GST FOR BUILDERS OLD SCHEME NEW SCHEME AND

GST FOR BUILDERS OLD SCHEME, NEW SCHEME AND TRANSITION ISSUES HOSTED BY CTC HYDERABAD STUDY GROUP & DELHI CHAPTER ALONG WITH FTAP NEW DELHI 11 th October, 2020 By: Puneet Agrawal

Real Estate Transaction Joint Development Agreement (JDA) Transfer of Development Right Construction/ Development for Land Owner Sale of Land Owner’s Share by Land Owner Construction of Flats/Units intended for Sale to Buyers Sale of Developed Plot of Land

1. JOINT DEVELOPMENT AGREEMENT 3

Coverage 1. Taxability on transfer of Development Rights – Exemption on TDR/FSI for Residential Apartment – Liability to Pay Tax on Exempted TDR/FSI on Un-booked Residential Apartment on the date of CC – Time of Supply for Promoter in case of JDA – RCM on TDR/FSI 2. Taxability on Construction service for Landowner 4

1 A. TAXABILITY ON TRANSFER OF DEVELOPMENT RIGHTS 5

Development rights are Immovable Property Law relating to immovable property • Finance Act as well as GST Act do not provide for the definition of immovable property. • Transfer of Property Act covers the law w. r. t immovable property but misses out on definition. • So General Clauses Act is taken into consideration which defines the immovable property u/s. 3(26) as: Immovable property shall include land, benefits arising out of land, and things attached to the earth, or permanently fastened to anything attached to the earth” • Development Rights are benefits which arises from the land therefore to be considered as immovable property. • In various judicial pronouncements it has been held that Developments Rights are immovable property.

Supporting Case Laws • In the case of Chheda Housing Development Corporation, 2007 (3) Mh. LJ 402. The Hon’ble Bombay High Court has observed that the benefit arising from land is an immovable property and FSI/TDR being benefit arising out of land must be held to be immovable property. Relevant Para of the Judgment is extracted below: 15…… From these judgments what appears is that a benefit arising from the land is immovable property. FSI/TDR being a benefit arising from the land, consequently must be held to be immovable property and an Agreement for use of TDR consequently can be specifically enforced, unless it is established that compensation in money would be an adequate relief • The Hon'ble Bombay High Court in the matter of Sadoday Builders Pvt. Ltd. (2011)6 Bom CR 42 has relied on the Judgement given in Chheda Housing Development Corporation and held that transfer of development rights are benefits arising out of land therefore must be considered as immovable property. • DLF – CESTAT Chandigarh

Levy of GST on Transfer of Development Rights • Scope of Supply defined under Section 7 of CGST Act provides for those activities which shall neither be treated as a supply of goods nor as a supply of services covered under Schedule-III which includes sale of land vide Para. 5. • But the definition of Service under GST is very wide and it only excludes goods as well as the prescribed exclusion given in the definition itself • Therefore, GST only excludes the transaction of sale of land not immovable property, hence GST is applicable on transfer of development rights.

Taxability on transfer of Development Rights Ø Tax Rate – 18% – While granting exemption, Government has classified under SAC 9972. Prima facie it does not fall under SAC 9972, but same rate of tax @ 18% under residual entry under SAC 9997 Ø Exemption – Transfer W. e. f. 01. 04. 2019 exempt for Construction of Residential Apartments • • – – – Exemption shall be withdrawn to the extent unsold inventory on issuance of CC or First Occupation Development Rights Transferred prior to 01. 04. 2019 – No Exemption No exemption for transfer pre 1. 4. 2019: contrary to the policy No Exemption for Commercial Units in both REP and RREP No Exemption for Residential Plots

Contd… Ø Time of Supply – Upto 24. 01. 2018 – Section 13 of the CGST / SGST Act • – Continuous Supply of Development Rights ? From 25. 01. 2018 to 31. 03. 2019 • • Monetary Consideration or Revenue Share – Section 13 Consideration in the form of Construction Service [Area Share] – – N. No. 4/2018 -dt. 25. 01. 2018 – When Transfers the possession or the rights in constructed complex by entering into conveyance deed or similar document (e. g. Allotment Letter) DR Transfer W. e. f. 01. 04. 2019 • • TDR for residential Apartments - Consideration both in monetary form and in the form of Construction Service – N. No. 6/2019 -dt. 29. 03. 2019 – on issuance of CC or First Occupation, whichever is earlier TDR for Commercial Apartment – – Monetary or Revenue Share – Section 13 In the form of Construction Service [Area Share]– issuance of OC or First Occupation • ITC to Developer after Completion of Project - Accumulation of ITC

Time of Supply for Promoter in case of JDA & Long Term Lease liable to RCM Received w. e. f. 01. 04. 2019 Vide Notification No. 06/2019 CT(R) dated 29. 03. 2019 • Liability to pay tax in case of following classes of registered persons: a. A promoter who receives TDR/FSI on or after 01. 04. 2019 for construction of a project against consideration payable or paid by him, wholly or partly, in the form of construction service of commercial or residential apartments in the project or in any other form including in cash; b. A promoter who receives Long term lease of land on or after 1 st April, 2019 for construction of residential apartments in a project against consideration payable or paid by him, in the form of upfront amount (called as premium, salami, cost, price, development charges or by any other name). 11

Contd… • Liability to pay tax (time of supply) shall arise on the date of issuance of completion certificate or first occupation, whichever is earlier, for following liability: For Tax payable as recipient of service a) the consideration paid by him in the form of construction service of commercial or residential apartments in the project, for supply of development rights or FSI (including additional FSI); (b) the monetary consideration paid by him, for supply of development rights or FSI (including additional FSI) relatable to construction of residential apartments in project; (c) the upfront amount (called as premium, salami, cost, price, development charges or by any other name) paid by him for long term lease of land relatable to construction of residential apartments in the project; and For Tax payable as supplier of service on construction service provided to landowner (d) the supply of construction service by him against consideration in the form of development rights or FSI(including additional FSI) 12

Contd… Ø Person Liable to Pay GST – Upto 31. 03. 2019 – Supplier of Service i. e. Landowner – W. e. f. 01. 04. 2019 – Developer being recipient of Service [irrespective of date of transfer of DR] Ø Valuation of Development Rights – Upto 31. 03. 2019 – Rule 27 of the CGST / SGST Rules – W. e. f. 01. 04. 2019 – Para 1 A of N. No. 12/2017 -CT(R) dated 28. 06. 2017 inserted through N. No. 4/2019 -CT(R) dated 29. 03. 2019 1 A. Value of supply of service by way of transfer of development rights or FSI by a person to the promoter against consideration in the form of residential or commercial apartments shall be deemed to be equal to the value of similar apartments charged by the promoter from the independent buyers nearest to the date on which such development rights or FSI is transferred to the promoter.

RCM on TDR/FSI & Long term lease u/s 9(3) • Promoter is liable to pay Tax under RCM on: – Transfer of Development Rights or FSI – Long term lease for period of 30 years or more Sl. No. Category of Supply of Services Supplier of Service Recipient of Service 5 B Services supplied by any person by way of transfer of development rights or Floor Space Index (FSI) (including additional FSI) for construction of a project by a promoter. Any person Promoter. 5 C Long term lease of land (30 years or more) by any person against consideration in the form of upfront amount (called as premium, salami, cost, price, development charges or by any other name) and/or periodic rent for construction of a project by a promoter. Any person Promoter N. No. 05/2019 CT(R) has amended N. No. 13/2017 CT(R) to insert the above services in the list of services on which GST is payable on RCM basis u/s 9(3) 14

Exemption on TDR/FSI & Upfront amount of Long Term Lease Service N. No. 04/2019 CT(R) has inserted the following services to the list of services exempt from levy of GST under N. No. 12/2017 CT(R) : • Transfer of TDR/FSI on or after 01. 04. 2019: Service by way of transfer of development rights (herein refer TDR) or Floor Space Index (FSI) (including additional FSI) on or after 1 st April, 2019 for construction of residential apartments by a promoter in a project, intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate. • Long term lease for thirty or more on or after 01. 04. 2019 (only upfront amount): Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years, or more, on or after 01. 04. 2019, for construction of residential apartments by a promoter in a project, intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate. 1. Supply of service by transfer of development rights (TDR) or transfer of FSI or lease of land on or before 31. 03. 2019, but construction yet to be started - no exemption is provided. 2. Yearly lease rental/premium is not exempted as only upfront amount is exempted in above said entry. 15

Calculation of Amount of Exemption • Calculation of Amount of Exemption Amount of exemption ₌ Amount of GST payable on TDR/FSI/Long Term Lease Total Carpet Area of Residential Apartments in the project X _____ Total Carpet Area (Commercial + Residential) of the Project It is to be noted that as per above formula provided in exemption notification, the amount of exemption is restricted to the proportionate area of the residential apartments without any distinction of project in REP/RREP. Thus, TDR/FSI/Long term lease proportionate to commercial area in RREP are not subjected to exemption. 16

Liability to Pay Tax on Exempted TDR/FSI & Long Term Lease On Un-booked Apartment on the Date of CC • Where any residential apartments remain un-booked on the date of issuance of completion certificate, or first occupation of the project, Promoter shall be liable to pay tax on RCM basis, on such proportion of value of development rights, or FSI (including additional FSI), Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years, or more, or as is attributable to such residential apartments. GST payable under RCM in such cases shall be calculated in the following manner: • ₌ Amount of Tax Amount of exemption • X _____ � Total Carpet Area of Residential Apartments in the project remain un-booked on Issuance of CC Total Carpet Area of Residential Apartment in the Project Time of supply in such cases shall be the earlier of, date of completion or first occupation of the project. 17

Upper Limit of Tax Liability • However, tax payable under RCM in such cases shall not exceed : – 1% of the value in case of affordable residential apartments and – 5% of the value in case of residential apartments other than affordable residential apartments remaining un- booked on the date of issuance of completion certificate or first occupation 18

1 B. TAXABILITY ON CONSTRUCTION SERVICE FOR LAND OWNER 19

Taxability on Construction service for Landowner Ø Leviable to GST Ø Person Liable to Pay GST – Developer

Contd… Ø Time of Supply – – Upto 24. 01. 2018 – Section 13 of the CGST / SGST Act From 25. 01. 2018 to 31. 03. 2019 • • – W. e. f. 01. 04. 2019 • • – Monetary Consideration – Section 13 Consideration in the form of Development Rights – N. No. 4/2018 -dt. 25. 01. 2018 – When Transfers the possession or the rights in constructed complex by entering into conveyance deed or similar document (e. g. Allotment Letter) Monetary Consideration – Section 13 Consideration in the form of Development Rights – N. No. 6/2019 -dt. 29. 03. 2019 – on issuance of CC or First Occupation, whichever is earlier It may result into accumulation of ITC in the hands of Landowner

Contd… Ø Valuation of Construction Service Provided to Land Owner in lieu of Development Rights – – Upto 31. 03. 2019 – Rule 27 of the CGST. SGST Rules W. e. f. 01. 04. 2019 – Para 2 A of N. No. 11/2017 -CT(R) dated 28. 06. 2017 inserted through N. No. 3/2019 -CT(R) dated 29. 03. 2019 2 A. Where a person transfers development right or FSI (including additional FSI) to a promoter against consideration, wholly or partly, in the form of construction of apartments, the value of construction service in respect of such apartments shall be deemed to be equal to the Total Amount charged for similar apartments in the project from the independent buyers, other than the person transferring the development right or FSI (including additional FSI), nearest to the date on which such development right or FSI (including additional FSI) is transferred to the promoter, less the value of transfer of land, if any, as prescribed in paragraph 2 above.

CASE STUDY- 1 JDA PRIOR TO 01. 04. 2019

Facts of the case ABC Ltd (hereinafter referred to as “Developer”) is a company engaged in construction of residential properties. XYZ & Co (hereinafter referred to as “Landowner”) is a partnership firm engaged in the business of Real Estate. They are owners of a piece of land measuring about 30, 000 square feet in Gurgaon. By entering into a Property Development Agreement on 21 st February, 2018, the landowner and the developer are desirous of entering into the following arrangement for the purpose of constructing apartments on the said land- 1. Transfer of Development Right The Landowner shall transfer the right to develop the land to the developer, wherein the Power of Attorney shall be granted to the developer enabling them to obtain requisite permissions and undertake necessary operations.

Contd… 2. Construction Activity The developer shall undertake construction activity on the aforementioned piece of land the total constructed area is estimated to be around 8, 000 sq. feet. 3. Non-Refundable Deposit Prior to undertaking construction, the developer shall be liable to pay an amount of Rs. 10 crore as non-refundable deposit to the landowners in lieu of the development rights. 4. Division of Constructed Property After construction, the constructed area shall be divided between developer and landowner in 40 -60 ratio.

Query 1. Determine the liability under GST in the hands of the (a) Owner and (b) Developer. 2. What would be the time of supply under GST in respect to construction services provided by the developer to the Owner?

GST Liability Levy of GST on transfer of development rights by XYZ & Co. (land owner) • Transfer of development rights are leviable to GST • Thus, land owner company is liable to pay GST on the transfer of development rights to the developer. • Applicable tax rate is 18%. Levy of GST on construction service (works contract) supplied by ABC Ltd. (Developer) • • • In this case, developer is providing works contract service to the land owner Thus, developer is liable to pay GST on works contract service provided to XYZ & Co. Applicable tax rate is 18%.

Contd… Ø Time of Supply • • • Monetary Consideration (Rs. 10 crore) received by Landowner for Development Rights – 21. 02. 2018 [Section 13] Consideration in the form of Construction Service received by Land owner – N. No. 4/2018 -dt. 25. 01. 2018 – When Transfers the possession or the rights in constructed complex by entering into conveyance deed or similar document (e. g. Allotment Letter) Consideration in the form of Development Rights received by Developer – N. No. 4/2018 -dt. 25. 01. 2018 – When Transfers the possession or the rights in constructed complex by entering into conveyance deed or similar document (e. g. Allotment Letter)

CASE STUDY- 2 JDA ON PERSONAL LAND FOR OWN USE

Facts of the Case Mr. A (“Owner”) owns a residential plot of land bearing No. 999, measuring 325 Sq. Yds. , situated at Defense Colony, New Delhi (hereinafter referred to as the “said property”) which he had inherited as legal heir on death of Mr. Ram Mohan (father of the Owner and first and erstwhile owner of the said property). The said property was purchased by Mr. Ram Mohan as a plot of land at his own cost and out of his personal earnings in the year 1962. The Owner is desirous to re-construct the said property by demolishing the existing structure on the said property and construct a new super structure comprising of 4 floors including the ground floor/level (“new structure”). Owner has entered into a Property Development Agreement (“Agreement”) with a developer. Agreement has been entered on 09. 2017. Developmental Rights are transferred by the Land Owner to the Developer on the date of execution of the Agreement Under the Agreement, in lieu of consideration for development and construction of the new structure, the Owner would allot and grant exclusive ownership and usage rights in the share of the said property to the developer as follows: i. Entire Second floor. ii. Use of common areas, facilities and services. iii. 45% undivided, indivisible and impartible ownership rights in the plot of land

Query 1. Determine the liability under GST in the hands of the Owner? 2. What if the owner has intent to sell his share to the prospective customer ?

GST Liability for Owner • It is pertinent to note that only those activities/ transactions are treated as supply only if the said activities/ transactions are made by a person in the course or furtherance of business and would be subject to levy of GST respectively. • In the present scenario, the said property is a residential property of the Owner for personal usage and enjoyment. The Owner of the said property is entering into an Agreement with the Developer for the purpose of development and construction of the new structure for his own residence. • Thus owner is not liable to pay GST on transfer of development rights. • If the land owner has got the super structure constructed for sale to the prospective customer, then the transfer of development right would also be considered as supply in course or furtherance of business, and therefore transfer of development right become leviable to GST.

CASE STUDY- 3 JDA DURING SERVICE TAX REGIME

Facts of the case • M/s “X” (“Company/Developer”) has entered into a Development Agreement on 22. 07. 2014 (“Agreement”) with M/s “P” Private Limited (“Land Owner”) for the purpose of development of the Group Housing Project on the Project Land situated at Noida, Uttar Pradesh; • The Development Agreement is dated 22. 07. 2014. As per the terms of the agreement, all rights covered within the scope of development rights has been transferred on execution of agreement • Construction has been started on the said project on 5 th August, 2018.

Query What is the GST implication on the Owner on transfer of Developmental Rights by the Land Owner to the Developer?

Effective date of Transfer of Development Rights • • Agreement for transfer of Development Rights was executed on 22. 07. 2014. Transfer through registered instrument • Land Owner has granted and the Developer has accepted the Developmental Rights on the date of Agreement. Therefore, the said Developmental Rights are transferred by the Land Owner to the Developer on the date of execution of the Agreement i. e. in July, 2014 itself. • During the service tax regime, transfer of title in immovable property is excluded from the definition of service. • Thus, the transfer of development right being an immovable property shall not be considered as provision of service and therefore not leviable to service tax under Finance Act, 1994. Hence, no service tax is payable by the Owner in this transaction. • Since the rights are supplied in the service tax regime itself (that is so called service have already been supplied prior to 1. 07. 2017), no GST is leviable on such transaction in light with charging section 9 of CGST Act read with transitional provision i. e. section 142(11).

CASE STUDY- 4 JDA WITH REVENUE SHARING ARRANGEMENT

Facts of the Case 1. XY Housing Pvt. Ltd. (Owner) entered into a Collaboration agreement on 15. 02. 2018 with BE Pvt. Ltd. (Developer) for the purpose of development of the Group Housing Land (GH Land) situated at Hauz Khas, New Delhi; 2. Vide the said agreement, the owner has granted irrevocably and unconditionally the development rights along with such ancillary and incidental rights on the GH Land as set forth in the Agreement. 3. It has been further agreed that the Owner shall handover the vacant and peaceful possession of the GH Land to developer on the Execution Date i. e. 15. 02. 2018, and possession was infact granted on that date. 4. Both the parties have agreed to share the receipts of the project in an agreed percentage of 37. 5% : 62. 5% to be computed in the manner provided in the agreement.

Query 1. Is there any service provided by developer to owner ?

GST Liability Levy of GST on transfer of development rights by land owner • Transfer of development rights are leviable to GST in the present Case. Supply of service by Developer to land owner • • The present case is revenue sharing model Thus, in this case, developer is not providing any supply of service to the land owner

Co-venture arrangement - ? ? ? • Where the parties enter into a model where they both would pool their respective resources – landowner will pool land, Developer will contribute construction over land which he shall own, and they will respectively sell their portions, and share the sale consideration • This arrangement would be a development agreement rather than an agreement for transfer of Development Rights to Developer and Construction Service to Landowner.

CASE STUDY- 5 JDA AFTER 01. 04. 2019 NO EXEMPTION OF TDR FORC OMMERCIAL APARTMENT

No Exemption of TDR for Commercial Apartment • DR transferred on 25. 07. 2019 • Total Project Carpet Area – 5, 000 sq ft. • Commercial Carpet Area – 50, 000 sq. Ft. • Residential Carpet Area – 4, 50, 000 sq. ft. • Value of Development Rights (as per Valuation Rules) – 10 Cr. • Tax on DR – 1. 8 CR. • Exemption on Development Rights = 1. 8 Cr. * 4, 50, 000/5, 000 = 1. 62 Cr.

2. CONSTRUCTION OF FLATS/ UNIT INTENDED FOR SALE TO BUYERS

Tax Rate – Residential & Commercial upto 31. 03. 2019 • Tax Rate = 18% vide Notification No. 11/2017 - CT (R) dated 28 th June, 2017 Sl No. 3 Chapter, Section or Heading Description of Service Rate (per cent) Heading (i) Construction of a complex, building, civil structure or a part 9 9954 thereof, including a complex or building intended for sale to a (Construction buyer, wholly or partly, except where the entire consideration has services) been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier. (Provisions of paragraph 2 of this notification shall apply for valuation of this service) ii) composite supply of works contract as defined in clause 119 of 9 section 2 of Central Goods and Services Tax Act, 2017.

ONE TIME OPTION TO PAY TAX AT EXITING RATES ON ONGOING PROJECTS 46

One Time Option - To Pay Tax at Exiting Rates Conditions to Pay Tax at existing tax rates as specified under tax rate Entry 3(ie)/(if) in tax rate N. No 11/2017 -CT(R) newly inserted vide N. No. 3/2019 -CT(R) dt. 29. 03. 19 One Time Option: • For ongoing projects, option shall be available to pay GST at existing tax rates with ITC [Entry 3(ie)/(if) of tax rate N. No 11/2017 -CT(R)]. Time Limit for Exercising the option: • Option to be opted on or before 10 th May 2019 by submitting a Form [Form given at Annexure IV of N. No. 03/2019 -CT(R)]. • If not opted, option to pay tax at new rate shall deemed to have be exercised. Invoices till exercising the option: • Invoices can be issued during 01 st April of 2019 to 10 th May of 2019 before exercising the option, but such invoices shall be in accordance with the option to be exercised 47

Contd… • Provided that in case of ongoing project, the registered person shall exercise one time option in the Form at Annexure IV to pay central tax on construction of apartments in a project at the rates as specified for item (ie) or (if), as the case may be, by the 10 th of May, 2019; • Provided also that where the option is not exercised in Form at annexure IV by the 10 th of May, 2019, option to pay tax at the rates as applicable to item (i) or (ia) or (ib) or (ic) or (id) above, as the case may be, shall be deemed to have been exercised; • Provided also that invoices for supply of the service can be issued during the period from 1 st April 2019 to 10 th May 2019 before exercising the option, but such invoices shall be in accordance with the option to be exercised. ; 48

Definition of Ongoing Project • “ongoing project” shall mean a project which meets all the following conditions, namely- (a). - commencement certificate in respect of the project, where required to be issued by the competent authority, has been issued on or before 31 st March, 2019, and - it is certified by any of the following that construction of the project has started on or before 31 st March, 2019: - (i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972 (20 of 1972); or (ii) a chartered engineer registered with the Institution of Engineers (India); or (iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority. (b) where commencement certificate in respect of the project, is not required to be issued by the competent authority, it is certified by any of the authorities specified in sub- clause (a) above that construction of the project has started on or before the 31 st March, 2019; 49

Contd… (c) completion certificate has not been issued or first occupation of the project has not taken place on or before the 31 st March, 2019; (d) apartments being constructed under the project have been, partly or wholly, booked on or before the 31 st March, 2019. ” Explanation. - For the purpose of sub- clause (a) and (b) above , construction of a project shall be considered to have started on or before the 31 st March, 2019, if the earthwork for site preparation for the project has been completed and excavation for foundation has started on or before the 31 st March, 2019. [Emphasis Supplied] Note: • (xiii) an apartment booked on or before the 31 st March, 2019 shall mean an apartment which meets all the following three conditions, namely- (a) part of supply of construction of which has time of supply on or before the 31 st March, 2019 and (b) at least one instalment has been credited to the bank account of the registered person on or before the 31 st March, 2019 and (c) an allotment letter or sale agreement or any other similar document evidencing booking of the apartment has been issued on or before the 31 st March, 2019; 50

NEW TAX RATES 51

New Tax Rates for On-going projects • Effective 1% [Rate 1. 5% after 1/3 rd deduction of Land]: – Affordable residential housing properties (as decided by GST Council i. e. area 60 sqm. in metros / 90 sqm in non metros and value upto Rs 45 Lakhs) – Affordable Houses under existing Central & State Housing Schemes presently taxable at effective concessional rate of 8%. • Effective 5% [Rate 7. 5% after 1/3 rd deduction of Land]: – Residential housing properties other than those covered in 1% rate. – Commercial apartments such as shops, offices - In a “Residential Real Estate Project” (RREP) having carpet area of commercial apartment not more than 15% of total carpet area of all apartments. 52

Tax Rates for New projects • Effective 1% [Rate 1. 5% after 1/3 rd deduction of Land]: – Affordable residential housing properties (as decided by GST Council i. e. area 60 sqm. in metros / 90 sqm in non metros and value upto Rs 45 Lakhs) • Effective 5% [Rate 7. 5% after 1/3 rd deduction of Land]: – Residential housing properties other than those covered in 1% rate. – Commercial apartments such as shops, offices - In a “Residential Real Estate Project” (RREP) having carpet area of commercial apartment not more than 15% of total carpet area of all apartments. 53

Definition of Affordable Residential Apartment (xvi) The term “affordable residential apartment” shall mean • “a residential apartment in a project which commences on or after 1 st April, 2019, or in an ongoing project in respect of which the promoter has not exercised option in the prescribed form to pay central tax on construction of apartments at the rates as specified for item (ie) or (if) against serial number 3, as the case may be, having carpet area not exceeding 60 square meter in metropolitan cities or 90 square meter in cities or towns other than metropolitan cities and for which the gross amount charged is not more than forty five lakhs rupees. • For the purpose of this clause, - (i) Metropolitan cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR) with their respective geographical limits prescribed by an order issued by the Central or State Government in this regard; • (ii) Gross amount shall be the sum total of; A. Consideration charged for the services specified at item (i) and (ic) in column (3) against sl. No. 3 in the Table; B. Amount charged for the transfer of land or undivided share of land, as the case may be including by way of lease or sub lease; and C. Any other amount charged by the promoter from the buyer of the apartment including preferential location charges, development charges, parking charges, common facility charges etc. 54

Contd…. (b) an apartment being constructed in an ongoing project under any of the schemes specified in sub-item (b), sub-item (c), sub-item (da) and sub-item (db) of item (iv); subitem (b), sub-item (c), sub-item (d) and sub-item (da) of item (v); and sub-item (c) of item (vi), against serial number 3 of the Table above, in respect of which the promoter has not exercised option to pay central tax on construction of apartments at the rates as specified for item (ie) or (if) against serial number 3, as the case may be. 55

CONDITIONS FOR NEW TAX RATES 56

Conditions for New Tax Rates (i) Payment of Tax in Cash • Provided that the central tax at the rate specified in column (4) shall be paid in cash, that is, by debiting the electronic cash ledger only; (ii) No Input Tax Credit (ITC) • Provided also that credit of input tax charged on goods and services used in supplying the service has not been taken except to the extent as prescribed in Annexure I in the case of REP other than RREP and in Annexure II in the case of RREP; (iii) Reversal of ITC attributable to construction in a project, time of supply of which is on or after 1 st April, 2019 • Provided also that the registered person shall pay, by debit in the electronic credit ledger or electronic cash ledger, an amount equivalent to the input tax credit attributable to construction in a project, time of supply of which is on or after 1 st April, 2019, which shall be calculated in the manner as prescribed in the Annexure I in the case of REP other than RREP and in Annexure II in the case of RREP; What to do with ITC available with Developer after reversal of requisite ITC, for payment of tax on or after 31. 03. 2019 - ? ? ? 57

Contd… (iv) Conditions in case of Joint Development Agreement (JDA) • Provided also that where a registered person (landowner- promoter) who transfers development • right or FSI (including additional FSI) to a promoter (developer- promoter) against consideration, wholly or partly, in the form of construction of apartments, (i) the developer- promoter shall pay tax on supply of construction of apartments to the landownerpromoter, and (ii) such landowner - promoter shall be eligible for credit of taxes charged from him by the developer promoter towards the supply of construction of apartments by developer- promoter to him, provided the landowner-promoter further supplies such apartments to his buyers before issuance of completion certificate or first occupation, whichever is earlier, and pays tax on the same which is not less than the amount of tax charged from him on construction of such apartments by the developer-promoter. Explanation: (i) "developer- promoter" is a promoter who constructs or converts a building into apartments or develops a plot for sale, (ii) "landowner- promoter" is a promoter who transfers the land or development rights or FSI to a developer- promoter for construction of apartments and receives constructed apartments against such transferred rights and sells such apartments to his buyers independently. 58

Contd… (v) 80% of input (goods other than capital goods) and input services [except TDR, FSI, long term lease (upfront payment) , electricity, high speed diesel, motor spirit, natural gas] shall be purchased from registered persons. • Provided also that eighty percent of value of input and input services, [other than services by way of grant of development rights, long term lease of land (against upfront payment in the form of premium, salami, development charges etc. ) or FSI (including additional FSI), electricity, high speed diesel, motor spirit, natural gas], used in supplying the service shall be received from registered supplier only; • Provided also that inputs and input services on which tax is paid on reverse charge basis shall be deemed to have been purchased from registered person; 59

Contd… (vi) On shortfall of purchases from 80% from registered person - Tax is to be paid under RCM @ of 18% Provided also that where value of input and input services received from registered suppliers during the financial year (or part of the financial year till the date of issuance of completion certificate or first occupation of the project, whichever is earlier) falls short of the said threshold of 80 per cent. , tax shall be paid by the promoter on value of input and input services comprising such shortfall at the rate of eighteen percent on reverse charge basis and all the provisions of the Central Goods and Services Tax Act, 2017 (12 of 2017) shall apply to him as if he is the person liable for paying the tax in relation to the supply of such goods or services or both; (vii) 100% Cement Purchases from Registered Person. On purchase of Cement from unregistered person - Tax is to be paid under RCM @ of 28% • Provided also that notwithstanding anything contained herein above, where cement is received from an unregistered person, the promoter shall pay tax on supply of such cement at the applicable rates on reverse charge basis and all the provisions of the Central Goods and Services Tax Act, 2017 (12 of 2017), shall apply to him as if he is the person liable for paying the tax in relation to such supply of cement; 60

Contd… Compliance requirement • • Maintain separate project wise account of inward supply from registered and unregistered supplier. Calculation of tax payment on shortfall and Reporting of the same on GSTN portal by 30 th June of subsequent FY. Payment of shortfall tax by adding tax liability in the month not later than June of subsequent FY. Payment of tax on cement purchase from unreg-person in the month in which cement is received. Reporting of ITC not availed as ineligible credit in GSTR-3 B [Row No. 4 (D)(2)]. Explanation. 1. The promoter shall maintain project wise account of inward supplies from registered and unregistered supplier and calculate tax payments on the shortfall at the end of the financial year and shall submit the same in the prescribed form electronically on the common portal by end of the quarter following the financial year. The tax liability on the shortfall of inward supplies from unregistered person so determined shall be added to his output tax liability in the month not later than the month of June following the end of the financial year. 2. Notwithstanding anything contained in Explanation 1 above, tax on cement received from unregistered person shall be paid in the month in which cement is received. 3. Input Tax Credit not availed shall be reported every month by reporting the same as ineligible credit in GSTR-3 B [Row No. 4 (D)(2)] 61

Illustration of RCM Liability in case of shortfall of 80% purchase from Registered Person Sl. No Name of Inputs and Input Services Amount % Whether received from Tax Payable registered under RCM supplier 1 Sand 1, 00, 000 10 Y 2 Cement 1, 50, 000 15 Y 3 Steel 2, 00, 000 20 Y 4 Bricks 1, 50, 000 15 Y 5 Flooring Tiles 1, 00, 000 10 Y 6 Paints 50, 000 5 N 7 Architect/ designing/ CAD/ drawing etc. 1, 00, 000 10 Y 8 Aluminum Windows, Ply, Commercial Wood 1, 50, 000 15 N Total 10, 00, 000 80 From Reg. Supplier 62 -

Contd… RCM @ 28% on purchase of cement from Unreg-person Sl. No Name of Inputs and Input Services Amount % Whether received from Tax Payable registered under RCM supplier 1 Sand 1, 00, 000 10 Y 2 Cement 1, 50, 000 15 N 42, 000 3 Steel 2, 00, 000 20 Y 4 Bricks 1, 50, 000 15 Y 5 Flooring Tiles 1, 00, 000 10 Y 6 Paints 50, 000 5 Y 7 Architect/ designing/ CAD/ drawing etc. 1, 00, 000 10 Y 8 Aluminum Windows, Ply, Commercial Wood 1, 50, 000 15 Y Total 10, 00, 000 85 From Reg. Supplier 42, 000 63

Contd… Sl. No Name of Inputs and Input Services Amount % Whether received from Tax Payable under RCM registered supplier 1 Sand 1, 00, 000 10 N 2 Cement 1, 50, 000 15 N 42, 000 3 Steel 2, 00, 000 20 Y 4 Bricks 1, 50, 000 15 Y 5 Flooring Tiles 1, 00, 000 10 Y 6 Paints 50, 000 5 Y 7 Architect/ designing/ CAD/ drawing etc. 1, 00, 000 10 N 8 Aluminum Windows, Ply, Commercial Wood 1, 50, 000 15 N Reverse Charge Payable on balance 15% shortfall 15 27, 000 Total 10, 00, 000 50 From Reg. Supplier 69, 000 64

Notified Goods and Services on which GST is payable under RCM on purchase from unregistered persons u/s 9(4) : N. No. 07/2019 CT(R) Sl. No. Category of supply of goods and services Recipient of goods and services 1 Any goods and services or both [other than services TDR, long term lease or FSI] which constitute the shortfall from the minimum value of goods or services or both for construction of project, in a financial year (or part of the financial year till the date of issuance of completion certificate or first occupation, whichever is earlier) which is prescribed as condition for new tax rates. Promoter 2 Cement which constitute the shortfall from the minimum value of goods or services or both for construction of project, in a financial year (or part of the financial year till the date of issuance of completion certificate or first occupation, whichever is earlier) which is prescribed as condition for new tax rates. Promoter 3 Capital goods supplied to a promoter for construction of a project on which tax is payable or paid at new tax rates (i. e. 1% / 5%). Promoter Although proviso to Entry 3(i) to 3(d) of N. No. 03/2019 CT(R) provides for payment of tax on purchase of cement from un-reg. dealer under RCM even where there is no shortfall in mandatory purchase of 80%, the mechanism u/s 9(4) provides for tax to be paid under RCM only in cases where there is a shortfall in mandatory purchase of 80% from reg. dealers. 65

Land Value – Deemed to be 1/3 RD • Para 2 of Notification No. 11/2017 - CT (R) dated 28 th June, 2017 provides that value of transfer of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply. 2. In case of supply of service specified in column (3), in item (i); sub-item (b), sub-item (c), sub-item (d), subitem (da) and sub-item (db) of item (iv); sub-item (b), sub-item (c), sub-item (d) and sub-item (da) of item (v); and sub-item (c) of item (vi), against serial number 3 of the Table above, involving transfer of land or undivided share of land, as the case may be, the value of such supply shall be equivalent to the total amount charged for such supply less the value of transfer of land or undivided share of land, as the case may be, and the value of such transfer of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply. Explanation. -For the purposes of this paragraph, "total amount" means the sum total of, (a) consideration charged for aforesaid service; and (b) amount charged for transfer of land or undivided share of land, as the case may be including by way of lease or sublease.

Payment of tax on sale of units • Land value deemed as 1/3 rd of sale price – – – • • Kashmir to Kanyakumari Goa, to Meghalaya to Mizoram, Arunachal Pradesh, Sikkim Thar desert Girnar Jharkhand Chhattisgarh Forests, cities and villages Remarkable equality But this equality is discriminatory Lack of classification creates discrimination and inequality Land, which is otherwise not taxable is taxed in this way

Payment of tax on sale of units Contd… • Wherever land value is high • Builders are absorbing GST • Then can be separated and should be accordingly taxed • Challenge should be made to these notifications Ex: • Flat 5 Cr – Tax 25 lakh (almost equal to construction cost – many cases in Delhi are like this) • Construction cost 75 Lakh • Tax construction @ 18% on 75 Lakh: – Tax 13. 50 Lakh with ITC

WRIT Petitions on Deemed Value of Land Writ Petitions Challenging deeming fiction in regard to value of Land Sanjeev Sharma [Delhi HC against AAR Ruling] Abhinav Mittal [P&H HC]

Cause of action is sin qua non for filing Writ petition • The Karnataka HC in the case of M/s Global Associates [W. P. 56586 -56588/ 2018 (T- TAR)] was dismissed. The issue was relating to correctness and legality of Entry 3(i) read with para 2 of the Notification No. 11/2017 -CT(R) dt. 28. 06. 2017 , held that: 16. Enacting a legislation or issuing Notification/Circular could not confer a right to challenge unless the litigant is affected by the action initiated by the executive in furtherance of such legislation/administrative Circular/Notification more particularly, in taxing statutes. Cause of action is sine qua non for challenging such legislation/ Notification/Circular. The writ Court cannot adjudicate upon such matters in vacuum. Adjudication of such issues sans any cause of action would be merely academic, consuming public time de hors the litigants waiting in serpentine queue seeking justice before the courts for the relief/s sought for, arising out of the cause of action. The petitioner involved in construction activity or works contract would not be suffice to examine the constitutional vires of the Act and the related Notification/Circular unless the cause of action emerges. • • • Litigant must be affected. Cause of action is sin qua non issues sans any cause of action would be merely academic

Suresh Kumar Bansal [Delhi HC] • In this regard, the levy of service tax in case of composite works contract was challenged and the Delhi High Court in the case of Suresh Kumar Bansal, W. P. (C) 2235 of 2011 ruled as follows: – The provisions of Rule 2 A of the Service Tax (Determination of value) Rules, 2006, as it stood prior to 01. 07. 2012, did not provide for exclusion of the value of land thus did not provide for complete machinery to tax composite works contract, in order to tax only the service portion. – Machinery provision for exclusion of all components other than service components was required to be provided by way of Act / Rules. The abatement notification providing for the same cannot substitute the lack of machinery provision to ascertain the value of services.

CASE STUDY- 5

Facts of the Case Gleeful Projects Pvt. Ltd. (“Developer”) is engaged in the development and construction of a housing society. Miss Radha Rani (‘Buyer’) has booked a park facing flat at 3 rd Floor with the Developer in the said under construction society. Club and Common Area shall be handed over to RWA. Consideration agreed with the Buyer is as under: a. Basic Sale Price @ 12, 000/ per sq. feet b. EDC/ IDC @ actual c. Preferential Location Charges (PLC) – Rs. 1, 000/- per sq. feet for Park Facing Flat and Rs. 500/- per sq. feet for Flat at 3 rd Floor d. Club Membership – Rs. 5, 000/e. One Car Parking in Basement – Rs. 6, 000/f. One Open Car Parking – Rs. 4, 50, 000/g. Registration Fee and Stamp Duty – At Actual h. Legal Charges • Last Installment is to payable by the Buyer at the time of Registration of Flat which shall be done after obtaining CC.

Query 1. Whether GST is leviable on the charges payable by the Buyer to Developer? 2. If yes, what would be the applicable tax rate? 3. Whether GST is leviable on last installment?

GST Levy and Tax Rate • Basic Sale Price @ 12, 000/- per sq. feet – Taxable @ 7. 5%, subject to 1/3 rd Deduction for land value – Thus, effective tax rate @ 5% – Yes, GST is payable on last instalment which is payable after issuance of CC. • EDC/IDC – at Actual – GST is payable on supply of goods and services at the value determined as per section 15 of Central Goods and Services Tax Act, 2017. – Section 15(2) provides the inclusions which are to be added in the value of supply. Section 15(2)(a) provides that any fees and charges levied under any law shall be included in the value of supply of goods and services, if charged separately by the supplier. – Thus, under GST regime External Development Charges and Internal Development Charges collected from the Customers shall form a part of the value of taxable supply and GST would be leviable on the same. – Taxable @ 7. 5%, subject to 1/3 rd Deduction for land value – Thus, effective tax rate @ 5%

Contd… • Preferential Location Charges (PLC) – Rs. 1, 000/- per sq. feet for Park Facing Flat and Rs. 500/- per sq. feet for Flat at 3 rd Floor – In our view, it is part and parcel of Construction of Flat therefore should be considered as part of total amount charged for construction of complex service – However, department considers it as different supply and issuing SCN for service tax demand on PLC for differential tax. – Better to offer, agree and charge differential prices for different Flats. For example in present case Rs. 13, 500/- per sq. feet for park facing flat at 3 rd Floor – Tribunal Judgements in favour of assesee • Club Membership – Rs. 5, 000/– Leviable to GST – In our view, it is part and parcel of Construction of Flat therefore should be considered as part of total amount charged for construction of complex service – Right transferred in the Club to Flat Buyer and drafted clauses of the agreement would play an important role – But department consider it to be “Membership” Charges and ask for full rate of tax – Tribunal Judgements in favour of assesee

Contd… • • One Car Parking in Basement – Rs. 6, 000/One Open Car Parking – Rs. 4, 50, 000/– Parking which is sold along with the Flat to customers becomes part and parcel of the construction service. – Thus, leviable to tax @ effective rate of 5%. • Registration Fee and Stamp Duty – At Actual – Advisable to charge it as “Reimbursement of Expenses” or Direct Payment by Buyer – Not leviable to tax subject to satisfaction of conditions of Rule 33 [Valuation in case supply as Pure gent] • Legal Charges – Generally it is charged for documentation done during registration of Flat – Taxable @ 18%

3. TRANSITIONAL ISSUES 78

3 A. CAPPING OF % INVOICING AND PROCUREMENT OF INPUT & INPUT SERVICE ON OR BEFORE 31. 03. 2019 79

CASE STUDY- 6

Capping in para 3(i): where percentage invoicing is more than the percentage completion Main Scheme S. No. Particulars Amount a Total ITC taken for Project till 31. 3. 2019 (T) b % Carpet Area of Residential Apartment In the Project (F 1) c Percentage completion of Project as on 01. 04. 2019 (F 4) 20. 00% d Percentage booking of Residential Apartments as on 31. 03. 2019 (F 2) 60. 00% e Percentage Invoicing of Residential Apartments as on 31. 03. 2019 (F 3) 30. 00% f g h 1, 00, 000 ITC attributable to Residential Apartments for construction in a project, time of supply of which is on or before 31 st March, 2019(Tr= a*b*d*e/c) ITC attributable to Commercial Apartments (on which tax is payable at existing tax rates) for construction in a project, time of supply of which is on or before 31 st March, 2019 (Tc) Reversal of ITC attributable to construction in a project, time of supply of which is on or after 1 st April, 2019, (a-f) (Tx = T-Tc-Tr) 100. 00% 90, 000 - 10, 000 T is the total ITC availed (utilized or not) on inputs and input services used in construction of the REP from 1 st July, 2017 to 31 st March, 2019 including transitional credit taken on 1 st July, 2017 81

Contd… • • 3. Notwithstanding anything contained in paragraph 1 or paragraph 2 above, Te shall be determined in the following situations as under: (i) where percentage invoicing is more than the percentage completion and the difference between percentage invoicing (per cent. points) and the percentage completion (per cent. points) of construction is more than 25 per cent. points; the value of percentage invoicing shall be deemed to be percentage completion plus 25 percent. points; Percentage Invoicing 30. 00% Percentage Completion 20. 00% F 3= Percentage Completion + 25% Eligible ITC for Residential (Tr) 75, 000 Eligible ITC without caping 90, 000 Eexcess reversal due to caping 15, 000 82

CASE STUDY- 7

Capping in para 3(ii): where percentage invoicing is more than the percentage completion Main Scheme S. No. Particulars Amount a Total ITC taken for Project till 31. 3. 2019 (T) b % Carpet Area of Residential Apartment In the Project (F 1) c Percentage completion of Project as on 01. 04. 2019 (F 4) 20. 00% d Percentage booking of Residential Apartments as on 31. 03. 2019 (F 2) 60. 00% e Percentage Invoicing of Residential Apartments as on 31. 03. 2019 (F 3) 30. 00% f g h 1, 00, 000 ITC attributable to Residential Apartments for construction in a project, time of supply of which is on or before 31 st March, 2019(Tr= a*b*d*e/c) ITC attributable to Commercial Apartments (on which tax is payable at existing tax rates) for construction in a project, time of supply of which is on or before 31 st March, 2019 (Tc) Reversal of ITC attributable to construction in a project, time of supply of which is on or after 1 st April, 2019, (a-f) (Tx = T-Tc-Tr) 100. 00% 90, 000 - 10, 000 T is the total ITC availed (utilized or not) on inputs and input services used in construction of the REP from 1 st July, 2017 to 31 st March, 2019 including transitional credit taken on 1 st July, 2017 84

Contd… • (ii) where the value of invoices issued on or prior to 31 st March, 2019 exceeds the consideration actually received on or prior to 31 st March, 2019 by more than 25 per cent. of consideration actually received; the value of such invoices for the purpose of determination of percentage invoicing shall be deemed to be actual consideration received plus 25 percent. of the actual consideration received; and % of invoicing after application of cap 30% Value of Booked Residential Apartments 80, 00, 000 Value of Invoicing of booked apartments (80 Crores*30%) 24, 00, 000 Consideration Received upto 31. 03. 2019 8, 00, 000 125% of Consideration Received 10, 00, 000 Deemed Value of Invoicing 10, 00, 000 % Invoicing (F 3) 12. 50% Eligible ITC for Residential (Tr) 37, 50, 000 Eligible ITC without caping 90, 000 Excess reversal due to Caping 52, 50, 000 85

Capping in para 3(iii) • (iii) where, the value of procurement of inputs and input services prior to 1 st April, 2019 exceeds the value of actual consumption of the inputs and input services used in the percentage of construction completed as on 31 st March, 2019 by more than 25 percent. of value of actual consumption of inputs and input services, the jurisdictional commissioner or any other officer authorized in this regard may fix the Te based on actual per unit consumption of inputs and input services based on the documents duly certified by a chartered accountant or cost accountant submitted by the promoter in this regard, applying the accepted principles of accounting. 86

3 B. RESTRICTION ON AVAILMENT OF ITC AND UTILIZATION OF ACCUMULATED ITC 87

Unutilised ITC and payment of tax using cash ledger • • 1. 4. 2019 onwards in residential projects: • Cannot avail ITC • Cannot utilise ITC • Unutilised ITC available for previous periods is like cash stuck • Section 16: • Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person

Unutilised ITC and payment of tax using cash ledger Contd… • S. 17(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely: …… (c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

Unutilised ITC and payment of tax using cash ledger Contd… • Notification 11/2017 – CT Rate (conditions) – Provided that the central tax at the rate specified in column (4) shall be paid in cash, that is, by debiting the electronic cash ledger only; – Provided also that credit of input tax charged on goods and services used in supplying the service has not been taken except to the extent as prescribed in Annexure I in the case of REP other than RREP and in Annexure II in the case of RREP;

Unutilised ITC and payment of tax using cash ledger Contd… • • Similar cases Indian Catering Association case (Del HC) • Way forward: – Challenge the notification – In the meanwhile take ITC and reverse – If notification quashed, the balance ITC and the ITC availed later would become available

4. Sale of Developed Plot of Land 10 92

Sale of Developed Plots • Sale of Land is nether Supply of Goods nor Supply of Service as per Schedule – III of CGST Act. Therefore not leviable to GST. • In service tax regime department has raised a dispute that development of Plots is a separate transaction from sale of Land issued SCNs to Developers. Thus, this issue is under litigation. • If we consider the entire value of land as exempted being sale of Developed Land – ITC on goods or service procured for development of land shall not be allowed. Efficient Model under GST for Sale of Plot (Tax Efficient and Free from Litigation) ü Segregate the value of land development activities. ü Development charges become leviable to GST. No Exposure on development activity as Company will pay taxes on it. ü ITC on goods or services procured for development of land shall be allowed and net tax cost impact will be on value addition only. ü The department is itself segregating these two ü For past transactions: can be fought ü There is no provision deeming the development to be separate from sale, as in case of construction of complex/ building for sale

5. OTHER ISSUES 94

Refund of cancellation • This is not a case where Credit note can be issued as contemplated in S. 34 – – “…. the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient …. ” • However, vide Circular No 137/07/2020 -GST dt. 13. 04. 2020, CBIC clarified that Credit Note Can be issued. To Quote: Issue Clarification An advance is received by a supplier for a Service contract which subsequently got cancelled. The supplier has issued the invoice before supply of service and paid the GST thereon. Whether he can claim refund of tax paid or is he required to adjust his tax liability in his returns ? In case GST is paid by the supplier on advances received for a future event which got cancelled subsequently and for which invoice is issued before supply of service the supplier is required to issue a "credit note" in terms of section 34 of the CGST Act. He shall declare the details of such credit notes in the return for the month during which such credit note has been issued. The tax liability shall be adjusted in the return subject to conditions of section 34 of the CGST Act. There is no need to file a separate refund claim. However, in cases where there is no output liability against which a credit note can be adjusted, registered persons may proceed to file a claim under "Excess payment of tax, if any" through FORM GST RFD-01.

Contd… What if time limit to issue Credit Note lapsed i. e. September of Next FY from invoice date • If service is not rendered, advance tax to be refunded • Article 265: no tax can be collected save by authority of law • Section 54(8)(c) of CGST Act – Refund • It is well settled that no taxes can be levied unless the taxable event is attracted Time Limit to Claim Refund • Better to claim refund within 2 Years from the date of Cancellation of Unit.

Anti profiteering • • • There are no rules/ method for computation Anti – profiteering authority acting arbitrarily All accounting methods for computing profit have been put at bay They are comparing the ratio of ITC to turnover pre and post GST – it is a makeshift method and is prone to errors of computation Several constitutional issues in anti profiteering mechanism Later denial of utilisation of GST (w. e. f. 01. 04. 2019) – hence if GST ITC taken for computing profiteering, then it is incorrect They are not allowing benefit of profit transferred Agreeing that the computation is not final, still going on with aggressive calculation Imposing penalty on

Anti profiteering Contd … • Way forward – Proper representation before the authority – Our own figures to be given with proper explanation – Their formula to be applied with clear cut statement that we don’t agree with the formula but calculating on your insistence – Must say that these are provisional figures, and would be finalised upon completion • Making confidential data – public – Delhi HC stayed – W. P. (C) 9248/2019 • Delhi HC stay on depositing 10% in court – Sarvpriya Securities W. P. (C) 2445/2020

THANK YOU Puneet Agrawal ALA Legal, Advocates & Solicitors puneet@alalegal. in | +91 -98918 -98911 Website: alalegal. in | Blog: gstlawindia. in