The CBIC has issued 21 notifications and 2 orders on March 29, 2019 under CGST, IGST and UTGST Acts. These statutes have been issued to implement the decisions taken by the GST Council in its 33rd and 34th meeting. The glimpse of these statutes is as under.
1.Unutilized ITC balance shall lapse if taxpayer opts for 6% presumptive scheme
[Notification No. 09/2019- Central Tax (Rate), 09/2019- Union Territory Tax (Rate)]
The CBIC has notified that when a supplier opts for new presumptive scheme, wherein the tax is payable on presumptive basis at the rate of 6%, the unutilized balance of input tax credit available in the electronic credit ledger of such taxable person shall lapse. Further, the rules applicable in case of composition dealers shall also apply mutatis mutandis to such supplier. This notification shall come into force with effect from April 1, 2019.
2.Order of Utilization of ITC
[Notification No. 16/2019- Central Tax]
The CBIC has inserted a new Rule 88A in CGST Rules, 2017 to allow the taxpayer to pay the liability towards SGST or UTGST by utizing the credit of IGST even if such credit is not used to set off the CGST liability first. This relaxation has been given to overcome the situation wherein the suppliers were required to pay the tax in cash even when they have the unutilized credit available in their electronic credit ledger.
After insertion of this Rule, the credit of IGST shall be utilized first towards the payment of IGST and any amount remaining may be utilized towards payment of CGST, SGST or UTGST, as the case may be, in any order at the option of a taxpayer.
Also, ITC on account of CGST, SGST or UTGST shall be utilized towards the payment of IGST, CGST, SGST or UTGST, as the case may be, only when the credit of IGST has been utilized in full.
| Particulars | IGST | CGST | SGST |
| Output tax liability (A) | 100 | 100 | 100 |
| Available ITC (B) | 200 | 50 | 50 |
| Up to January 31, 2019 | |||
| ITC utilized (C) | 100 | 50 | 50 |
| Balance ITC (D = B-C) | 100 | – | – |
| Unpaid output liability (E = A – C) | – | 50 | 50 |
| Utilization of IGST for payment of CGST/SGST | – | 50 | 50 |
| Balance ITC | – | – | – |
| Net Liability | – | – | – |
| On or After February 1, 2019 but upto March 31,2019 | |||
| Utilization of IGST for payment of IGST, CGST and SGST (C = B – A) | 100 | 100 | – |
| Utilization of SGST for payment of SGST (C = B – A) | – | – | 50 |
| Balance ITC (D = B – C) | – | 50 | – |
| Unpaid output liability | – | – | 50 |
| Balance ITC | – | 50 | – |
| Net Liability to be paid in cash | – | – | 50 |
| On or After April 1, 2019-Option -I | |||
| Utilization of IGST for payment of IGST, CGST and SGST (C = B – A) | 100 | 100 | – |
| Utilization of SGST for payment of SGST (C = B – A) | – | – | 50 |
| Balance ITC (D = B – C) | – | 50 | – |
| Unpaid output liability | – | – | 50 |
| Balance ITC | – | 50 | – |
| Net Liability to be paid in cash | – | – | 50 |
| On or After April 1, 2019-Option -II | |||
| Utilization of IGST for payment of IGST, SGST and CGST (C = B – A) | 100 | – | 100 |
| Utilization of CGST for payment of CGST (C = B – A) | – | 50 | – |
| Balance ITC (D = B – C) | – | – | 50 |
| Unpaid output liability | – | 50 | – |
| Balance ITC | – | – | 50 |
| Net Liability to be paid in cash | – | 50 | – |
3.Transfer of credit in case of change in ownership
[Notification No. 16/2019- Central Tax]
In case of change in the constitution of business of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of business, the registered person can transfer the unutilized ITC to the successor. As per Rule 41 of the CGST Rule, the input tax credit shall be apportioned in the ratio of the value of assets transferred. A new Explanation has been inserted in Rule 41 to clarify that the ‘value of assets’ shall mean the value of the entire assets of the business, notwithstanding the ITC has been availed thereon or not.
4.Manner of determination of ITC to be reversed by the builders
[Notification No. 16/2019- Central Tax]
If goods and services are used for both business and personal purposes, or for making taxable and exempt supplies, the credit of taxes paid in respect of common inputs and input services shall be allowed on proportionate basis. The common credit attributable to exempt supplies or for non-business use shall be reversed by the registered person.
Rule 42 of CGST Rules, 2017 provides the manner of determination of input tax credit to be reversed by the supplier. In the said Rule a new Explanation has been inserted for calculation of ITC to be reversed in case of builders.
Rule 42 prescribed a formula for calculation of common credit, a portion of which shall be reversed. As per this formula, the taxable person has to calculate the value of ‘T4‘, i.e., the amount of tax attributable to inputs used exclusively for making taxable supplies including zero rated supplies.
In case of real-estate developers or builders, the calculation of variable ‘T4’ shall be deemed to be nil during the construction phase because inputs and input services shall be used commonly for construction of apartments, which are booked on or before the date of issuance of completion certificate or first occupation of the project (whichever is earlier) and for those which are not booked by the said date.
Further, the methodology for calculation of value of exempt supplies and total turnover has been defined specifically for builders or developers.
5.Rates notified for Real Estate Sector/developers/builders
[Notification No. 03/2019- Integrated Tax (Rate), 03/2019 – Central Tax (Rate), 03/2019- Union Territory Tax (Rate)]
The CBIC has notified special rates for real estate sector/builders/for their ongoing projects and for the new projects which commence on or after April 1, 2019. These rules shall be applicable for the projects which fulfill the criteria of affordable residential apartment, non-affordable residential apartment and commercial apartment. Also, for the ongoing projects a new GST Form has been prescribed in which promoters can file declaration by May 10, 2019 to exercise one time option to pay tax either as per old rates 18% or 12% or as per new prescribed rates of 7.5% or 1.5%, as the case may be, before giving effect to the 1/3rd abatement on account of land portion.
6.Exemption list issued for services relating to real estate sector/developer/builders
[Notification No. 04/2019 – Integrate Tax (Rate), 04/2019 – Central Tax (Rate), 04/2019 – Union Territory Tax (Rate)]
The CBIC has given exemption to certain services rendered by way of transfer of development rights, floor space index (FSI) services, upfront amount (called as premium, development charges or any other name) for granting long term lease for 30 years or more, for construction of residential apartments on or after April 1, 2019. This notification shall come into force with effect from April 1, 2019.
7.Services notified on which GST shall be payable in revere charge under Section 9(3)
[Notification No. 05/2019 – Integrate Tax (Rate), 05/2019 – Central Tax (Rate), 05/2019 – Union Territory Tax (Rate)]
The CBIC has specified that services rendered by way of transfer of development rights, floor space index (FSI) services, upfront amount (called as premium, development charges or any other name) for granting long term lease for 30 years or more, by any person to a promoter in relation to construction of his project, on which liability shall be discharged by the promoter on revere charge basis in accordance with Section 9(3) of CGST Act. This notification shall come into force with effect from April 1, 2019.
8.Promoters shall pay GST under reverse charge as per Section 9(4) on certain goods and services received from unregistered supplier
[Notification No. 07/2019 – Integrate Tax (Rate), 07/2019 – Central Tax (Rate), 07/2019- Union Territory Tax (Rate)]
The real-estate developers or builders opting to pay tax at concessionl rate if they buy specified percentage of total inputs and input services from registered suppliers. The CBIC has notified that the promoter shall pay GST under reverse charge if there is any shortfall in such percentage. Also, the same shall apply to cement and capital goods as well. This notification shall come into force with effect from April 1, 2019.
9.Classes notified for persons who shall pay GST on the date of issue of completion certificate
[Notification No. 06/2019 – Integrated Tax (Rate), 06/2019- Central Tax (Rate), 06/2019- Union Territory Tax (Rate)]
The CBIC has notified that the promoters, receiving development rights, Floor Space Index (FSI) for construction of residential or commercial apartments in a project, long term lease of land for construction of residential apartments in a project as ‘registered persons’, shall pay GST on the date of issuance of completion certificate for the projects or on its first occupation, whichever is earlier. This notification shall come into force, with effect from April 1, 2019.
10.The rate of GST shall be 18% on the inputs in respect of which promoter is liable to pay GST in reverse charge
[Notification No. 08/2019 – Integrated Tax (Rate), 08/2019 – Central Tax (Rate), 08/2019 – Union Territory Tax (Rate)]
The CBIC has notified that 18 % GST shall be paid on any goods (other than cement and capital goods) which are supplied by an unregistered person to a promoter under reverse charge irrespective of the existing rate of such goods. This notification shall come into force with effect from April 1, 2019.
11.Determining ITC attributable to taxable & exempt supplies in respect of construction services is defined now
[Order No. 04/2019- Central Tax and 03/2019 – Union Territory Tax]
The CBIC has specified that builder or developer shall determine the amount of ITC attributable to taxable and exempt supplies on the basis of area of construction of complex, building, civil structure or part thereof, which is taxable and the area which is exempt. This order shall come into force with effect form April 1, 2019.
12.Certain definitions have been provided for the builders who intend to take the benefits of slashed rates.
[Notification No. 16/2019- Central Tax]
The notification defines various term which may be relevant for the developer or the builder to avail of this scheme.
The author is Chartered Accountant and can be reached at rsc@carajnish.in