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Issues faced by Realtors and works contractors

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We have listed down several issues faced by Real estate and construction sector. A long list of issues are included separately for builders and works contractor for transition and post GST period.

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Issues faced by Realtors and works contractors

  1. 1. Your issues – Our Concern (One step solution for all your GST dilemma) Sandesh Mundra & Associates, Chartered Accountants
  2. 2. Why us? Sandesh Mundra & Associates, Chartered Accountants • 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.
  3. 3. Types of issues Sandesh Mundra & Associates, Chartered Accountants Post Transition issues Issues arising during Transition period
  4. 4. Issues arising in Transitional period Sandesh Mundra & Associates, Chartered Accountants
  5. 5. 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 Sandesh Mundra & Associates, Chartered Accountants
  6. 6. 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? Sandesh Mundra & Associates, Chartered Accountants
  7. 7. 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 ? Sandesh Mundra & Associates, Chartered Accountants
  8. 8. 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? Sandesh Mundra & Associates, Chartered Accountants
  9. 9. • 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? Sandesh Mundra & Associates, Chartered Accountants Uncovered Transitional issues – Contractor
  10. 10. • 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? Sandesh Mundra & Associates, Chartered Accountants Uncovered Transitional issues – Contractor
  11. 11. • 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
  12. 12. Post Transition issues for developers Sandesh Mundra & Associates, Chartered Accountants
  13. 13. 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? Sandesh Mundra & Associates, Chartered Accountants
  14. 14. • 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? Sandesh Mundra & Associates, Chartered Accountants Coverage of Supply
  15. 15. 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? Sandesh Mundra & Associates, Chartered Accountants
  16. 16. 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? Sandesh Mundra & Associates, Chartered Accountants
  17. 17. • 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? Sandesh Mundra & Associates, Chartered Accountants Land issues
  18. 18. 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 ? Sandesh Mundra & Associates, Chartered Accountants
  19. 19. 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? Sandesh Mundra & Associates, Chartered Accountants
  20. 20. 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? Sandesh Mundra & Associates, Chartered Accountants
  21. 21. 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 Sandesh Mundra & Associates, Chartered Accountants
  22. 22. • 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 Sandesh Mundra & Associates, Chartered Accountants Reversal of ITC
  23. 23. 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. Sandesh Mundra & Associates, Chartered Accountants
  24. 24. • How anti-profiteering authorities will function? • How to assure compliance of your organization in accordance with anti-profiteering clause? • Fate of Article 366(29A) Sandesh Mundra & Associates, Chartered Accountants Miscellaneous issues
  25. 25. Sandesh Mundra & Associates, Chartered Accountants Post Transition issues for Contractors Post GST Effect
  26. 26. • 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? Sandesh Mundra & Associates, Chartered Accountants Coverage of Supply
  27. 27. • Whether interest paid or interest received to or from customers is chargeable to GST? Sandesh Mundra & Associates, Chartered Accountants Coverage of Supply
  28. 28. 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? Sandesh Mundra & Associates, Chartered Accountants
  29. 29. 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 Sandesh Mundra & Associates, Chartered Accountants
  30. 30. 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? Sandesh Mundra & Associates, Chartered Accountants
  31. 31. Miscellaneous issues • 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. Sandesh Mundra & Associates, Chartered Accountants
  32. 32. • 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) Sandesh Mundra & Associates, Chartered Accountants Miscellaneous issues
  33. 33. Solution…?? • Please contact us in case if you are facing any of the above specified issue or any other issue in GST. Sandesh Mundra & Associates, Chartered Accountants
  34. 34. OUR ENDEAVORS 2
  35. 35.  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 Chartered Accountants

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