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Impact and Implication of GST on Real Estates and Construction Contracts – Existing and Future Vishnu Daya & Co.

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Page 1: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Impact and Implication of GST on Real Estates and Construction Contracts –Existing and Future

Vishnu Daya & Co.

Page 2: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Index

Overview of GST

• Why GST?

• Taxes Subsumed under GST

• GST Concept

• How GST Works?

Certain Key Provisions of GST

• Meaning and Scope of Supply

• Schedule I & II

• Place of Supply and Time of Supply

• Composition Scheme

Compliances Under GST

• Input Tax Credit

• Registration

• Returns filing

• E-way bill

• Invoice

GST Impact

• Current taxing provision for a works contractor in regular scheme with sub contractor and without sub contractor Vis-à-vis- GST

• Current taxing provision for a works contractor when registered under composition scheme vis-à-vis GST

Vishnu Daya & Co.

Page 3: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Index

GST Impact

• Classification and supply of apartments on own land developed by land owner cum developer.

• Classification and taxation of JDA

• Construction on own land

• Only developer as contractor

• Supply of manpower

• Valuation

• Revenue sharing Vs Area sharing

• Outsourcing of end to end construction activity

• Advance paid Vs Advance received?

GST Impact

• Purchase return

• Reduction in the purchase bills

• Sending inputs for job work

• Providing various facilities in the work site

• Retention amount

• Switching over from one apartment to another

• Cancellation of apartment

• Sale by individual to third party and consenting party by developer

• Buyback contracts

• Inter-state works contract

Vishnu Daya & Co.

Page 4: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Index

GST Impact

• URD purchases

• High sea sales

• Construction to SEZ, EOU and STPI

• Government projects and low cost housing

• Reverse charge mechanism

• Transition credits

• Precautions

Vishnu Daya & Co.

Page 5: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Overview of GST

Vishnu Daya & Co.

Page 6: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Why GST?

Questions with the current taxation regime

Excise Duty – Not creditable through the

supply chain

Service Tax – Not creditable to the traders

VAT – Not creditable to the service providers

CST – cost to all

Several more local taxes not creditable

Different tax rates across country

Discriminatory exemptions

How GST addresses the same?

Seamless credit throughout the supply

chain

Single tax rates across the country

Easy movement of goods and free

trade across the country

Vishnu Daya & Co.

Page 7: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Taxes to be subsumed under GST

Excise Duties including the

additional excise duties

Cesses in the nature of

excise duty /customs duty

Additional duties of customs

(i.e. CVD and SAD)

Central Sales Tax

Service Tax

Cesses and surcharges levied

by Union i.e. SBC & KKC

VAT/ Sales Tax

Entry Tax not in lieu of

octroi

Entertainment Tax (unless

levied by the local bodies)

Luxury Tax

Taxes on lottery, betting

and gambling

Cesses and surcharges

levied by States, related to

supply of goods and

services

Central Levies State Levies

GST

Vishnu Daya & Co.

Page 8: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Taxes Not

Subsumed

Vishnu Daya & Co.

Central Taxes

Export duties and Basic Customs Duty

Terminal Taxes on goods and passengers, carried by rail, sea or air

Security Transaction Tax

Taxes on Petroleum Products

Alcohol Products

State Taxes

Stamp duties

Taxes on land and Buildings

Electricity tax

Taxes on vehicles

Tolls

Profession tax

Taxes on Petroleum Products

Alcohol Products

Page 9: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

GST in India – Destination Based Taxation – Dual GST

CGST

• On intra-State Supply

SGST

• On intra-State Supply

UTGST

• On intra-State Supply

IGST

• On Inter-state Supply

OR

The location of the Supplier and the Place of

Supply are in same State – Intra-state Supplies

The location of the Supplier and the Place of

Supply are in different State – Inter-state

Supplies

Exception : IGST applies to Import, SEZ

developer/unit and tourist

Vishnu Daya & Co.

Page 10: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Certain Key

Provisions of

GST

Vishnu Daya & Co.

Page 11: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Goods – Section 2

(52)

Every kind of movableproperty other thanmoney and securities butincludes actionable claim,growing crops, grass andthings attached to orforming part of the landwhich are agreed to besevered before supply orunder a contract ofsupply;

Vishnu Daya & Co.

Page 12: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Works Contract –

Section 2 (119)

A contract for building,

construction, fabrication,

completion, erection, installation,

fitting out, improvement,

modification, repair, maintenance,

renovation, alternation or

commissioning of any

immovable property wherein

transfer of property in goods

(whether as goods or in some

other form) is involved in the

execution of such contract

Vishnu Daya & Co.

Page 13: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Questions

Whether construction of part ofbuilding is works contract?

Is it works contract, when separatevalue for supply and installation of ACis provided?

Whether supply and installation ofelevator is a works contract?

Whether comprehensive maintenanceof elevator is a works contract?

Vishnu Daya & Co.

Page 14: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Composite supply

A supply made by a taxable person to

a recipient consisting of two or more

taxable supplies of goods or services

or both, or any combinations thereof,

which are naturally bundled and

supplied in conjunction with each

other in the ordinary course of

business, one of which is a principal

supply

Vishnu Daya & Co.

Page 15: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Meaning of Principal supply

The supply of goods or services which constitutes the predominant

element of a composite supply and to which any other supply forming part

of that composite supply is ancillary

Vishnu Daya & Co.

Page 16: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Examples of

composite supply

Questions

Supply of goods with additional charge for

transportation, insurance, packing, loading etc.

Supply and installation of machinery

Medical consultancy and dispensary (provided both are

taxable)

Professional fees for services and claiming

reimbursements

Whether supply and installation is a composite supply or

works contract?

When the single contract is given to factory located in

different State, but the installation is done by the branch,

whether the same would be classified as works contract in the

hands of factory as well as branch?

Vishnu Daya & Co.

Page 17: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Mixed supply

– 2(74)

Two or more individual supplies of goods or services or any

combination thereof, made in conjunction with each other by

a taxable person for a single price where such supply does

not constitute a composite supply

Various marketing schemes – either bundled or unbundled

Sale of school bag, water bottle and stationery for one price

Examples:

Vishnu Daya & Co.

Page 18: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Consideration 2(52)

Any payment made or to be made, whether in money or otherwise, inrespect of, in response to, or for the inducement of, the supply ofgoods and or services, whether by the said person or by any otherperson;

The monetary value of any act or forbearance, whether or notvoluntary, in respect of, in response to, or for the inducement of, thesupply of goods and or services whether by the said person or by anyother person;

Provided that a deposit whether refundable or not, given in respect ofthe supply of goods and or services shall not be considered aspayment made unless the supplier applies the deposit as considerationfor the supply.

Exclusion: Subsidy by the Government

Vishnu Daya & Co.

Page 19: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Implications of consideration

What definition says

Advance payment made at the time of

JD agreement to owner- non

refundable

Bonus offered to person to join

employment before his normal

relieving period

Free supply of design to a fabricator

Amount paid to the tenants to vacate

the land and building

How it will effect?

To induce the owner to sign JD

agreement

To induce the person to join

employment- Not employer employee

relationship exists

Monetary value of the act

To induce a person to vacate-

Precaution??

Vishnu Daya & Co.

Page 20: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Money- 2(75) Means

The Indian legal tender or any foreigncurrency, cheque, promissory note, bill ofexchange, letter of credit, draft, pay order,traveller cheque, money order, postal orelectronic remittance or any otherinstrument recognized by the RBI whenused as a consideration to settle anobligation or exchange with Indian legaltender of another denomination but shallnot include any currency that is held forits numismatic value

Vishnu Daya & Co.

Page 21: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Meaning of otherwise used in consideration

Barter

Exchange

Any other mode

Any mode Government may notify

Vishnu Daya & Co.

Page 22: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Meaning and Scope of Supply

Supply Includes

All forms of supply

Supply Specified in Schedule I

Import of Services

All forms of supply –

Such as sale, transfer,

barter, exchange,

license, rental, lease or

disposal made or agreed

to be made for a

consideration by a

person in the course or

furtherance of business

Supplies made without

consideration

For a consideration and

whether or not in the course

or furtherance of business

Vishnu Daya & Co.

Page 23: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Schedule I

Permanent transfer/disposal of business assets where input credit has been

availed;

Supply between the two or more distinct or related persons within or outside

the State – Exception gift to employees less than Rs.50K

Supply of goods by principal to agent – where agent undertakes to supply

goods on behalf of principal

Supply of goods by an agent to principal – where agent undertakes to

receive goods on behalf of principal

Importation of services by taxable person from a related person or from any

of his other establishments outside India, in the course or furtherance of

business

Vishnu Daya & Co.

Page 24: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Schedule II – Construction Service declared as

Service

Construction of a complex, building, civil structure or a

part thereof, including a complex or building intended for

a sale to a buyer, wholly or partly, except where the

entire consideration has been received after issuance of

completion certificate, where required, by the competent

authority or after its first occupation, whichever is

earlier

Vishnu Daya & Co.

Page 25: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Relevance of

declared service

Should be classified as service only and

not under any other category like supply

of goods or supply of service or vice versa

or composite supply of goods or service

Rate of tax for declared service may be

different. For example, rate of GST for

construction is 12% without refund of

overflow of input credit

Page 26: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Questions Whether construction of road is a

construction service or works contract

service?

What is the classification of site

formation and sale of developed site?

What is the meaning of “part thereof ”

in construction service?

Whether the sub contract of

construction is a construction service or

works contract service?

Vishnu Daya & Co.

Page 27: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Questions Whether signing JD is a supply?

Whether demolition of site office at thetime of completion is a supply?

Whether agreeing to supply water,electricity and security at free of cost is asupply?

Whether supplying free of cost materialto the contractor is a supply?

Whether offering “free of costmaintenance for two years” is a supply?

Vishnu Daya & Co.

Page 28: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Questions under construction

Whether contractor can build a complex or building and classify under

construction service?

Whether a building partly for own use and partly for renting would fall

under construction service?

Whether sale of material is required in classification of construction

service?

Vishnu Daya & Co.

Page 29: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Place of Supply of Services

SITUATION PLACE OF SUPPLY

In respect of services excluding specific

categories:

When provided to registered person for

services

Service provided to an unregistered person

Location of the service receiver when

provided to registered person

Location of the recipient, where the

address on record exists. (In other cases,

location of the supplier)

Services in relation to Immovable property,

boat or vessel including ancillary services

Location of the immovable property or boat

or vessel

Transportation of goods including by mail or

courier

In case of registered person, Location of

such service receiver.

In other cases, location at which goods are

handed over for transportation

Vishnu Daya & Co.

Page 30: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Questions If you appoint an architect from Bangalore for a

project in Coimbatore and billing to client in

Bangalore, what type of tax architect should charge?

Whether credit of the above is available?

Whether the view will change when architect is from

Singapore?

Whether the GST paid on Hotel located in another

State can be claimed in Karnataka?

When inter-state works contract is undertaken,

whether registration is to be obtained in that State?

When an apartment in Bangalore is billed to a buyer

from Delhi, what type of tax should be charged?

Vishnu Daya & Co.

Page 31: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Place of Supply of Goods

Situation Place of Supply

Where supply involves movement of

goods

Location where movement of goods is

terminated (Place of Delivery)

Where goods are delivered before or

during the movement of goods either by

way of transfer of documents or title to

the goods or otherwise, to the recipient

or any other person on the direction of

a third person (Bill to Ship to cases)

Principal place of Business of such

Third person

Where supply does not involve the

movement of goods

Location of such goods at the time of

delivery to the recipient.

All other cases As determined by the law made by the

Parliament on recommendation of the

Council

Vishnu Daya & Co.

Page 32: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Bill to Ship to Transactions

Vishnu Daya & Co.

Factory

in B’lore

Delivery address –

Chennai

Billing address

– Mysore

CGST + SGST Factory in

B’lore

Delivery address

– B’lore

Billing address –

Chennai

IGST

Page 33: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Relevance In case of inter-state works contract,

supply to the work site by a local supplier

is an inter-state supply or local supply?

If registration in other State is not

obtained, whether the Government will

force to take casual dealer in the State?

Vishnu Daya & Co.

Page 34: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Meaning of casual person

A person who occasionally undertakes transactions involving supply of

goods or services or both in the course or furtherance of business, whether

as principal, agent or in any other capacity in a state or a Union territory

where he has no fixed place of business

Implications:

Compulsory registrations for casual taxable person.

Persons participate in exhibition cum sale

Conducting events, entertainments, etc.

Vishnu Daya & Co.

Page 35: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Place of Business- Means

A place from where the business is ordinarily carried on, and includes a

warehouse, a godown or any other place where a taxable person stores his

goods, supplies or receives goods or services or both; or

A place where a taxable person maintains his books of account; or

A place where a taxable person is engaged in business through an agent, by

whatever name called

Relevance: Due to the above, when you undertake interstate works contract,

the officer may force you to take registration in other state. Further other

business exigencies will force you to register which will be discussed later

Vishnu Daya & Co.

Page 36: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Time of

supply of

service

Vishnu Daya & Co.

Earlier of

Earlier of

Date of invoice – for

goods

Last date for issuing invoice - for services

Date of receipt of payment

Page 37: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Time of

Supply –

RCM –

Goods

Vishnu Daya & Co.

Earliest of the above

Date of receipt of

goods

Date of payment

30 days after the date of

invoice

Page 38: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Time of

Supply –

RCM –

Services

Vishnu Daya & Co.

Earliest of the above

Date of payment

60 days after the date of

invoice

Page 39: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Composition

Dealer

The turnover should be less than Rs.50,00,001.

It may be enhanced to Rs. 1 Crore

It is on all India based.

Applicable to the trader (1%), manufacturer (2%)

and hotelier (5%).

Service providers including works contractors

cannot for this.

Dealers cannot collect the tax

Invoice should specifically state that he is a

composite supplier

Title of the invoice is “bill of supply”.

Vishnu Daya & Co.

Page 40: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Precautions Should not purchase from composition

supplier

Should purchase when input credit is not

available

Vishnu Daya & Co.

Page 41: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

GST Impact on

Real Estate Sector

Page 42: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Current Taxing Scheme – Regular

Excise duty paid on the purchases is part of cost

VAT paid to the sub contractor who is in regular scheme is available as input credit

VAT paid to the sub contractor who is in composition scheme is available as turnoverdeduction

Any excess tax collection on account of deduction of sub contractor will be forfeited

Claim labour and other like charges either on actual basis or standard rate

On the balance turnover, tax to be computed classifying steel and non steel turnover

Pay tax on URD purchases and avail the credit

Proof of payment of tax by sub contractor is must to claim turnover deduction

Matching principle for inputs exist

Vishnu Daya & Co.

Page 43: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Current Taxing Scheme – COT

Classification of purchase into inter-state, local, import and URD

Full tax to be paid on inter-state and import purchase based on classification

Full tax to be paid on URD purchase

Deduction towards sub contractor turnover (without GP and whether under regular orcomposition scheme) is allowed

COT is paid at full rate on the “cost” of inter-state and import purchase

On the balance turnover, pay COT @ 4%.

Pay tax at applicable rate on URD purchase

Proof of payment of tax and filing of return by sub contractor is required

No deduction towards labour and other like charges and also no input

Vishnu Daya & Co.

Page 44: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Service Tax for Regular and Composition Dealer

Classification Questions like works contract or construction service

Valuation rules for actual value or deemed value

Abatement notification

Valuation of free supply material

Various items to be included and excluded

Payment of tax on advance under ST and not under VAT

Timing of payment of ST on the owner portion

Vishnu Daya & Co.

Page 45: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Difficulties in the current model of VAT and service tax

In case of COT dealer under VAT, how to pay ST on actual basis?

When a person has sub contracted everything to a COT dealer, can he pay

the ST on actual basis?

Very arbitrary valuation rule for original work (40%) and other work (70%).

Whether the decision of L & T can be applied to service tax?

Meaning of actual value adopted.

Vishnu Daya & Co.

Page 46: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

How GST will be

for the industry?

Classification as works contract orconstruction service

Both are declared as “service”

Flat rate of tax for works contract service@ 18%

Flat rate of tax @ 12% for constructionservice including the value of land

No refund of overflow of input tax incase of construction service

In case of works contract, refund ispermitted.

Page 47: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Invoicing

For collection of advances (mobilization or material

or any other type) – Raise advance receipt voucher

with the prescribed contents

For regular demand note – raise invoice on the

customer and charge applicable GST

Bifurcate the value between land and construction

Invoice should contain all the particulars stated in

the law

In case of invoice on/by contractors, raise the

invoice as per the terms of the contract

No concept called pro forma invoice

Any measurement variation – should be by way of

credit or debit note from the contractor/ supplier

Vishnu Daya & Co.

Page 48: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Consequence of

delay in invoicing

Attracts interest and penalty

If invoice prepared consequent to the visit of

the officer, the developer or recipient cannot

avail input credit on such invoice

May go for summary assessment

Other implication on delay in invoicing

Whether invoice can be deferred when tax is paid

on advance?

Vishnu Daya & Co.

Page 49: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Precautions

Check the contents of the invoice regularly

If any invoice issued for advance supply of goods, credit can be taken only

after the receipt of goods

For supply of goods- 3 sets and for supply of service- 2 sets

Misplacement of invoice, delay in accounting etc.- Counterproductive

Vishnu Daya & Co.

Page 50: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Classification of

various types of

contracts

Construction of complexes, building

Sale of residential unit by developer in aJD

Sale of residential unit by land owner ina JD

Sale of owner portion of the unit bydeveloper

Labour contract on piece rate basis

Sub contractor with material of a workscontract

Page 51: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Classification of

various types of

contracts

High sea sale of elevator to the SEZ

Annual maintenance of apartment/commercial building

Hire charges of cranes and other equipment

Supply and fixing of air conditioner

Electrical contracts

Supply and installation of lift

Site formation and sale

Road formation

Sale of UDS

Page 52: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Classification and

taxation of joint

development

agreement

Works contract Vs Construction

service?

Both are declared as service

Rate of GST for works contract @

18% with refund of excess input

credit

Rate of GST for construction @

12% including the land value without

overflow of input credit

Page 53: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Classification Under Current Law

Service Tax

Under service tax law, choice isgiven to the assessee to classifyeither construction service orworks contract service

If the land value is considered forassessable value, it is classifiedunder construction service

Excluding the land value, it wouldbe works contract service

VAT

No such concept of inclusive

of land value. VAT levies tax

only on the material

In case of JD, Commissioner

Circular No 9/2009 dated…

demands tax on the full value.

Page 54: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Going

forward

Whether construction service is a specific

entry for the sale of building or apartment

with land?

Since land is specifically mentioned as non

taxable item under GST, whether land value

can be considered for valuation purposes?

Whether works contract is directly related to

the transfer of property resulting into

immovable, based on the concept of GST,

whether WC is the right classification?

Vishnu Daya & Co.

Page 55: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Our View

It is possible to split the value towards land and building

When the construction is not commenced but advancesare taken towards land, it cannot be billed with 12% GST.When various other authorities demand invoice anddocument like bank for the purpose of loan, the invoiceor receipt should clearly mention it as land and notconstruction service

Since GST is on the goods and service and not on theland, in our view, it is still possible to classify the activityas works contract and charge GST @ 18% and claimrefund

Refer the matter to the advance ruling

Wait for the clarification

Also challenge the clarification as well as advance rulingif negative before the high court. Until then pay the taxunder protest

Vishnu Daya & Co.

Page 56: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Questions in JD Whether signing JD agreement involves

supply of service by the developer to the

land owner?

What is the current legal provisions?

Whether agreeing to construct is a

consideration?

Definition of consideration- does not

require consideration in money

Vishnu Daya & Co.

Page 57: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Taxation of Joint

Development

Agreement

On signing the contract, developer may have topay GST on the market value of theconstruction to land owner

Raise invoice on land owner and collect GST

Land owner may not be able to take creditimmediately as the service is not provided

The land owner will not be able to utilize thecredit immediately.

The developer will have to deposit the entireGST collected to the Govt due to NIL inputcredit

In the hands of developer, input credit willaccumulate and the same will not be allowed asrefund. Exception: Rate difference

Solution????

Vishnu Daya & Co.

Page 58: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Definition of business

Any trade, commerce, manufacture, profession, vocation, adventure,wager or any other similar activity whether or not for a pecuniarybenefit;

Any transaction or activity in connection with or incidental orancillary to above;

One time activity of the nature specified above

Supply or acquisition of goods including capital goods andservice in connection with commencement or closure ofbusiness

Provision by a club, association, society or any such body (for asubscription or any other consideration) of the facilities or benefits toits members;

Vishnu Daya & Co.

Page 59: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Business- definition

Admission for a consideration of persons to any premises

Services supplied by a person as the holder of any office which

has been accepted by him in the course or furtherance of his

trade, profession or vocation

Services provided by a race club by way of totalisator or a

license to book maker in such club; and

Any activity or transaction undertaken by the Central/ State

govt, local authority in which they are engaged as public

authorities

Vishnu Daya & Co.

Page 60: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Issues in the definition of business

Conversion of personal asset into business asset?

Introduction of capital asset by an individual to a firm

Amount payable by a person towards goodwill of a firm.

Vishnu Daya & Co.

Page 61: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Issues

Land owner may have to register under GST to sell his portion

of area

Though it may be a one time event, still it will fall within the

meaning of business

If landowner sells only one unit and retains rest of the units, it

will be a business

The decision of L & T- as an immovable property???

Vishnu Daya & Co.

Page 62: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Construction on

the own land

Classification – construction service or

works contract service will continue

If no amount is collected from

prospective customers until OC or

completion certificate, it will not be liable

for GST under any head

In the above case, input credit will not be

available

URD tax may have to be paid on goods

and services

Page 63: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Construction

as contractor

– Questions

Mobilization advance

Classification

Retention amount

Deductions

Penalties

Billing cycle

Input credit on supplies

RCM on URD and others

Vishnu Daya & Co.

Page 64: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Discussion on

Questions –

Mobilization

Advance

No difference between material advance

or mobilization advance

GST has to be paid immediately and

point of taxation is the date of receipt

Raise receipt voucher

Since it is a continuous supply service,

invoice can be raised on the recipient

Recipient can avail the credit

Vishnu Daya & Co.

Page 65: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Meaning of continuous supply of service

A supply of services which is provided or agreed to be provided

continuously or on recurrent basis, under a contract, for a

period exceeding 3 months with a periodic payment obligations

and includes supply of such services as the Govt. may subject to

such conditions, as it may, by notifications specify

Vishnu Daya & Co.

Page 66: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Examples and relevance of Continuous supply of service

Example

Works contract services

Retainer services

Consultancy services

Renting of commercial

properties

Relevance

For the purpose of raising

invoice

Follow the provision given

in Section 31(5) to raise

invoice

If due date for invoice is

not ascertainable, then

invoice should be raised for

the payment received.Vishnu Daya & Co.

Page 67: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Classification Composite supply Vs. Works contract

As long as the final structure is animmovable property, it will be a workscontract

If the same is part of the immovableproperty but removable withoutdamaging the structure, it may be acomposite supply. Eg. Supply andinstallation of sink or water taps,electrical fittings, etc.

Vishnu Daya & Co.

Page 68: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Retention

amount

Section 16 states that input credit will be available tothe recipient only if the “full” payment is made to thesupplier within “180” days of the invoice.

How to achieve this in case of retention amount?

Collect BG for the retention amount. Hence to encasha bank guarantee for the product defects, there mustbe a strong and clear agreement

Pay full amount and receive back the retention amount

Whether a clause can be inserted in the agreement thatretention portion of the work can be billed only afterthe defect liability period of … years?

Whether the contractors can be advised to bill net ofretention amount to avoid the confusions?

Whether encashment of BG or writing off theretention amount is liable for GST?

Vishnu Daya & Co.

Page 69: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Deductions from

the bill

Various amounts will be deducted such asdifference in measurement, quality issue, nontendered items, etc.

Any deduction from the invoice should by wayof “credit note” from the contractor to theprincipal or to main contractor. Similarly in caseof deduction from the purchase bill, thesuppliers have to issue credit note.

Credit note should contain the invoice referenceand all other particulars required by the law

The receiver of the credit note should reversethe input credit to allow the deduction ofoutput tax to the contractor

When the final customer is a factory whocannot take input credit, how system will crossverify the reversal of input credit?

Vishnu Daya & Co.

Page 70: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Penalties If any amount is deducted on account of

penalty, it may be treated as income in

the hands of recipient

Department may dispute the input credit

on the penalties

There is no inclusive tax concept under

GST. Tax has to be shown separately in

the invoice to get the benefit of tax

deduction

Vishnu Daya & Co.

Page 71: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Billing cycle

If the contract period is more than 90 days, itwill be treated as continuous supply of service.

There must be periodic payment cycle in thecontract based on performance.

As per the time of supply provisions, invoicehas to be raised based on amount received orterms of the contract whichever is earlier

There is no concept of proforma invoice

Invoice should contain all the particulars givenin Section 31

Two copies of invoice should be raised- one forthe buyer and another copy for own use

If there is delay in billing for whatever thereason and if department makes you to raiseinvoice, credit thereon will not be available tothe recipient

Vishnu Daya & Co.

Page 72: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Input credit on

supplies

Contractor will be eligible for the input credit on all

inputs, input services and capital goods

List of inputs and services not eligible are as under:

1. Motor vehicles except when used for transport of goods

2. Goods/ Services used for foods and beverages, outdoorcatering, beauty treatment, health services, cosmetics andplastic surgery, membership of a club, health and fitness;

3. Life insurance, rent-a-cab, health insurance except whereGovt. notifies the service as obligatory under any law;

4. Travel benefits extended to employees on vacation;

5. Goods/ Services used in the execution of works contractservices for construction of immovable property (excludingplant and machinery) – construction includes renovation,additions, repair, etc. to the extent capitalised;

6. Goods on which tax is paid under composition

7. Goods or services used for private consumption

Vishnu Daya & Co.

Page 73: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Conditions to avail the credit

Vishnu Daya & Co.

Supplier to make payment

to vendor within 180

days from the invoice date

Credit allowed to Supplier

Vendor has paid the tax and filed

the return within due date

Vendor has uploaded the

correct Supply details in website

Tax invoice is available –

invoice should contain all

information required

Goods/ Services received

Page 74: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

How to utilize

credits?

INPUT

TAX

CREDIT TO BE UTILISED AGAINST

CGST SGST IGST

CGST a – 1ST Preference r a – 2ND Preference

SGST r a – 1ST Preference a – 2ND Preference

IGST a – 2ND Preference a – 3RD Preference a – 1ST Preference

Page 75: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Returns Due Date

Vishnu Daya & Co

• GSTR 1

• Outward supplies

10th of the following month

• GSTR 2

• Inward Supplies

15th of the following month • GSTR 3

• Consolidated return and payment of tax

20th of the following month

• GSTR 9

• Annual Return

31st December of the following Year

No changes can be made to the

returns after September of the

following year or after furnishing the

annual return, whichever is earlier

Page 76: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Questions Non filing of return by the supplier

Non uploading by the supplier

Goods supplied, advance paid butinvoice not received. Supplier pays thetax on advance basis

Rejection of material as such

Return of material after making inward

Details of non payment within 180 daysfrom the bill date to be reported inGSTR-2

Vishnu Daya & Co.

Page 77: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

RCM and URD

Central Government will notify the list ofgoods and services liable for RCM withinthe State

Central Government will notify the list ofgoods and services liable for RCM whenprocured from outside the State

There will be separate list of goods andservices (notified goods and services) forRCM

Any goods or services purchased fromURD will be liable for GST

Page 78: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Questions in

URD

Classification and rate of tax

Preparation of tax invoice for the URD

Payment by cash and credit cannot be

utilised

Precautions:

Do not purchase the “manufactured

goods” from URD as it will enhance the

cost

Vishnu Daya & Co.

Page 79: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Supply of

manpower

It is not a works contract

Giving work on piece rate is not a works contract

Free supply material for the contractor- generally

is not a works contract. However at times, it may

be a works contract. Will be discussed separately

Manpower supply either to the construction

service or to the works contract service will be

taxed @ 18%.

Concept of Reverse charge mechanism has been

removed

Page 80: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Valuation

Construction service to be valued with land

Looks to be optional one. However needs a

clarification

Works contract service – only the

construction activity would be taxed.

There is no bifurcation of steel and non steel

items

No deduction towards labour and other like

charges

Vishnu Daya & Co.

Page 81: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Valuation

No deduction towards sub contractor

turnover

No composition scheme.

Decision of L & T will not hold good. It is

applicable only when the works contract is a

composite supply. Since it is declared as

service, decision will not hold good

Raise invoice to the value as per the terms of

the contract

Vishnu Daya & Co.

Page 82: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Valuation –

free issue

material

Decision of SC in the case of N M Goel will

hold good.

If the contract is inclusive of FOC material,

it will have to be taxed in the hands of

supplier as well as contractor.

No need to add any profit

Contract should be clearly drafted. If

required, an addendum to be made as and

when situation warrants

Vishnu Daya & Co.

Page 83: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Questions Free issue of water, electricity and

security services

Free issue of design to the various sub

contractors

Free service of common architect of

builder or developer

Free use of some capital goods

Free use of land for staying the

construction workers etc.

Vishnu Daya & Co.

Page 84: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Revenue sharing

Vs Area sharing

Area sharing will have lot of Questions

such as timing of payment of GST,

availability of credit to the land owner,

valuation, overflow of credit in the hands

of developer at the time of closure of the

project, registration of the owner under

GST, non applicability of L & T decision

etc.

Solution: Revenue sharing??

Page 85: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

How the revenue

sharing scheme

works?

The land owner and developer will enter

into an agreement to share the revenue

generated out of the built up area

The payment from the buyer can either

go to the bank account of developer or

to the account of the owner directly,

depending upon the understanding and

agreement

Vishnu Daya & Co.

Page 86: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

How RS will

resolve the issue

of JD

GST is not payable at the time of agreeingfor the revenue

Owner will be introducing the land ascapital

Builder will introduce his manpower andcapital

The entire project development will behanded over to developer so that entireproject will suffer GST

AOP can sell the units under constructionservice or under works contract service

Vishnu Daya & Co.

Page 87: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Possible

Questions

Revenue sharing arrangement may bea different person and hence it mayrequire registration

The parties may not agree to formpartnership or LLP.

If the same is a special purposevehicle like AOP, the member and theAOP will be different. There could bestamp duty for the transfer of land,which the parties may not like

Vishnu Daya & Co.

Page 88: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Definition of person

Includes an individual,

HUF,

a company,

a firm,

a LLP,

an AOP or a BOI, whether incorporated or not, in India or outside India,

any corporation established by or under any Central Act or Provincial Act or a

Government Company as defined in Section 2(45) of the Companies Act,

any body corporate incorporated by or under the laws of a country outside

India,

Vishnu Daya & Co.

Page 89: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Meaning of person

a co-operative society registered under the law relating to co-

operative societies,

local authority,

Central or a State Govt, society, trust and every artificial judicial

person not falling within any of the above

Vishnu Daya & Co.

Page 90: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Possible

Questions

Unsold inventory??

Owner may be interested to retain

certain units after the completion.

It is a new concept. Industry, advocates

and auditors have to understand the full

consequences

Vishnu Daya & Co.

Page 91: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Outsourcing Entire

Activity to

Contractor

The decision of SC in L & T may not hold

good due to the declaration of works

contract and construction service as

declared service

The main contractor may have to register

and pay tax and avail input credit on the

sub contractor turnover

Even the owner may have to register under

GST

Page 92: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Input Credit for a contractor when classified under works contractor

Works contractor is eligible for input credit on all inputs and

input services.

Restricted goods and services as discussed earlier

Majority of the inputs will be liable for 28% and few ill be liable

for 18% or 5%.

If the input credit is more than output tax, refund is permitted

Vishnu Daya & Co.

Page 93: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Questions Input credit relate to the sale of land

may be proportionately disallowed

Timing of payment of GST on the land

owner share

Valuation of the land owner share

Any input service credit directly relate to

the acquisition of land like brokerage

paid, land clearance document etc., may

not be available

Vishnu Daya & Co.

Page 94: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Input Service for a Developer when classified under construction service

Like works contract, credit of all services will be available

Since GST is payable including on the land, the rate of GST is 12%

As per rate of tax announced, there will not be refund of overflow of input tax

The overflow of credit can be adjusted to other products

It is not advisable to classify works contract as construction service based on

project to project

Vishnu Daya & Co.

Page 95: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

When construction

classification can

be opted

When litigation free situation demands

When land value is very low

When the cost of overflow of input is

already built in the project cost

Number of projects are on hand

Page 96: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Abatement Method –

Current Structure

- Service Tax paid under

Notification No. 26/2012

- VAT paid under COT

- No need to segregate the value

for land and construction in the

agreement

Vishnu Daya & Co

ParticularsAmount

Service

Tax Rate

ST

Amount

VAT

Rate

VAT

Amount

Base Value

Sale Price 19,19,400 - -

UDS 1,91,400 - -

Construction 17,28,000 4.50% 86,373 4.00% 69,120

Other Charges - -

Water & Electricity

Charges 72,000 4.50% 3,240 4.00% 2,880

Maintenance Fund 43,200 15.00% 6,480 0.00% -

legal Charges 30,000 15.00% 4,500 0.00% -

PLC / Floor rise 36,000 4.50% 1,620 4.00% 1,440

Club Membership 1,00,000 15.00% 15,000 0.00% -

Car Park 1,50,000 4.50% 6,750 4.00% 6,000

Total Cost 23,50,600 1,23,963 79,440

Service Tax 1,23,963

VAT 79,440

Total Unit Amount 25,54,003

Tax payable 2,03,403

Page 97: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Impact on Output

Tax – 12% Rate

- Tax payable under computedunder construction services

- Under this category, value ofland should be included in thegross value

- Rate of tax is 12%

- Wherever agreement enteredunder the current regime underabatement scheme has to followthis method only.

- Excess input credit anythingremains after payment ofoutput tax will lapse

Vishnu Daya & Co

Particulars

Tax

RatesTax Value Amount

Base Value

Sale Price - 19,19,400

UDS - -

Construction 12.00% 2,30,328 19,19,400

Other Charges -

Water & Electricity Charges 18.00% 12,960 72,000

Maintenance Fund 18.00% 7,776 43,200

legal Charges 18.00% 5,400 30,000

PLC / Floor rise 18.00% 6,480 36,000

Club Membership 18.00% 18,000 1,00,000

Car Park 18.00% 27,000 1,50,000

Total Cost 3,07,944 23,50,600

GST 3,07,944

Total Unit Amount 26,58,544

Tax payable 3,07,944

Less: Input 2,32,161

Net Tax payable 75,783

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Input Tax Credit – Current

Regime

Particulars Tax NatureTax

RateAmount Amount

Assessable

Value

Materials-Non-

steel ED + VAT 28.81 1,54,894 6,92,488 5,37,594

Steel ED + VAT 18.13 21,917 1,42,836 1,20,919

Sand & Jelly VAT 18.69 2,017 12,812 10,795

Labour charges Service Tax 15.00 50,601 3,37,338 3,37,338

Office expenses

Admin Charges Service Tax 15.00 13,500 90,000 90,000

Salary NIL - - 90,000 90,000

Finance Cost NIL - - 1,20,000 1,20,000

Selling Cost Service Tax 15.00 24,681 1,64,542 1,64,542

Total 2,67,610 16,50,017 14,71,189

- All purchases are

presumed to be local

- In case of COT – no

VAT input available

- No sub-contract

Vishnu Daya & Co

Page 99: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Regular Method – Current

StructureParticulars

AmountService

Tax Rate

ST

Amount

VAT

Rate

VAT

Amount

Base Value

Sale Price 19,19,400 - -

UDS 1,91,400 - -

Construction 17,28,000 6.00% 1,03,680 10.15% 1,75,392

Other Charges - -

Water & Electricity

Charges 72,000 6.00% 4,320 10.15% 7,308

Maintenance Fund 43,200 15.00% 6,480 0.00% -

legal Charges 30,000 15.00% 4,500 0.00% -

PLC / Floor rise 36,000 6.00% 2,160 10.15% 3,654

Club Membership 1,00,000 15.00% 15,000 0.00% -

Car Park 1,50,000 6.00% 9,000 10.15% 15,225

Total Cost 23,50,600 1,45,140 2,01,579

Service Tax 1,45,140

VAT 2,01,579

Total Unit Amount 26,97,319

Tax payable 3,46,719

Less: Input 1,85,296

Net Tax payable 1,61,423 Vishnu Daya & Co

Page 100: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Impact on Output Tax

– 18%

Particulars Tax Rates Tax Value Amount

Base Value

Sale Price - 19,19,400

UDS - 1,91,400

Construction 18.00% 3,11,040 17,28,000

Other Charges -

Water & Electricity Charges 18.00% 12,960 72,000

Maintenance Fund 18.00% 7,776 43,200

legal Charges 18.00% 5,400 30,000

PLC / Floor rise 18.00% 6,480 36,000

Club Membership 18.00% 18,000 1,00,000

Car Park 18.00% 27,000 1,50,000

Total Cost 3,88,656 23,50,600

GST 3,88,656

Total Unit Amount 27,39,256

Tax payable 3,88,656

Less: Input 2,32,161

Net Tax payable 1,56,495

- Tax payable undercomputed under workscontract services

- Under this category, valueof land should be excludedfrom the gross value. Thereshould be a properdocumentary evidence tosubstantiate the same.

- Rate of tax is 18% on theconstruction amount

- The tax payable is more byINR 1,06,584/- comparedto method I

Vishnu Daya & Co

Page 101: GST on Real Estates and - S-CME · Services in relation to Immovable property, boat or vessel including ancillary services Location of the immovable property or boat or vessel Transportation

Input Tax Credit –

GST ParticularsTax

RateAmount Amount

Effective

Cost

Cement, Ceramics, Bricks

etc 28% 15,283 54,583 54,583

Steel & others 18% 1,10,219 6,12,330 6,12,330

Sand & Jelly 5% 120 2,396 2,396

Labour charges 18% 60,721 3,37,338 3,37,338

Office Exp:

Admin Charges 18% 16,200 90,000 90,000

Salary - - 90,000 90,000

Finance Cost - - 1,20,000 1,20,000

Selling Cost 18% 29,618 1,64,542 1,64,542

Total 2,32,161 14,71,188 14,71,188

- Majority of the

construction materials are

grouped under 28% bracket

- Services are majorly

grouped under 18% bracket

- However, there is additional

cost benefit since excise

duty component and CST

component would be

available as credit

Vishnu Daya & Co

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Comparison with Current

to GST Particulars Current GST Impact

Gross Tax Payable 2,03,403 2,82,072 -78,669

Total Taxes paid on purchases 2,67,610 2,32,161 35,449

Input Credit Taken 88,782 2,32,161 1,43,379

Net Tax Payable 1,14,621 49,911 64,710

Total Tax Cost to customer 3,82,231 2,82,072 1,00,159

- On the customer collection point ofview, there is an increase in the tax to becollected.

- On the procurement side, there is anincrease in the input availability as well.

- If construction service method followed,then there would be positive impact.

- If works contract entry followed, therewould be negative impact.

- The comparison is made in respect ofthe units which would be sold entirelyafter GST. In case of partially sold units,impact would be changed dependingupon the completion and procurementstatus

Vishnu Daya & Co

12% under GST

Particulars Current GST Impact

Gross Tax Payable 3,46,719 3,88,656 -41,937

Total Taxes paid on purchases 2,67,610 2,32,161 35,449

Input Credit Taken 1,85,296 2,32,161 1,43,379

Net Tax Payable 1,61,423 1,56,495 4,928

Total Tax Cost to customer 4,29,033 3,88,656 40,377

18% under GST

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Advance paid Vs

Advance received

The supplier will be liable to GST on advance paid

irrespective of it’s purpose

Though the supplier can raise invoice for the advance paid,

credit thereon can be availed only after the receipt of

material. Hence it is cumbersome to have clear accounting

of such invoice

Vendor has to issue advance receipt voucher

If any advance is collected, tax thereon has to be paid

immediately

An advance receipt voucher to be prepared with prescribed

contents

If advance is refunded, advance refund voucher to be

prepared with prescribed contents

In case the advance is refunded, tax paid thereon has tobe claimed refund only.

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Purchase return

Vishnu Daya & Co

• Raise sales invoice and charge GSTPurchase return of materials purchased before the GST on which either VAT or

excise or both transition credit was availed

• Vendor (supplier) has to raise credit note with invoice reference and date. The credit note has to be accounted and input credit should be reversed

Purchase return of material purchased after the GST but returned within 6

months to 18 months from the date of purchase

• Raise supply invoice on the vendor.Purchase return beyond the above period

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Job work

Job work – definition:

any treatment or process undertaken by a

person on goods belonging to another

registered person and the expression “job

worker” shall be construed accordingly

Section 143 requires to follow the procedure

of obtaining the permission of

commissioner to send the goods for job

work

If procedure is not followed, GST may have

to be charged

Vishnu Daya & Co

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Questions – If

procedure is not

followed

How to send same for job worker who is

URD?

Whether self e way bill can be used to

bring the material from URD job worker

to location?

Records to be maintained to send and

receive material from job worker

Vishnu Daya & Co

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Switching over

from one

apartment to

another

It will be treated as return of supply which

is equal to sales return

If it happens within September of

previous year, it can be allowed as sales

deduction

If it happens after September of the

previous year, any tax paid in the previous

will not be allowed as tax adjustment

Credit note for the sales return should be

given

Vishnu Daya & Co

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Questions Loss of GST paid

Should be reported as sales return inGST

New apartment booked should bereported as sales

GST may have to be paid on the newbooking

Any amount recovered for switchingover will be taxed as new stream ofservice

Vishnu Daya & Co

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Cancellation of

apartment

Similar to switch over

Cancellation within September andbeyond September

If it happens within the permitted timelimit, GST adjustment can be made

If it happens beyond the permitted timelimit, there will be GST loss

When sold to others, it will not be animmovable property

When sold to others, tax paid earlier willnot be allowed as deduction

Vishnu Daya & Co

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Sale by individual

to third party and

consenting party

by developer

In this case, the developer or owner

will only change the name of the

new buyer

The developer will get some

amount for agreeing such

arrangement

Vishnu Daya & Co

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How it will impact

in GST

Since the original agreement itself

will give the liberty to register either

in the name of the party or any other

family members or others, it will not

have any impact

If any amount is charged for

consenting the deal, it will be liable

for GST in the hands of developer

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Buy back

Works contract and construction services

have been declared as services

Any buyback of the works contract would be

held as “URD purchase” and hence it will be

liable for GST in the hands of buyer

In case of buy back, tax will suffer twice

Vishnu Daya & Co

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Inter-state works

contract

Place of business

Location of the provider /

supplier of service

Location of the receiver

Place of supply in respect of

works contract or construction

service

Vishnu Daya & Co

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Place of

Business

“fixed establishment” means a place (other thanthe registered place of business) which ischaracterised by a sufficient degree ofpermanence and suitable structure in terms ofhuman and technical resources to supplyservices, or to receive and use services for itsown needs;

“place of business” includes ––

a place from where the business is ordinarily carriedon, and includes a warehouse, a godown or any otherplace where a taxable person stores his goods,supplies or receives goods or services or both; or

a place where a taxable person maintains his books ofaccount; or

a place where a taxable person is engaged in businessthrough an agent, by whatever name called;

Vishnu Daya & Co

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Location of

the Supplier

of Service

Where a supply is made from a place of businessfor which the registration has been obtained, thelocation of such place of business;

Where a supply is made from a place other thanthe place of business for which registration hasbeen obtained (a fixed establishment elsewhere),the location of such fixed establishment;

Where a supply is made from more than oneestablishment, whether the place of business orfixed establishment, the location of theestablishment most directly concerned with theprovisions of the supply; and

In absence of such places, the location of theusual place of residence of the supplier;

Vishnu Daya & Co

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Location of

the receiver

of service

Where a supply is received at a place of business forwhich the registration has been obtained, thelocation of such place of business;

Where a supply is received at a place other than theplace of business for which registration has beenobtained (a fixed establishment elsewhere), thelocation of such fixed establishment;

Where a supply is received at more than oneestablishment, whether the place of business orfixed establishment, the location of theestablishment most directly concerned with thereceipt of the supply; and

In absence of such places, the location of the usualplace of residence of the recipient;

Vishnu Daya & Co

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Place of

supply in case

of works

contract

Service directly in relation to an immovable property, including

services provided by architects, interior decorators, surveyors,

engineers and related experts or estate agents, any service provided by

way of grant of rights to use immovable property or for carrying out

or co-ordination of construction work;

Any services ancillary to the services referred above

Location at which the immovable property is located or intended to

be located.

If the location of the immovable property is located or intended to be

located outside India, the place of supply shall be the location of the

recipient

Where the immovable property is located in more than one State or

Union territory, the supply of services shall be treated as made in each

of the respective States or Union territories, in proportion to the value

for services separately collected or determined in terms of the contract

or agreement entered into in this regard or, in the absence of such

contract or agreement, on such other basis as may be prescribed.

Vishnu Daya & Co

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Whether

registration is

required for inter-

state works

contract

If materials and services are sourced

from outside the state, it may not require

registration in the particular state.

If materials and services are sourced

locally and registration is not obtained,

that part of the credit will not be

available. Since location of supplier and

place of supply in the same state,

suppliers will charge CGST/ SGST

Vishnu Daya & Co

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Other issues If recipient state requires the inward

way bill, then it is required to register

Movement of the goods from the site

office would be difficult

State authorities will claim that site office

is place of business as in that place

materials and services will be received

Movement of scrap or sale of scrap etc.,

would be difficult

Vishnu Daya & Co

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High Sea Sale

High sea sale will be a taxable supply. Only IGSTwill be charged

If the buyer is a SEZ unit, tax need not becharged

Issues:

The department may dispute the value

Whenever the supply is made as high sea sale, itshould be removed from the scope of workscontract or composite supply

If a same person is given with two POS – high seasale and installation, then the rate of tax forinstallation will be equal to rate of tax applicablefor goods

Vishnu Daya & Co

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Construction to

EOU, STPI and

SEZ

No exemption to EOU and STPI

Construction to SEZ is zero rated supplyand hence not taxable

On procurement and sub contracts, taxwill have to be paid

There may be exemption to subcontractors when the main contractor isexempt from GST.

If input accumulates on account ofconstruction to SEZ, refund can beclaimed

Vishnu Daya & Co

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Government

Projects, Low

Cost Housing

and Single House

Government has withdrawn the exemption

to low cost housing and single house

If a labour contractor provides the pure

labour service for the construction of

individual house, he is not liable for CGST.

We have to see exemption under SGST

separately

Vishnu Daya & Co

Issues:

Project under construction. WIP may be taxed under GST

Tax clause with the Government or authorities

Precautions:

Raise the invoice to the extent of work completed before the

commencement of GST

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Transition credits

Currently under COT under VAT

Currently under regular under VAT

Currently wholly sub contracted

Currently partly sub contracted

Service tax under abatement scheme (say

30%)

Service tax under actual scheme

Service tax under 40% scheme

Service tax under 70% scheme

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Types of

transition

credits-

desired

Excise duty paid on materials in the form of stock and WIP

Excise

VAT on the materials in the form of stock on hand and WIP

VAT

Credit taken and available as balance in the service tax and VAT returns

Credit

Vishnu Daya & Co

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What is the

provision for

works

contractors?

Works contractors paying the service tax

under notification number 26/2012

(30% on total value including land) alone

made eligible for transition credit

WIP is not covered and hence even

though WIP is service, it is not eligible

for transition credit

Separate legal provision has to be

provided for transition credit of SGST

part

Vishnu Daya & Co

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Who will not get

transition credit?

Works contractors under 40% or 70% or

actual scheme.

Works contractors undertaking exempted

project

Vishnu Daya & Co

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What is the way out?

Invoice

Invoice the WIP as per the current law

Steel

If you are purchasing the materials like cement, steel etc., source the same with excise invoice

Change

Change the sub contractors into regular dealer and avail input credit

Register

Register under central excise as dealer in the second week of June

File

File the dealer return and final return under existing VAT and service tax law

File

File the transition form within 30 days

COT

If you have sub contracted the work to a COT dealer, advise him to defer the invoice to GST regime

Vishnu Daya & Co

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Transition issue Where service tax paid on the advances

received but Vat portion is not paid.

How to pay the GST?

Huge unsold inventory and currently

entire project is sub contracted to a COT

dealer

Vishnu Daya & Co

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Tax Invoice

a) Name, address and GSTIN of the supplier;

b) A consecutive serial number, in one or multiple series, containing alphabets or numerals orspecial characters hyphen or dash and slash symbolised as “-” and “/” respectively, and anycombination thereof, unique for a financial year;

c) Date of its issue;

d) Name, address and GSTIN or UIN, if registered, of the recipient;

e) Name and address of the recipient and the address of delivery, along with the name of Stateand its code, if such recipient is un-registered and where the value of taxable supply is fiftythousand rupees or more;

f) HSN code of goods or Accounting Code of services;

g) Description of goods or services;

h) Quantity in case of goods and unit or Unique Quantity Code thereof;

i) Total value of supply of goods or services or both;

j) Taxable value of supply of goods or services or both taking into account discount orabatement, if any;

k) Rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);

l) Amount of tax charged in respect of taxable goods or services (central tax, State tax,integrated tax, Union territory tax or cess);

m) Place of supply along with the name of State, in case of a supply in the course of inter-Statetrade or commerce;

n) Address of delivery where the same is different from the place of supply;

o) Whether the tax is payable on reverse charge basis; and

p) Signature or digital signature of the supplier or his authorized representative

Vishnu Daya & Co

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Receipt

Voucher

a) name, address and GSTIN of the supplier;

b) a consecutive serial number not exceeding sixteen characters, in one or multiple

series, containing alphabets or numerals or special characters -hyphen or dash

and slash symbolised as “-” and “/”respectively, and any combination thereof,

unique for a financial year

c) date of its issue;

d) name, address and GSTIN or UIN, if registered, of the recipient;

e) description of goods or services;

f) amount of advance taken;

g) rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);

h) amount of tax charged in respect of taxable goods or services (central tax,

State tax, integrated tax, Union territory tax or cess);

i) place of supply along with the name of State and its code, in case of a supply

in the course of inter-State trade or commerce;

j) whether the tax is payable on reverse charge basis; and

k) signature or digital signature of the supplier or his authorized representative:

Vishnu Daya & Co

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Debit Note

and Credit

Note

a) the word “Revised Invoice”, wherever applicable, indicated prominently;

b) name, address and GSTIN of the supplier;

c) nature of the document;

d) a consecutive serial number not exceeding sixteen characters, in one or multiple

series, containing alphabets or numerals or special characters -hyphen or dash

and slash symbolised as “-” and “/”respectively,, and any combination thereof,

unique for a financial year; (e) date of issue of the document;

e) name, address and GSTIN or UIN, if registered, of the recipient;

f) name and address of the recipient and the address of delivery, along with the

name of State and its code, if such recipient is un-registered;

g) serial number and date of the corresponding tax invoice or, as the case may be,

bill of supply;

h) value of taxable supply of goods or services, rate of tax and the amount of the

tax credited or, as the case may be, debited to the recipient; and

i) signature or digital signature of the supplier or his authorized representative:

Vishnu Daya & Co

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E-Way Bill

Mandatory for movement of goods if valueexceeds INR 50,000/-

Can be generated by supplier or transporter

Generate the e-way bill for all inwardsupplies from an unregistered person

Valid for 1, 3, 5, 10 or 15 days from the dateof generation depending upon the distancethe goods have to be transported

Cancellation within 24 hours

In case of multiple consignments –transporter to generate E-Way Bill

Vishnu Daya & Co

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Vishnu Daya & Co.

VISHNU DAYA & CO.CHARTERED ACCOUNTANTS

CA Dayananda K

98450 25682

[email protected]

CA Vinayaka Hegde

99025 86492

[email protected]

Bangalore:

GF 7 & 3rd Floor, Karuna Complex, No. 337,

Sampige Road, Malleswaram, Bangalore-560003

Phone: +91-80-23312779

+91-80-23560633

Chennai:

1-C, 'Queens Court' 6/102, Monteieth Road,

Egmore, Chennai - 600 008

Phone: +91-044-28554447

Pune:

B-1 603, Kumar Prime Rose,

Near Eon IT Park,

Kharadi, Pune-411014