GST and TDS applicability on prelaunch purchase of apartment in year 2012

GST and TDS applicability on prelaunch purchase of apartment in year 2012

I entered into a Memorandum of Understanding (MoU) with a famous builder for purchase of residential apartment space of 1500 sq. ft. saleable area in a prelaunch scheme, in a proposed project at Hennur, Bangalore. Paid the full amount including cost of flat and other charges in Dec. 2012. Amount was more than Rs. 50 lakhs. Builder did not ask for any taxes at that time but there was following para in MoU.
"Service tax, VAT shall be payable as applicable. Stamp duty and registration fees shall be payable on actuals by the purchaser on the Agreement for Sale as well as on the registration of sale deed."

As per the builder the documentation steps are as follows: MoU, Term Sheet, Agreement for Sale, Deed of Conveyance at time of registration. In spite of several reminders, they did not send or sign termsheet in nearly 9 years since I paid the full amount. Now they are asking me to pay 12% GST first and then they will sign term sheet. They got all approvals to construct upto 20 floors in 2016 and in mid 2019 they got approval to construct floors 21 to 30. Actual construction is only upto 3 floors, just the structure. My flat is assigned in floor 27.

I informed them following. Since they got construction clearance for my floor in Mid 2019, GST rate to be used is 5%.

I asked them to provide copy of commencement certificate, especially the date of issue for floors upto 20 floors and the revised or new commencement certificate for floors 21 to 30, especially the issue date. I checked K-RERA website but could not find these docs.

I also asked if they will pass on Input Tax credit if 12% GST is paid by some other customer, as an example.

In addition, they are asking me to deposit 1% TDS to the government and after I send the deposit receipt, they will put back that 1% as a credit in my name in their accounts, to be balanced with future payments by me. Until that time, they have put a block on 1% of the amount I paid. I refused to pay that, as TDS provision was not there at the time I paid the money. Moreover, the block on my fund is illegal, in my opinion.

They are not replying to these points though one month is over.

Now my queries are as follows.
1. Are my aforesaid stands and justifications are correct and supported by laws, rules and regulations?
2. Am I liable to pay GST in this specific situation?
3. What should be the correct GST rate and when (i.e. at the time of what document signature or construction stage) it is payable?
4. Please also provide supportive documents, copies / links of laws, rules, judgements, etc. so that I can have this for protecting me in future.

Asked 3 years ago in GST

Dear Sir,

Hope you are doing well !!

For the ongoing projects, builders have been given the option to either continue in 12 per cent Goods and Services Tax (GST) slab with ITC or opt for 5 per cent GST rate without ITC.

“Ongoing projects” means projects where construction and actual booking started before April 1, 2019, but which was not completed by March 31, 2019.

In your case, the new rate is apply only if builder had opted the option of new rates.Otherwise, you will be liable to pay GST as per old rates.

Also, you won't be eligible to claim the ITC as you are an end user of goods.

We may help you with all the compliances under TDS and GST.

It is advisable to take a phone consultation for detailed discussion.

Payal Chhajed

CA, Mumbai

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Hello Sir,

PFB the answers to your queries as:

1. Your stand taken for the various laws are in part correct and need to be reconsidered taking into account additional factors.

In relation to TDS, yes your views are correct as the said payment was done in 2012, while the charging section was introduced in 2013. Therefore, any further payment hence forth would be liable to tax, albeit on the entire amount paid, i.e. including the previous monies paid to the developer.

In relation to GST, please refer 2.

2. & 3. To the extent of monies paid pre-GST, you are not liable for the taxation as it was the liability of the builder to pay tax on such advance received therein at that time, i.e. in 2012 paying Service tax. In case of any further amount payable by you, the same would be liable to GST, and the rate would depend on the scheme opted by the builder. being an old project, the builder had the option to stay under old structure and if had opted the same, then he will charge 12% to you, however your contention of passing on of ITC by them is valid in this case.

Should the builder switched to the new scheme, then he would be charging 5% to you, and to the limited extent of old ITC standing to his ledger and adjustable, the benefit of the same should be given to you.

However, if a new KRERA registration was provided to them for construction of floors 21 onwards, then the builder has no option but to opt for new rate of scheme of 5%.

GST would be payable as per the agreement executed between you and the developer, and at the point of payment specified therein.

Please advise in case of any other clarification.

Thanks & Regards,

CA Aditya Dhanuka.

Aditya Dhanuka

CA, Kolkata

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- Generally construction activities fall under the category of continuous supply of services. Under continuous supply of services, payment is made either as per the contract or it is linked to completion of event. First of all ask for receipt vouchers from the builder against all payments made by you. If you had made payment as per the contract which is demanding payment before 01.07.2017 then you are not liable to GST.

- As you have paid entire cost of your flat before 01.07.2017 (date when GST became operational), GST is not applicable to you. You can file a complaint with National Anti-profiteering Authority at State level.

- TDS section 194-IA has been inserted w.e.f. 01.06.2013 therefore it is also not applicable in your case as entire payment was made till Dec.2012.

For detailed discussion, please take phone consultation.