summary

Land abatement does not convert supply into exempt status; ITC reversal on that basis can be contested.
The statutory land abatement is a valuation mechanism that reduces the taxable base for a residential unit and does not create a separate exempt supply; therefore, treating that abatement as a basis for exempt supply and invoking Rule 42 to reverse input tax credit mischaracterises the legal fiction and is contestable, with only genuinely common expenses being potentially allocable.