GST Implications on Real Estate in India, GST on Real Estate 2017
GST Implications on Real Estate in India, GST on Real Estate 2017. Please find below an update on GST Implications on Real Estate in India. (updated as per the available statutory developments as on 18th June 2017)
By now, you all are familiar with GST terminologies like CGST, SGST, IGST, ITC etc. It has been decided to roll out CGST from 1st July 2017. Tamilnadu and other few states like Kerala, Karnataka, West Bengal etc., are yet to notify / enact their State GSTs.
GST Implications on Real Estate in India
CGST is applicable on Real Estate under Two Categories
Works Contract Construction Services @ 18% (without Land Value) – Full Input Tax Credit on the stocks lying as on 30th June 2017
Sale of Residential / Commercial Units @ 12% (with Land value) – Full Input Tax Credit available on the Stocks lying as on 30th June 2017. But no refund of overflow (i.e., excess credit can’t be claimed as refund)
2. The Builder / Developer should have already registered and obtained Provisional GSTIN
3. Applicability of Service Tax or GST (2 out of 3 Rule):- If two out of three conditions are satisfied as on 30th June 2017, then the Service Tax is applicable. Else GST is applicable.
- Completion of of Supply / Services
- Raising of Invoice
- Receipt of Money
Accordingly, Real Estate Developers can raise interim demand for the works completed upto 30th June 2017, irrespective of stage claims. This would avoid confusion on tax applicability on different dates.
4. Actions Points:-
- Ascertain the closing stock as on 30th June 2017 and reverse the Taxes on the materials procured.
- Ascertain the Completion of the Project and obtain all applicable RA bills from the Contractors as on 30th June 2017
- Renegotiate rates with the Contractors as they also would be eligible for ITC on materials they consume.
- Raise invoices / demand letters for the % of works completed till 30th June 2017
- Obtain GSTIN from all suppliers / contractors.
- Revisit the Pricing after adjusting the completed supply portion and pass on the benefits to the Customers. This working is compulsory as the GST Authorities may review this and if they found that the benefit was not passed on to the customers, it will amount to “Profiteering u/s 171” or “unjust enrichment”
- Educate clients accordingly
5. The selling rates to be revised / adjusted post GST after ascertaining implication of the Input Credits / Tax structure etc.
6. There is a relaxation on filing of Returns for the first two months. However, Input Credit to be declared immediately to take credit.
7. In Tamilnadu, TN SGST is yet to be enacted / notified. hence impact of the same is not yet ascertainable. It is presumed that till the State Law is enacted, existing TNVAT may continue. Accordingly, VAT under “gross up” rule may be paid in coming months also. However, it is important to ascertain the available VAT Input Credits and pass necessary entries in the Books of Accounts as on 30th June 2017.
8. Updates will be sent based on further developments.
Author – CS Rupali Sharma
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