• Notification Date: 20-02-2024
• Notification No: N/A

Builders Receiving GST Notices to Reverse Input Tax Credit Amid Compliance Scrutiny

The GST department has issued notices to numerous builders, directing them to reverse their input tax credit (ITC) for the years 2017-18 and 2018-19. These notices pertain to the ITC claimed on unsold apartments at the time of obtaining Building Use (BU) permission. Builders are instructed to reverse the ITC for units sold post-BU permission, as GST payments were not made for these units. Consequently, the department has urged developers not to claim ITC for such apartments.

A knowledgeable source revealed that several developers have been targeted for claiming excessive ITC during the 2018-19 period. It’s worth noting that the option of GST rates at 8% or 12% (with ITC) was exclusively available for ongoing projects as of March 31, 2019. Projects commenced after April 1, 2019, must adhere to the GST rates of 1% or 5% (without ITC). However, GST isn’t applicable to unit sales post-BU permission.

Instances have been discovered where developers claimed full ITC when they were eligible for lower rates, prompting the issuance of notices by the department. Developers receiving such notices are advised to reverse ITC with interest and penalties, as per the law. Lack of awareness about ITC rules among developers has been cited as a contributing factor to these discrepancies.

Post April 1, 2019, GST stands at 1% for affordable housing projects meeting specified criteria, while non-affordable housing projects attract a 5% GST rate. To qualify for concessional rates, it’s imperative that at least 80% of inputs and input services are procured from registered suppliers. Shortfalls in this regard require developers to pay taxes under the reverse charge mechanism.

Additionally, cement procurement must strictly occur from registered suppliers. If obtained from unregistered sources, developers are liable to pay a 28% tax under the reverse charge mechanism, with payment due in the month of cement receipt.