• Will ITC be refunded if it cannot be collected from end user?

I am a developer, have joint agreement with land owner in ratio of 50%-50%, he owns 2 flats and i own two. Flats are built and completed and i paid GST to contractor, i have ITC credit but i cant collect GST on selling of flats as they are completed, will Govt. refund me the ITC ?
If Govt. doesnt refund, do i need to add to my cost the ITC amount which i paid ?
also what are the tax implications on my part and also from the land owner ?
Asked 5 years ago in GST

Hi,

When a developer enters into a development agreement with a Landowner, GST would become payable by the Landowner when the developer transfers possession or the rights in the constructed complex, building or civil structure, to the Landowner by entering into a conveyance deed or allotment letter.

Hence, when the Landowner receives a constructed property from the Developer in exchange for providing land, the Landowner would become liable for payment of GST. The GST rate applicable on such a transaction would be 18%.

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Hi,

Firstly, please let us know if you have only this project or there are some other projects also wherein you are selling under construction properties as well. If you have other GST liabilities, then you can offset your GST input with that liability.

GST Implication on Developer:

You will have to charge GST to landowner @ 18% for the construction services provided by you. You can utilize your GST credit while paying this GST to the government.

GST Implication on Landowner:

If landowner is selling flats post completion, then he need not charge GST to buyers.

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

However, It is a joint agreement. You are liable to charge 18% GST for the construction services.

You can claim GST credit while paying to the government.

Land owner is not lible to charge GST on subsequent sale provided completion certificate has received.

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Refund of ITC will be given only in 2 case

1. Export of goods or services or both

2. inverted duty structure (except Exempted supply)

in your case you had sold flats after completion it treated as exempted supply and hence you will not received refund of GST

in case of any excess itc not refundable and not adjusted against payment of gst will be your cost and hence you have to added it into your cost

sales proceed of 4 flat your your sales / turnover and your can claim all your expenses against it

it treated as normal business income

Bhadresh S Mevada
CA, Surat
49 Answers

Not rated

Dear Sir,

You will have to charge GST @ 18% to landowner owner for construction services provided by you.

You can use ITC credit if you have gst liabilities for other projects.

Landowner is not liable to charge GST on subsequent sale post receipt completion certificate.

Warm Regards,

Karishma Chhajer

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

5.0 on 5.0

If the occupation certificate have been received then sale of Fat is neither supply of goods nor service hence GST is not applicable on sale of Flats and ITC is also not available for the same.

ITC is not available if GST is not applicable at the time of Sale so refund is not available for ITC and it will be added to the cost of Flat.

With Respect to GST Act neither you nor land owner required to pay GST on Sale of Flat.

Narendra Sonagra
CA, Ahmedabad
57 Answers

Not rated

Hi,

If you have other projects where there is GST liability, you can offset your GST input with that.

GST to landowner should be charged @ 18% for the construction services provided by you.

There will be no GST to buyers if it is sold after construction.

Regards,

Nikhil.

Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

As per GST if building is sale out after completion then no gst apply in you case you entered sale agreement with end user after completion hence no GST can be charged. So whatever GST you paid to contractor is part of your costing so act accordingly. There is no provision of refund of ITC in such cases.

Nitin Jain
CA, Jaipur
214 Answers

4.7 on 5.0

Hi,

Suppose there were 4 flats out of which 2 flats are yours and 2 are landowner's.

You will charge GST to landowner for construction of 2 flats. With respect to your 2 flats, you will charge GST to buyer only if you sell the house before construction. If you sale 2 flats post construction, then GST will not be charged.

I hope above example clear your doubts.

Please feel free to call/ revert in case you need more clarity

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

1.Suppose the construction is not over then the GST to be collected from the prospective buyer for all flats.

2. No, The landowner will not be responsible for under construction property.

However, he will be responsible for gst on transfer for development right.

3.It is not 2 time . One for development right and second for construction services.

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

1. If the construction is not over then the GST has to be collected for all flats.

2. No, the landowner will not be responsible for under construction property.

3. No.

Regards,

Nikhil.

Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

Dear Sir,

If the flats are under-construction you can collect GST on the landowner share of the flats and claim the set-off of ITC paid to contractor. How can you collect the GST on your share? Why landowner will pay GST of your share?. If the flats are completed then you have to add ITC in your cost. I think there is no provision of refund of ITC to developers for overflow of ITC.

Thanks

Vivek Kumar Arora
CA, Delhi
4825 Answers
1031 Consultations

5.0 on 5.0

1. If the construction is not over then GST should be collected from prospective buyer.

2. No. he/land owner is not responsible.

3. No. It is not two times.

Warm Regards,

Karishma Chhajer

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

5.0 on 5.0

YES, IF THE COMPLETION CERTIFICATE IS NOT RECEIVED THEN THE DEVELOPER CAN COLLECT THE GST FROM ALL FLATS PROSPECTIVE BUYER AND LAND LORD BORTH

YES, GST WILL BE PAID BORTH TIME

AS PER THE NOTIFICATION NO 04/2018 CENTRAL TAX (RATE)

Bhadresh S Mevada
CA, Surat
49 Answers

Not rated

Hi

When construction is not completed, you need to collect GST from buyers of your share of flats only. Also, you need to collect GST from landowner in respect of construction of his share of flats at the time of possession.

Lakshita Bhandari
CA, Mumbai
5687 Answers
909 Consultations

5.0 on 5.0

When there is chargeability of GST, ITC can be claimed in respect of such services.

However, if the construction has been completed, there is no applicability of GST and no ITC can be claimed in respect of such flats sold post completion of construction.

Lakshita Bhandari
CA, Mumbai
5687 Answers
909 Consultations

5.0 on 5.0

YOU CAN SELL IT ANY TIME YOUR FLATS AND BUILDER FLATS

WHEN YOUR SOLE FLAT AFTER BUYING FORM DEVELOPER IS NOT GOODS ACCORDING TO GST AND GST IS NOT APPLICABLE ON THAT PART

IF YOU RECEIVED YOUR SHARE OF FLATS FROM DEVELOPER

BEFORE COMPLETION CERTIFICATE YOU HAVE TO PAY GST ON IT

( GST IS INCLUDED IN YOUR COST) AND

AFTER COMPLETION CERTIFICATE NO GST ON THAT FLATS

YOU HAVE TO CHARGES GST FROM BUILDER ON DEVELOPMENT CHARGES

IF YOU ENTERED DEVELOPMENT AGREEMENT BEFORE GST ERA THEN NO NEED TO PAY GST.

AMOUNT FOR DEVELOPMENT RIGHT IS THE FARE MARKET VALUE OF THE FLATS WHICH YOU ARE RECEIVED FROM DEVELOPERS.

Bhadresh S Mevada
CA, Surat
49 Answers

Not rated

Yes you can add it as a cost.

Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

Please note that You will charge GST to landowner for construction of 2 flats.

GST can be calculated using any of the below suitable method:

1.Open market value of the Construction services or 2) 50% of undivided share of land in your case 3) Like value of similar flats 4) Cost of Construction + 10%

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

You need to charge GST to the landowner for his share of flats.

Calculation of GST shall be based on any of the following methods:

1. Open market value of the construction services provided by you.

2. value of undivided share of builder's land

3. Value of similar flats

4. Cost of construction with 10% mark-up on that.

Lakshita Bhandari
CA, Mumbai
5687 Answers
909 Consultations

5.0 on 5.0

Hi,

Yes, you need to collect GST on his share of flat.

You can charge GST base on any of the following method:

1. Open market value of construction services provided by you

2. Value of similar flats

3.Value of undivided share of builder flats

4.Cost of construction with 10% mark up

Further, you can collect GST on development right even if you entered into an agreement in pre-GST era.

Fair market value will be the amount for development rights.

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Dear Sir,

You can collect GST from builder for his share of flats.

Warm Regards,

Karishma Chhajer

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

5.0 on 5.0

1. GST can be charged from buyer only for under construction project,

2.Land owner will be liable to pay GST for transfer of development rights as well as for construction.

Swati Agrawal
CA, Mumbai
1146 Answers
7 Consultations

5.0 on 5.0

Government has issued clarification for transfer of development rights and as per government transfer of development right are taxable under GST and land owner have to collect GST from developer after assessing the value of development right but in my opinion that notification is invalid since development right are part of land and GST in not applicable on Land so developments right is also not taxable.

Land owner also not required to collect GST from buyer and developer is not required to collect GST from Land Owner.

Narendra Sonagra
CA, Ahmedabad
57 Answers

Not rated

I think you need to collect GST for builders share of flats.

Vivek Kumar Arora
CA, Delhi
4825 Answers
1031 Consultations

5.0 on 5.0

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