Expenses other than GST charged by Developer for Supply of Apartments under Construction Service are not Eligible to claim ITC: KAAR [Read Order]

The Bangalore bench of Karnataka Authority for Advance Ruling (KAAR) held that the expenses other than the goods and service tax charged by the developers which were used for the supply of apartments under the works contract service are not eligible to claim Input Tax Credit (ITC). 

Vinod Kumari Goyal, the applicant was a proprietary concern registered under the provisions of the Central Goods and Services Tax Act (CGST),2017 as well as Karnataka Goods and Services Tax Act, 2017, and the owner of the land and has entered into a joint development agreement (JDA) with Total Environment Building Systems Private Limited, Bengaluru for development of residential apartments. 

The applicant had sought the advance ruling in respect of the issue was that whether the applicant was eligible to claim input tax credit on expenses, other than tax charged by the Developer for the supply of apartments under construction service. 

Sanjay Dhariwal, the Chartered Accountant represented the applicant and submitted that once the transaction is liable to tax in the hands of the developer the same transaction cannot be made taxable in the hands of the applicant when the applicant sells the apartment to his customer even if the agreements are entered with customers before issuance Completion Certificate which sans transfer of property in goods. 

Also submitted that under the new scheme, input tax credit was restricted to the developer but not to the land owner. Therefore, the applicant is eligible to claim credit for tax charged by the developer. 

The Authority observed that the applicant was acting as a supplier of works contract service to the prospective purchasers of apartments and hence he is a supplier under Section 7(1) of the CGST Act and liable to pay tax under Section 9(1) of the CGST Act. 

Also observed that the input tax credit was not eligible to be claimed on any of the expenses other than the tax charged by the developer for the construction services subject to its eligibility if all other conditions are satisfied. 

The two-member bench comprising Ravi Prasad and Kiran Reddy held that a registered dealer on the date the time of supply of construction services falls or the amount of tax payable by the applicant for his supply of apartments was more than the amount of tax charged by the developer from the applicant for the supply of construction services are eligible to claim the input tax credit and other expenses other than tax charged by the developer was not eligible to claim the input tax credit. 

To Read the full text of the Order CLICK HERE

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