Issues faced by Realtors and works contractors

Your issues – Our Concern
(One step solution for all your GST dilemma)
Sandesh Mundra & Associates,
Chartered Accountants

Why us?
• Complicated taxation in Real estate and works contract is not
something new.
• With 13 years of experience in indirect taxation, we have always
given our best in resolving conflicts.
• Now with GST in a maturing stage, we intent to provide solution
of every problem you face.
• With above intent we have identified probable issues before they
haunt you and their most feasible solutions for realtors and
contractors.
• Let us discuss some of them.

Types of issues
Post Transition issues
Issues arising during
Transition period

Issues arising in Transitional period

Transitional issues
• Doctrine of promissory estoppel for past exemptions?
• How to calculate credit held in work in progress?
• Challenges for WIP assessment :-
– What is sale
– Requirement of 12 months documentation

Uncovered Transitional issues - For
developers/builders
• If first occupancy before GST and BU after GST then, GST or tax in earlier regime?
and what happens in vice versa scenario?
• Can we pay GST 18% (without land) if Pre-GST service tax paid @ 6% (considering
the same as works contract).
• I had not paid service tax and VAT on land by doing separate agreements. Can I
continue with the same?
• What if client has upgraded unit booked pre-GST and VAT and Service tax is
already paid on such supply?

Uncovered Transitional issues - JDA
• What will be effect on taxability of flats allotted to land owner if DR
(Development Rights) sold pre GST and the flats allotted post GST?
Taxability of Flats ?
• If DR is signed before GST and landowner received consideration post GST.
Whether it is liable to GST? Taxability of Rights ?

Uncovered Transitional issues – Contractor
• I, being a sub-contractor is exempt from Service Tax (29h, 25/2012 benefit)
and VAT as the contractor was paying in full. Did not claim credit for that
project? Can I claim the same in GST?
• As per Section 142(5) of MGST Act, ITC reversed prior to GST cannot be
claimed as ITC in GST. Whether 36% reduction under MVAT scheme can be
termed as reversal?
• Can sub-contractor claim exemption of specified works contractor on the
basis of L&T back to back judgement?

• I had bifurcated my works contract pre-GST. Can I continue with the
same structure in GST?
• I had claimed back to back exemption in Karnataka in VAT. Can I
continue with the same? If yes then, can I claim ITC on sub-
contractor’s billing till 30/06?
• I had carried forward my excess sub-contractor deduction as on
30/6. Can I claim credit of the same in GST?

• As per Supreme court every works contract is divisible. Can I still carry the
same opinion in GST?
• I have initiated sale in the course of import. Goods are in transit as on
30/06. Can I still claim the exemption?
• Entry passed for apportionment of overheads post GST. Will the same be
subjected to GST ?
• Back to Back work to Sub-contractor – Who will claim credit on WIP?

• Deduction of consumables claimed in VAT. The same held on stock as on
appointed day. Can we claim its credit u/s 140(3)?
• Purchased goods from URD. Received goods before 30/06. Bill raised on
15/7. URD VAT has to be paid or RCM in GST is to be paid?
• Whether GST provides any right to claim discount from supplier post GST?
• How to negotiate for revision of tax inclusive BOQ rates in government
contracts?
Uncovered Transitional issues – Common
issues
Sandesh Mundra &
Associates,
Chartered
Accountants

Post Transition issues for developers

Coverage of Supply
• Whether exchange of flats for redevelopment is taxable?
• Whether GST is leviable on taxes and charges like stamp duty etc.?
• Whether maintenance charges and preferential location charges will be
treated in construction service as a composite supply?

• In Service tax, provision of service is triggered at the time of
receipt of amount, in VAT it was agreement with buyer or
incorporation of goods, what will be the point in GST?
• What will be the impact if no amount is received before BU?
• How to prove first occupation?
Coverage of Supply

Valuation
• How will be valuation in case of allocation of units to land
owner?
• Will GST be applicable in case if developer forms a JV with
landowner?
• What will be implications if developer and land owner are
related parties?

Land issues
• Whether land can be treated as non-GST supply?
• Do we have an option to claim full land value as deduction or
1/3rd deduction is compulsion?
• Whether lower rate of 12% is applicable after claiming 1/3rd
deduction for land value?

• Whether 1/3rd deduction will also be available on preferential charges
and other similar charges?
• In case where landowner and developer both are different person and
landowner collects consideration for land and developer collects
consideration for development. Whether land deduction will be available
on actual basis or 1/3rd deduction is allowed?
Land issues

Cancellations
• How to claim our monies back from tax authorities in case of
cancellation of service?
• Will upgradation tantamount to cancellation of original
service? What will be the implications?
• Whether GST will be charged on penalty recovered from
buyer upon cancellation ? Rate of Tax ?

Reverse charge mechanism
• Government omits proviso in URD RCM and postponed it till
31.03.2018. Two issues arises:-
1. Omission stands for retrospective amendment. Whether this
amendment to be considered as retrospective?
2. How to determine time of supply for transitional bills?

Input Tax Credit
• Whether refund of overflow of ITC will be allowed to builders?
• If answer to above is no then, how to do planning for
procurements and transaction structure in optimum manner?
• How to manage working capital in above scenario?

Reversal of ITC
• Whether reversal of credits qua supply of land or supply after
BU/First occupancy is required or is there a way out to
escape?
• If reversal is required then when to reverse?
a) At the time of consuming inputs
b) At the time of receipt of BU
c) At the time of sale of property after BU

• How the reversal will be done if –
 Inputs procured pre-GST and CENVAT carried forward to GST
 Inputs procured pre-GST and CENVAT not carried forward to GST
 Input procured and utilized pre GST
 Input procured and utilized post GST
Reversal of ITC

Miscellaneous issues
• If a developer has received a contract to develop properties in any
other state. What are the options he has to structure the
transaction?
• What if a supply made to Non-SEZ is classified as supply to SEZ?
What are the implications?
• What is the way out for rectification for wrong entries in returns.
• What is the way out for mismatch in GSTR 3B Vs GSTR 1and 2.

• How anti-profiteering authorities will function?
• How to assure compliance of your organization in accordance
with anti-profiteering clause?
• Fate of Article 366(29A)

Post Transition issues for Contractors
Post GST Effect

• If a client gives loan to contractor and contractor offsets
installments and interest for such loan from RA bills. Whether GST
be applicable at the time of loan payment considering it as
advance?
• How to claim our monies back from tax authorities in case of
cancellation of service?
• Will upgradation tantamount to cancellation of original service?
What will be the implications?
Coverage of Supply

• Whether interest paid or interest received to
or from customers is chargeable to GST?
Coverage of Supply

Input Tax Credit
• If a contract provides interior decoration services for a client’s office and it
contains interiors, civil, electrical services. Whether credit paid on full
transaction will be blocked under Section 17(5)?
• Government vows to provide refund of unutilized credit for inverted rate
structure. Whether contract can seamlessly have such refund without any
trouble?

Works contract Vis-à-vis composite supplies
• What is the basis for classification of a property into movable
and immovable and what are the implications?
• What are the implications if dept. deny our classification?
• Implications in case of works contract in earlier regime and
composite supplies in this regime

• If a contractor has received a contract in any other state. What are
the options he has to structure the transaction?
• What if a supply made to Non-SEZ is classified as supply to SEZ?
What are the implications?
• What is the way out for rectification for wrong entries in returns.
• What is the way out for mismatch in GSTR 3B Vs GSTR 1and 2.

• How anti-profiteering authorities will function?
• How to assure compliance of your organization in accordance
with anti-profiteering clause?
• Can we still split the contract?
• Fate of Article 366(29A)

Solution…??
• Please contact us in case if you are facing any
of the above specified issue or any other issue
in GST.

 079-40032950
 09426024975
304, Super Plaza,
Near. Prakash High School,
Sandesh Press Road, Vastrapur,
Ahmedabad - 380 054
www.smaca.insandesh.mundra@smaca.in
Sandesh Mundra & Associates

Issues faced by Realtors and works contractors

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Issues faced by Realtors and works contractors