Page 20 - GSTL_13th August 2020_Vol 39_Part 2

J28 GST LAW TIMES [ Vol. 39
service to the landowner. In the same breath, this long clause allows the land-
owner to utilize the same for payment of GST on the supply of apartments before
the issue of completion certificate. Further condition is that the GST paid on the
apartments shall not be less than the GST charged by the developer. So, what
comes in as credit must go out as output tax liability.
There is nothing in this notification, which restricts the scope of first
proviso to either the developer only, or to the landowner only. This proviso is of
wide purport and would apply to both the landowner and the developer. Thus,
if entire tax is paid in cash, how can the landowner be allowed to use ITC for
payment of GST on the apartments sold by him? How can the developer use the
ITC computed as per Annexure-I or Annexure-II, if entire tax has to be paid in
cash?
As far as landowner is concerned, perhaps it can be surmised that since
he gets no other ITC besides the GST charged for the construction service re-
ceived by him, he is allowed to use the credit as per the fourth proviso -
clause (ii). But what is the developer supposed to do with the credit retained as
per Annexure-I or Annexure-II?
Apart from the credits under the said annexures, the developer has a few
other credits in respect of which the conditions of notification place no bar, nor
clearly bar the right to take ITC. One is the GST paid on the transfer of develop-
ment rights by the landowner to the developer. In terms of Entry 5B of Notifica-
tion No. 13/2017-C.T. (Rate), GST is payable by the developer on reverse charge
basis. Secondly, the developer is bound to purchase at least 80% of the value of
inputs and input services from registered persons. If there is short fall, then the
developer has to pay on the shortfall on reverse charge basis.
Sixth proviso to Entry 3 cleverly states that once the tax is paid with re-
spect to shortfall on reverse charge basis, it shall be deemed that such supplies
are received from registered person. What does this mean? Whether this tax is
paid is available as ITC or not? It is not clear. Or should the claimant considered
himself bound by second proviso which forbids all credits except to the extent
allowed under Annexure-I and II? The notification is sometimes miserly with
words.
The conditions for these five sub-entries are a monstrosity in drafting.
The Annexures indulge in hairsplitting - separate determination of credit on res-
idential part of REP, commercial part of REP and so on. To further complicate,
the annexures have evolved some formulae which can give headache to a Rama-
nujan. Yet another complication is the option between two formulae for splitting
the credit! One wonders, would the Government have lost huge money, if ITC
proportionate to stage of completion had been allowed based on the estimated
value of the project had been allowed? Every item in these Annexures is a poten-
tial source of future dispute, which encourages rent seeking behaviour by the
Revenue Officers.
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GST LAW TIMES  13th August 2020  20