GST : Builders can't seek refund of ITC

Rujuta Parekh
Friday, 28 July 2017

Pune: While real estate developers will obtain Input Tax Credit (ITC) from various input goods and services, they will be unable to claim a refund of the ITC. Officials from the Central Goods and Services Tax (CGST) Department clarified that developers will be able to carry forward the ITC but not get refunds. 

Pune: While real estate developers will obtain Input Tax Credit (ITC) from various input goods and services, they will be unable to claim a refund of the ITC. Officials from the Central Goods and Services Tax (CGST) Department clarified that developers will be able to carry forward the ITC but not get refunds. 

Speaking during a seminar organised by the department for developers, builders and contractors, Additional Commissioner, CGST, Surendra Kumar Mankoskar said, “Developers can obtain ITC from nearly 160 inputs or input services. So, in a project costing Rs 100 crore, the developer will get ITC of Rs 16 crore while their output tax will be Rs 12 crore when computed under 12 per cent GST, which the consumers will pay. The Rs 4 crore difference will be the balance ITC. This balance can be carried forward to other projects but will not be refunded.” 

He, however, also mentioned that the developers cannot claim ITC against projects that have obtained the Occupancy Certificate. “Once a project receives an OC, the project becomes immovable property which attracts zero per cent GST. Since it is exempted, the developers cannot claim ITC for the project,” he said. 

Clarifying other doubts in the minds of developers and contractors, Mankoskar said that while government works contracts were exempted in the previous tax regime, all exemptions have been withdrawn under GST. “There are only three exemptions to work contracts including construction contracts under the Pradhan Mantri Awas Yojna, railway projects and single residential units,” he said. 

Clarifying on the charging of GST on units for which an advance has already been taken, Mankoskar said, “If 70 per cent of the payment has been made and the necessary registrations done, the client will have to pay the remaining amount at the new GST rate. In case of a development contract with the landlord wherein the builder has promised 10 flats in the scheme to the landlord, the landlord will have to bear the GST on the said units as it is a part of the taxable supply,” he added. 

Mankoskar further said that another seminar for developers and contractors has been organised on August 4 at GST Bhavan to clarify any queries or problems related to GST. 

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