Registration, Goods and Services Tax - GST

[VishnuPriya R]

A builder is into construction of flats. And decided to sell flats after obtaining of CC only and also not sold nor received any money before CC. Sale after CC is covered under Schedule III hence not liable for GST. However builder has not obtained GST registration as he does not have aggregate turnover. Is he liable for GST registration u/s. 24 and also liable to pay RCM under GST for inward supplies in case the 80:20 ratio is not meet?.

Thank you.

Posts / Replies

[KASTURI SETHI]

If the ratio of 80 % : 20% is not qualified, on shortfall value below 80 %, RCM will be applicable and hence registration will be compulsory under Section 24 (1) (iii) of CGST Act. See Board's circular no.3/2/2020-GST dated 24.06.20.

[KASTURI SETHI]

It is also worthwhile to  study the definition and scope of the terms, 'Builder', 'Developer' and 'Promoter' under RERA  Act.

[SACHIN GARG]

Section 24 overrides Section 22 and not Section 23. Section 23 says registration not mandatory if providing exclusively exempt services. So IMHO registration not required, RCM not liable to be paid.

[Shilpi Jain]

If there is only after CC sale no requirement of taking GST registration. 

However if the 80:20 condition is not met registration will have to be taken and gst liability under RCM will have to be discharged.

[Ganeshan Kalyani]

I agree with the view of the experts.

[VishnuPriya R]

Thank you all for the clarification.

[Amit Agrawal]

With due respect, I hold different views compared to views posted above by my learned professional colleagues. 

A. As said builder is not providing 'construction services' mentioned in Notification no. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended by Notification no. 3/2019- Central Tax (Rate) dated 29.03.2019), question of fulfilling 'conditions' mentioned in those notifications (with lower tax-rates against specified construction services therein) does not arise. 

A2. First Para of Notification no. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended from time to time worth noting in the context of the query raised and same reads as follows:

"In exercise of the powers conferred by sub-section (1) ⁷⁶[sub-section (3) and sub-section (4)] of section 9, subsection (1) of section 11, sub-section (5) of section 15⁷⁷[,] sub-section (1) of section 16 ⁷⁸[and section 148] of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, hereby notifies that the central tax, on the intra-State supply of services of description as specified in column (3) of the Table below, falling under Chapter, Section or Heading of scheme of classification of services as specified in column (2), shall be levied at the rate as specified in the corresponding entry in column (4), subject to the conditions as specified in the corresponding entry in column (5) of the said Table:-

............................."

A3. Subject builder is NOT supplying any services mentioned in said notification. Hence, entire notification is not applicable to such builder and one need not go to the corresponding 'conditions' mentioned in such notifications.

A4. Summarizing above, such builder is not liable to pay any GST under RCM for not-fulfilling condition of 80:20 ratio for inward supplies (or for buying cement for unregistered supplier) imposed through Notification no. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended by Notification no. 3/2019- Central Tax (Rate) dated 29.03.2019).

B. Section 23(1)(a) of the CGST Act, 2017 does NOT come into picture here as 'the builder is not supplying any goods / services which are not liable to tax or wholly exempt from tax'. 

B1.  Schedule-III (Serial No.5) read with Section 7(2)(a) treats 'Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building' neither as a supply of goods nor a supply of services. 

These are ex facie views of mine and the same should not be construed as professional advice/suggestion.

[Padmanathan Kollengode]

I agree with views of Ld Friend Amit Ji. Just to add/ elaborate this view:

Notification No. 3/2019 in column (3) reads as under:

“(i) Construction of affordable residential apartments by a promoter in a Residential Real Estate Project (herein after referred to as RREP) which commences on or after 1st April, 2019 or in an ongoing RREP in respect of which the promoter has not exercised option to pay central tax on construction of apartments at the rates as specified for item (ie) or (if) below, as the case may be, in the manner prescribed therein, intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

(ia) Construction of residential apartments other than affordable residential apartments by a promoter in an RREP which commences on or after 1st April, 2019 or in an ongoing RREP in respect of which the promoter has not exercised option to pay central tax on construction of apartments at the rates as specified for item (ie) or (if) below, as the case may be, in the manner prescribed therein, intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

Column (5) reads as :

Provided also that where value of input and input services received from registered suppliers during the financial year (or part of the financial year till the date of issuance of completion certificate or first occupation of the project, whichever is earlier) falls short of the said threshold of 80 per cent., tax shall be paid by the promoter on value of input and input services comprising such shortfall at the rate of eighteen percent on reverse charge basis and all the provisions of the Central Goods and Services Tax Act, 2017 (12 of 2017) shall apply to him as if he is the person liable for paying the tax in relation to the supply of such goods or services or both;

Master Notification 11/2017 CT-R reads as under:

G.S.R......(E).- In exercise of the powers conferred by sub-section (1) of section 9, subsection (1) of section 11, sub-section (5) of section 15 and sub-section (1) of section 16 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, hereby notifies that the central tax, on the intra-State supply of services of description as specified in column (3) of the Table below, falling under Chapter, Section or Heading of scheme of classification of services as specified in column (2), shall be levied at the rate as specified in the corresponding entry in column (4), subject to the conditions as specified in the corresponding entry in column (5) of the said Table:-

Since the entire consideration has been received after Completion Certificate is received, the Entries (i) and (ia) above are not applicable. As such, the conditions under Column (5) is also not attracted.