Common Input tax Credit – for Builders on ITC post completion certificate
Query (Issue) Started By: – hubert fernandes Dated:- 19-8-2017 Last Reply Date:- 21-6-2018 Goods and Services Tax – GST
Got 5 Replies
GST
" We undertake construction of residential complex and shall avail ITC on inputs. We however have doubt on inputs used on a project after its completion / occupancy certificate from local authorities.
The above can be elaborated with the following case example
Assumption : Project 1 is one among the other on going projects
Project 1 consisting of 100 flats, wherein occupancy certificate from local authorities is obtained say on 1/9/2017. On the day of occupancy out of the 100 flats say 70 flats have been sold and the receivables as per payment schedule of these 70 flats are 95 % of consideration value as indicated in agreement. However on the day of occupancy certificate an estimated of 90% of the cost of construction is complete and balance 10% works gets
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advise us as to what shall be the position on ITC on generic input services such as "audit fees, Administrative office rent, AMC,Security sevices,retainairship fees"
Please advise us on the above so that ITC can be rightly captured at invoice level
Reply By RAMESH PRAJAPATI:
The Reply:
ITC is allowed on taxable turnover only. ITC should be reversed proportionately in respect of exempt supply.
Reply By Ganeshan Kalyani:
The Reply:
Dear builders , reduce the price of the project post GST as seemless flow of credit is there.
Yes proportionate credit is allowed.
Reply By KASTURI SETHI:
The Reply:
I agree with the views of Sh.Prajapati, Sir. His brief reply covers all your points. I further add para-wise as under:-
(a) Not admissible.
(b) Does not agree sale factor is there.
(c) Yes.
Audit fee and retainer-ship fee would be considered ineligible.
This is the legal position explained above. Now I deviate somewhat and discuss your issue logically.
As per Section 66
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ion of building, complex, flat etc. it is to be treated as service. In the former situation, Service Tax law or GST law treats it sale thereby arises a question where the ingredient of 'service' has disappeared. How practically is it feasible that 'service' has been converted into 'sale' by mere factum of timing of receipt of consideration ? The legal status of service cannot be changed into sale or vice versa by any stretch of imagination. There is no co-relation between incidence of service (now supply) and time-factor of receipt of entire consideration. How can the factum of time factor determine the fate of consumer, builders or contractor or the whole nation in the interest of revenue ? The essence of definition of service whether in pre-GST era or post GST era remains almost the same. Time factor of receipt of consideration cannot prevail over the definition of service, if it prevails, it is contradictory and can be termed as flaw in the law or unconstitutional. In view of time f
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