See you can claim from the builder to transfer the input tax credit benifit he received on depositing GST if he fails to provide same you can complaint before the jurisdictional commissioner of GST.
How to secure input tax refund after paying GST at 12% for an under construction flat
We had booked a 2 BHK flat in a project called "Prestige Falcon City" in Bangalore. The builder, M/s Prestige, had fixed the basic cost of the flat at Rs.81,60,916 payable in bi-monthly installments, which included VAT and service tax up to June 30, 2017 and GST since then. The builder has so far recovered Rs.7,78,887 towards VAT, Service Tax and GST. The last installment payment was made by us on October 10, 2018. The builder has been collecting applicable tax at applicable rates with every installment but is very evasive when confronted regarding giving credit to us in respect of input tax. We need to know whether we are entitled for any input tax credit on VAT and service tax paid before 31.07.2017 and on GST paid thereafter.
Asked 7 years ago in Taxation
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Please enlighten us on how to obtain refund of input tax from the builder as the company is evading giving us credit. The builder's argument is that 90% of required materials were procured before July 01, 2017 and as such, no input credit is due to the flat buyers under GST regime, although GST at 12% was fully collected from all.
Asked 7 years ago
In the case of our purchase of a 2BHK flat in Prestige Falcon City, a channel partner of M/s Prestige had given us an assurance of discount of 2% in the sale value of the flat, which amounted to Rs.1,62,088. The channel partner, named M/s Bookaprop Pvt Ltd. had given us a credit note and a cheque for the said amount in 2016. However, when the cheque was presented, it bounced, with the reason " Signature differs" which points towards fraud and cheating by the channel partner. Our repeated efforts for making the channel partner to honour its obligations have so far not succeeded since they are taking the plea that M/s Prestige has so far not settled their claims towards commission and till that is settled, they cannot pay. We have with us the credit note and the dishonoured cheque as evidence. Please advise us how we could enforce our claims and whether we could press for any action against the channel partner and the builder for abetment under RERA or under any other law.
Asked 7 years ago
See if builder has not received any input benifit then in that case he won't be able to pass on same to.you.
You need to file a Complaint with the gst grievance cell for the same. If he had collected gst of the said tenure e is bound to follow the applicable provisions of input tax credit
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1. ST and VAT got subsumed into GST on and from 1.7.17
2. under GST regime the builder is liable to pass on the ITC benefit to flat buyer
3. however when such benefit is to be passed and how the amount is to be computed - is a grey area as the act says nothing on it
4. the passing of ITC benefit to flat buyer is in a way made discretionary at the hands of the builder
5. however the flat buyer can have recourse to file a complaint with the National Anti Profiteering Authority against the builder for not passing on the ITC benefit
6. if the builder says that all materials and services were procured prior to 1.7.17 and thus no ITC can be passed on to the buyer, then ask him to show the invoices
7. the act nowhere states that only those invoices under which the builder purchased goods or availed services, after coming into force of GST, are to be considered, for purpose of passing on the ITC benefit
8. if that is so, then builder is liable to give you the ITC benefit on all the amounts paid by you under the GST regime
9. the government set the service tax rate of 12%, which is much higher than ST and VAT payable prior to GST, because the builder has to collect that 12% and pass on the ITC benefit to the buyer, so that the effective GST rate comes down or is at par with the taxes applicable prior to GST regime
10. so your remedy will be to file a complaint with NAPA and even RERA. Rera has wide powers. It can even give directions to NAPA to consider your complaint expeditiously, in the event RERA comes to conclusion that it does not have jurisdiction over tax matters
11. as to the bounced cheque, the reason given by the channel partner is incorrect. Just because its commission was not paid to it by the builder, is no reason for it to claim that it is not liable to clear the cheque. That was never the condition at the time of giving the cheque. You can complaint against the channel partner to RERA and also file a cheque bounce case against it
Dear Sir,
Please ask your above question on www.taxfull.com which is sister concern of www;kaanoon.com, where is experts will be Chartered Accounts.
The Finance Ministry, on December 8, 2018, said the GST will not be levied on buyers of real estate properties, for which the completion certificate is issued at the time of sale. However, the Goods and Services Tax (GST) will be applicable on sale of under-construction property or ready-to-move-in flats, where the completion certificate is not issued at the time of sale, it said.
In case part of the money is paid to the builder before the introduction of GST, you would have paid service tax at 4.50 per cent and VAT as applicable in your state, on such payments. However, the rate of 4.50 per cent service tax was under the composition scheme, under which the builders/ developers were not entitled to take any input credit on the materials and services used in the construction. So, the entire service tax and VAT was loaded or recovered from the customers. Hence, for under-construction flats booked prior to July 1, 2017, where the payments were made prior to the GST coming into force, the builder would have already recovered the service tax and VAT, applicable on such payments made. Even if the payment was not made prior to July 1, 2017, but the builder had already raised the invoice or demand, for either the full consideration or part of the balance amount, you would have paid the component of service tax and VAT on it, because as per the point of taxation rules 2011 applicable in case of service tax, the service tax is to be levied at the earlier of the two – the moment of payment or raising of invoice.
The rate of GST on an under-construction property was 18 per cent. However, one-thirds of the value of the consideration was presumed to be the value toward cost of the land, in cases where the interest in the land is also supposed to be transferred.
As the builders/ developers were able to claim the benefit of input tax credits against the GST liability of 12 per cent, the net impact was probably lower, under the GST regime.
According to the GST’s rules, the builder will be in a position to claim input credit on the materials and services used and should pass on the benefit of input credits to the flat buyers.
Hence, the builders should not ask the flat buyers to pay the full 12 per cent, without taking into account the benefits under the GST. However, if a builder does so, the authorities can initiate punitive actions against such builder, under the anti-profiteering provisions of the GST laws.
The builder may give plenty of such reasons for not refunding the input tax benefits to the customers. You may issue a legal demand notice demanding the benefits failing which you may file a case before consumer forum seeking relief and remedy.
The builders will adopt such unfair trade practices to promote sales in the initial stages but they will not honor the commitment.
You have an option to file a recovery suit or approach consumer forum for remedy provided you are not barred by limitation.