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Seven indirect taxation-related laws being amended: FM Nirmala Sitharaman 

Seven indirect taxation-related laws being amended: FM Nirmala Sitharaman 

Finance Minister Nirmala Sitharaman Thursday said seven legislations under indirect taxation are being amended to ensure greater simplicity, as she moved the Finance Bill in the Lok Sabha. She told the Lower House that amendments to laws are being made through the Finance Bill in five major categories, including in the Goods and Services Tax (GST).

Apart from seven Acts related to indirect taxation being amended, the government would also be bringing changes to seven laws related to direct taxation. The changes would ensure that indirect taxation-related matter would have greater simplicity and be effective, she said. About proposed amendments to direct taxation-related laws, Sitharaman said those are being done for furthering the agenda of Make in India, adding the country needs a lot more manufacturing activities.

The GST alone has five different amendments that would also make compliance easier for the MSME (Micro, Small and Medium Enterprises) sector, she added. According to her, eight Acts pertaining to financial markets, including Sebi Act, are being amended. RSP member N K Premachandran objected to the Finance Bill having the provisions to amend a number of laws, including Benami Act, Sebi Act and PMLA Act, and urged Speaker Om Birla to disallow it.

A Finance Bill can only have taxation proposals, Premachandran said, soon after the finance minister stood up to move the bill for consideration and passage.

He also accused the government of bypassing Parliament to avoid discussion and scrutiny for amending existing laws by including them in the bill.

Sitharaman said rules and constitutional provisions cited by Premchandran do not rule out non-taxation proposals for inclusion in the Finance Bill but only say that it should be done only when imperative.

“The government considers it very imperative,” she asserted.

Birla, in his ruling, disallowed Premachandran’s objections and said there have been occasions earlier as well when non-taxation proposals were included in the Finance Bill.

Source: Economic-Times.

GST Cell, ni-MSME to conduct 3-day training program on GST

GST Cell, ni-MSME to conduct 3-day training program on GST

To impart the knowledge about Goods and Service Tax (GST) and procedures for implementation, GST cell in association with ni-msme has proposed to conduct training program on GST to have a better understanding about the new tax regime.

The three days certification program will start from July 29 here, and will end on July 31, 2019.

The objective of the program is to impart the knowledge about Model GST law and to provide valuable insights on impact of GST on Industry/Trade/ Services.

In addition, it will give practical knowledge of the different procedures required under GST Act and Rules such as Registration, tax invoices, Filing of Returns, availing Input Tax Credit, compliance, Refunds and other documentation requirements.

The target participants for the program are Entrepreneurs of Industry and trade, Key managerial personnel, Professionals, Tax consultants, Academicians and students.

On the successful completion of program, the participant will be able to understand the transitional issues relating to migration from Current indirect tax structure to GST regime.

GST is a game changing reform for the Indian economy by creating a common Indian market and reducing the cascading effect of tax on the cost of goods and services. GST has a large ramification on business processes and there is a grave necessity for the industry members, entrepreneurs of Industry/Trade, Managerial personnel, Finance managers and professionals to ensure compliance with the Act, and for benefitting from the seamless pass through of Tax to the final consumer.

Source: Knn-india.

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Nirmala Sitharaman Explains How GST Filing Will Be Simplified

Nirmala Sitharaman Explains How GST Filing Will Be Simplified

Finance Minister Nirmala Sitharaman on Friday said that the Goods and Services Tax (GST) processes were being further simplified while adding that businesses with less than Rs. 5 crore annual turnover will need to file quarterly GST return.
She also announced to increase special additional excise duty and road and infrastructure cess on petrol and diesel by one rupee each, hike in customs duty on gold and precious metals to 12.5 per cent and imposing nominal basic excise duty on tobacco products and crude.

The Union Budget 2019-20 also provides for exempting import of certain defence equipment from basic customs duty, reducing customs duty on certain raw materials and capital goods, and rationalisation of export duty on raw and semi-finished leather.

“The threshold exemption limit for a supplier of goods is proposed to be enhanced from Rs. 20 lakh to an amount exceeding Rs. 40 lakh. Taxpayers having an annual turnover of less than Rs. 5 crore shall file the quarterly return,” she said.

She said that a fully automated GST refund module shall be implemented. “Multiple tax ledgers for a taxpayer shall be replaced by one,” she said. The Budget proposes to move to an electronic invoice system wherein invoice details will be captured in a central system at the time of issuance.

“This will eventually be used to prefill the taxpayers’ returns. There will be no need for a separate e-way bill. To be rolled out from January 2020, the electronic invoice system will significantly reduce the compliance burden,” said Ms Sitharaman.

The Finance Minister said that the landscape of indirect tax has changed significantly with the implementation of GST.

Terming it as a “monumental reform”, Ms Sitharaman said the GST regime has brought together the centre and the states with the result 17 taxes and 13 cesses became one and a multitude of rates instantly became four.

“Almost all commodities saw rate reduction. Tens of returns were replaced by one. Taxpayers’ interface with tax departments got reduced. Border checks got eliminated. Goods started moving freely across states, which saved time and energy. The dream of ‘One Nation, One Tax, One Market’ was realised,” she said.

The Finance Minister said that GST rates have been reduced significantly where relief of about Rs. 92,000 crore per year has been given. “There is a need to unload the baggage and allow the business to move on, as more than Rs. 3.75 lakh crore is blocked in litigations in service tax and excise,” she said.

The budget proposes a dispute resolution-cum-amnesty scheme — Sabka Vishwas Legacy Dispute Resolution Scheme, 2019 — will allow quick closure of these litigations. The relief under the scheme varies from 40 per cent to 70 per cent of the tax dues for cases other than voluntary disclosure cases, depending on the amount of tax dues involved.

Describing ‘Make in India’ as a cherished goal, the Finance Minister proposed an increase in basic customs duty on certain items so as to provide domestic industry a level playing field. These items include PVC, cashew kernels, vinyl flooring, tiles, metal fittings, mountings for furniture, auto parts, certain kinds of synthetic rubbers, marble slabs, optical fibre cable, CCTV camera, IP camera, digital and network video recorders.

She also proposed to withdraw exemption from customs duty on certain electronic items which are now being manufactured in India.

To encourage domestic publishing and printing industry, 5 per cent customs duty will be imposed on imported books. To further promote domestic manufacturing, the budget proposes customs duty reductions on certain raw materials and capital goods.

These include certain inputs of CRGO sheets, amorphous alloy ribbon, ethylene dichloride, propylene oxide, cobalt matte, and naphtha, wool fibres, and input for manufacture of artificial kidney and disposable sterilised dialyzer, and fuels for nuclear power plants.

The Union Budget proposes to increase special additional excise duty and road and Infrastructure cess each by one rupee a litre on petrol and diesel.

“Crude prices have softened from their highs. This gives me a room to review excise duty and cess on petrol,” she said.

Nirmala Sitharaman also announced an increase in customs duty on gold and other precious metals from 10 per cent to 12.5 per cent. The Budget also proposes rationalisation of export duty on raw and semi-finished leather to provide relief to the sector.

Ms Sitharaman said that tobacco products and crude attract National Calamity and Contingent duty which in certain cases is being contested on the ground that there is no basic excise duty on these items. To address this issue, the Budget proposes to impose a nominal basic excise duty on tobacco products and crude.

The Finance Minister proposed a few amendments to the >Customs Act. She said: “Recent trends reveal that certain bogus entities are resorting to unfair practices to avail undue concessions and export incentives.”

She announced that misuse of duty-free scrip and drawback facility involving more than Rs. 50 lakh rupees will be a cognizable and non-bailable offence.

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Source: NDTV.
GST proved to be consumer, assessee friendly’, writes Arun Jaitley on two years of rollout

GST proved to be consumer, assessee friendly’, writes Arun Jaitley on two years of rollout

Former finance minister Arun Jaitley, who introduced the Goods and Services Tax (GST) on July 1 in 2017, on Monday stated that the new tax regime “proved to be both consumer and assessee friendly.”

Jaitley, in a blog, wrote: “After two years, one can confidently argue, without fear of contradiction that GST proved to be both consumer and assessee friendly. The high taxation of pre-GST era pinched the consumers’ pocket and acted as a disincentive against tax compliance. The last two years have seen each of the meetings of the GST Council reducing the tax burden on consumers as the tax collections improved.”

jaitley

He mentioned that “the assessee base in the last two years has increased by 84%.”

Giving “response to certain misconceived ideas,” Jaitley said: “Many warned us that it may not be politically safe to introduce the GST. In several countries, governments lost elections because of the GST. India had one of the smoothest transformations. Within the first few weeks of the implementation, the new system settled down.”

On GST’s simplification and compliance, he said: “There is now a single registration system which works online and the procedures for the trade and business are reviewed and simplified regularly.”

Commenting on the pre-GST era, he stated that, “GST merged seventeen different laws and created one single taxation. The pre-GST rate of taxation as a standard rate for VAT was 14.5%, excise at 12.5% and added with the CST and the cascading effect of tax on tax, the tax payable by the consumer was 31%. The GST changed this scenario completely. Today, there is only one tax, online returns, no entry tax, no truck queues, and no inter-state barriers.”

He highlighted that the GST Council “worked on the principle of consensus” which “added to the credibility of the decision-making process.”

The former finance minister further stated that GST could become a “two-tier tax” process.

“Except on luxury and sin goods, the 28 percent slab has almost been phased out. Zero and 5 percent slabs will always remain. As revenue increases further, it will give an opportunity to policymakers to possibly merge the 12 percent and 18 or cent slab into one rate, thus, effectively making the GST a two-rate tax,” he said.

Source:Times-of-India.

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GST Council mandates e-ticketing for cinemas, industry players say no impact on business

GST Council mandates e-ticketing for cinemas, industry players say no impact on business

Last week during the 35th GST Council meeting, electronic ticketing system was made mandatory for multiplexes. The move is to keep a check on possible Goods and Services Tax (GST) evasion and to put an end to the sale of coloured tickets that a few cine complexes are still using.

According to the GST Council, multiplexes will be required to issue a tax invoice electronically and for this purpose, the electronic ticket issued by them shall be deemed to be a tax invoice.

So, what does the government mean by e-ticketing?

E-ticketing means computerised ticketing. A computerised ticket is where the information can be stored digitally.

There are operators that issue manual coloured-paper tickets. Despite, having GST numbers, it has been difficult to track the tax calculation.

Hence, the GST Council has asked all multiplex operators to maintain a digital record of all the transactions, which is possible only when they issue computerised tickets.

The council has mandated mentioning the GST invoice number, the GST number and the SAC code (Services Accounting Code) in the computerised ticket. This would help in the digital storage of the aforementioned elements, making it is easy to monitor and pull out data as compared to manual tickets.

While the move will bring greater tax compliance, the question is how will it impact multiplex players?

Talking to Moneycontrol, Mukta A2 Cinemas Business Head Sachidanand Shetty said, “The impact will be positive as we’d have to do away with the dependency on manual tickets. We’re already e-ticketing compliant.”

He added that the move is a step towards realistic sales with better control and swift reconciliation of box office revenue.

This means that selling GST compliant movie tickets will lead to transparency and it will tell the actual collection of the Indian film industry.

However, most of the multiplexes are already selling e-tickets.

According to Miraj Cinemas MD Amit Sharma, “E-ticketing is more symbolic in nature as over 90 percent cinemas and 100 percent multiplexes have already been doing e-ticketing for years.”

“Maybe the government is looking at it (mandatory e-ticketing for multiplexes) as a case model for other B-to-C (business to customer) places for implementation.”

Inox Leisure, one of India’s largest multiplex chains, is also e-ticketing complaint.

Inox Leisure CEO Alok Tandon said, “We have been issuing computerized movie tickets ever since Inox’s inception due to which making ticketing and billing systems GST compliant was a matter of hours for us.”

“100 percent of our ticketing is computerized and GST compliant as it bears all the details like GST number, GST Invoice number and the SAC code,” he added.

Impact of mandatory e-ticketing on online ticket booking business

On whether mandatory e-ticketing will have an impact on the online movie ticket booking business, Shetty said that it “should boost the same by about 5 percent to the current sales of Mukta A2 Cinemas.”

“While multiplex chains more or less follow the same in all markets – Tier I, II and III – now the new rule will ensure compliance all across,” he added.

In terms of online ticket sales, Inox sells 40-50 percent tickets online whereas, Mukta A2 cinemas is in the range of 35-40 percent.

Multiplexes are welcoming the move saying that e-ticketing will help maintain records in a digital manner, leading to more accurate computation of industry revenue and estimation of due taxes to be levied.

TRA Research CEO N Chandramouli, however, has pointed out another aspect of this move.

He said, “While better tax compliance has been the objective of all governments, from even before democracies were popular, today it has become rigid, inflexible and obdurate.”

“Tax is an earning of the government for services it provides, but businesses are left helpless if they have no room to negotiate the services they get for taxes they pay. If businesses become afraid of doing business because of the tax regime, I think the purpose is defeated at all ends,” he added.

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Source: Money-Control.
What government is doing to improve GST compliance

What government is doing to improve GST compliance

1) What’s the direction of GST in the near term?

Central and state tax officials have until recently taken a lenient approach in administering the technology-driven tax, allowing businesses and traders time to adapt to the new regime. This is quickly making way for a tough new approach to check evasion. Implementing a new, simpler tax return filing form that will make tax evasion harder and stabilizing revenue collection top the agenda of the GST Council. Its medium-term agenda includes converging the two standard tax rates—12% and 18%—applicable on a large number of items somewhere in the middle as revenue collection improves.

2) What’s the plan to check tax evasion?

The GST Council plans to curb tax evasion by using technology and data gathered from various sources to their full extent. One of the proposals is to ask large firms to generate invoices for business-to-business transactions on a designated portal. This will help prevent instances of the buyer taking credits for taxes that the seller has never paid to the government. Identifying and plugging revenue leakage would be a priority for the GST Council, said EY tax partner Abhishek Jain. “The proposed new return form will restrict tax credit utilization to the extent the invoices uploaded by the seller will allow,” he added.

3) What about evasion at the retail level?

Selling without invoices, often with the connivance of the buyer, and the retailer pocketing the tax amount collected from the buyer instead of remitting it to the government are two ways tax evasion takes place at the retail level. Sale without invoice will require inventory more than what is shown in the records. This is often done by using the same e-way bill (electronic permit for transportation of goods) multiple times. Officials believe the plan to validate e-way bills with the data collected at toll plazas of movement of radio frequency identification-enabled vehicles will help check this problem.

4) In what way will close coordination between the direct and indirect tax administration help?

Experts say that globally, indirect tax reforms have helped improve income tax and corporate tax collections as the transparency in sales achieved by GST makes it harder to hide income. Close coordination between the two streams of taxation helps officials to connect the dots and profile assessees better.

5) How serious is the revenue shortfall?

The combined monthly target of central and state governments for this fiscal is about ₹1.14 trillion. They collected just over ₹1 trillion in May, up 6.7% from the same month a year ago but below the monthly target. Revenue shortfall implies the centre has to compensate states for their losses. The sluggish pace of revenue growth means there is not much legroom for the GST Council to cut tax rates in the near future unless revenue receipts soar.

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Source: Live-Mint.
GSTN Starts Offering Free Software To MSMEs For Filing GST Returns

GSTN Starts Offering Free Software To MSMEs For Filing GST Returns

The Goods and Services Tax Network on Tuesday said it has started offering free accounting and billing software to micro, small and medium enterprises with annual turnover of up to Rs 1.5 crore, in a move that would benefit about 80 lakh MSMEs.

This GST MSME software would help small businesses create invoices and account statements, manage inventory and prepare GST returns. The said software is available under ‘Download’ tab on the official GST website, GSTN said in a statement.

“GSTN has partnered with eight billing and accounting software vendors for providing software to the micro, small and medium enterprises, with annual turnover under Rs 1.5 crore, in a financial year without any cost to such taxpayers,” the statement added.

Almost 80 lakh MSMEs with turnover of less than Rs 1.5 crore could benefit from the GST MSME software, it added.

The GST MSME software providers offer basic features like sale, purchase, cash ledger, inventory management, supplier/customer masters, generation of invoices, preparation of GST returns for free. Services like bank reconciliation and account receivables would be chargeable.

GSTN chief executive officer Prakash Kumar said the software will help MSMEs to move towards a digital system so that their efficiency can be improved and their compliance burden can be reduced.

“Such taxpayers are nearly 80 percent in number under GST and thus this step is going to benefit a large number of taxpayers. GSTN on directions of GST Council has identified eight vendors to provide the accounting and billing software without any cost to such taxpayers,” Kumar said.

The GST Council had in January approved the proposal of providing free accounting and billing software to small assessees up to Rs 1.5 crore turnover.


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Source: Bloomberg.

GST standard rates may not be merged any time soon

GST standard rates may not be merged any time soon

The Revenue Department does not think it would be appropriate even in the near future to merge the two standard rates of Goods & Services Tax (GST) into one rate.

The existing GST regime has multiple rates: 0, 0.25, 1, 3, 5, 12, 18 and 28 per cent. The 12 per cent and 18 per cent rates are known as ‘Standard Rates.’

There has been talk of merging the two rates and having one standard rate of 15 per cent to simplify the GST structure.

Also, it will help blunt the criticism of there being too many rates. (0.25, 1 and 3 are special rates. The 0.25 per cent rate is for uncut diamonds; 1 per cent is for affordable housing and 3 per cent for gold and silver.)

“At this juncture clubbing of the two rates into one rate of 15 per cent might cause a revenue loss of approximately ₹1 lakh crore annually,” a senior Revenue Department official told BusinessLine. He further added that such a revenue loss is unwarranted at this moment as it would also affect the overall fiscal deficit. The government aims to restrict the deficit to 3.4 per cent of GDP in the current fiscal year.

Lopsided impact

As of now, out of 1,200 plus goods, nearly 42 per cent attract GST at the rate of 18 per cent, while nearly 15 per cent fall within the 12 per cent bracket. This means the proposed rate change will lead to a higher rate on fewer goods and a lower rate on more goods, leading to a revenue loss.

“This exercise can take place once revenue collection stabilises and average monthly collection is more than ₹1 lakh crore,” the official said.

Since implementation of GST from July 1, 2017, there have been just four instances when the monthly collection crossed ₹1 lakh crore. For 2018-19, the government aims to get ₹13.38 lakh crore (CGST+SGST+IGST+Compensation loss) but revised this later to ₹11.48 lakh crore. Now, for the current fiscal year (2019-20), the aim is ₹13.71 lakh crore. This means the monthly average collection should be ₹1.14 lakh crore. The collection in April stood at ₹1.13 lakh crore.

What the experts think

MS Mani, Partner at Deloitte India, said that with GST collections showing signs of stabilising in recent months, it may be better to for wait for some time before rationalising rates further.

“The initial focus could be on further simplification of procedures on returns, audits and input tax credits,” he said.

Rajat Mohan, Partner, AMRG & Associates, felt that consolidating the twin slabs of 18 per cent and 12 per cent to tax services under a single slab of 15 per cent, as suggested by former Chief Economic Advisor Arvind Subramanian, would lead to an immediate downward spiral in tax collections. “The high volume of transactions in the B2C service segment, such as life insurance, health insurance, construction of commercial shops and offices, accommodation services, food and beverages, social care services etc would pull effective tax contributions down by 3 per cent of the erstwhile contribution, which is expected to be colossal in absolute terms,” said Mohan.


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Source: Hindu-business-Line
GSTR 9 – Annual GST Returns Riddle

GSTR 9 – Annual GST Returns Riddle

Every registered entity is required to file annual return for goods and services tax (GST) by December of the next year. Since the form was not ready in time, the original due date of December 2018 is now extended up to 30 June 2019.

Registered persons, with more than Rs2 crore turnover, have to file GST reconciliation statement and certification (GSTR 9C) as well as annual returns or GSTR9 and audited financial statements. GSTR 9C is required to be certified by a chartered accountant (CA).

GST annual returns or (GSTR9) is a summary of details already reported in GSTR1 (sales returns) and GSTR3B (monthly/ quarterly), i.e., summary of sales and purchases along with tax payments. This, in theory, looks very simple as one-nation-one-tax GST; but when we try to actually fill the returns, there are multiple issues for which no clarifications are available or there are different interpretations by professionals. A few examples are given below:

1. In GSTR9, adjustments or amendments up to September 2018 are asked to be reported. However, the Central Board of Indirect Taxes and Customs (CBIC) has already extended this date up to March 2019. Consequent changes in the form are yet to be made.

2. Table 4 of GSTR9 asks for details of advances, inward and outward supplies made during the financial year on which tax is payable. This data is auto-populated as per GSTR1 filed. However, if some sales are not reported in GSTR1 but tax is already paid through GSTR3B then where to report it is not clarified.
3. The FAQs on this matter issued by CBIC read as under:

“In Form GSTR-9, can additional liability not reported earlier in Form GSTR-3B be declared? Yes, additional liability not reported earlier at the time of filing Form GSTR-3B can be declared in Form GSTR-9. The additional liability so declared in Form GSTR-3B is required to be paid through Form GST DRC-03.”

First of all, it should be GSTR9 and not GSTR3B in line 3. Further, it just information NOT info known but does not say which table and where to declare this liability.

4. Input reversals done in GSTR3B are shown as utilisation of input tax credit (ITC) in auto-populated table 9. Further, this field in not editable.

5. Headings of table 11 and 12 say that “Details of the previous financial year’s transactions reported in next financial year” are to be shown there. However, there is difference in language used in the help file and line item. The help file says, “Particulars for the previous FY transactions declared in returns of April to September of next FY or up to date of filing of annual returns for 2017-18, whichever is earlier.” Whereas individual line item for table 11 and 12 talks only about GSTR1. Now there is confusion as to whether changes made in GSTR3B in the next financial year can be reported here. There is no other table to report these changes either.

6. For those who are not supposed to file audit report in 9C, there is confusion about whether GSTR9 should be based only on returns filed or books of accounts. There is no mention of books of accounts anywhere in GSTR9 frequently asked questions (FAQs).

7. On tax paid on reverse-charge basis, in subsequent financial year through GSTR3B, where does one report in GSTR9? There are no final answers to this. If reported along with normal turnover, it will not match with books of accounts.

8. Table 7 of GSTR9 says, ITC reversed for the financial year is to be disclosed. However, it does not specify in which returns. If reversed during 2018-19 for 2017-18 then it may lead to double reduction while filing next year’s GSTR9.

9. Table 8 of GSTR9 about ITC related information has no column for IGST on import paid but goods still in bonded warehouse, hence credit not taken. Many persons have not taken this credit till goods are cleared. If we follow as per GSTR9 schema, this credit will lapse.

10. The harmonised system of nomenclature (HSN) wise summary of inward supplies where 10% or more of total inward supply is to be given. However, if the supplier has not provided the exact HSN code, it would be very difficult for the taxpayer to now search for it.

These are some of the issues that taxpayers are facing while filing GSTR9 annual return. There are many such issues in GSTR9C audit report form as well. The main issue is that the government has been very slow in giving clarifications and, since returns filed cannot be revised, people are waiting till the last date to file. We all know what happens to GSTN in the last few days of any due date.

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Source: Money Life.
(CA Nikhil Vadia has over 20 years of experience in direct and indirect taxation, internal audit, systems review and management consultancy.)
GST: Homebuyers To Pay 12% GST On Balance Due If Completion Certificate Issued By March 31

GST: Homebuyers To Pay 12% GST On Balance Due If Completion Certificate Issued By March 31

Homebuyers will have to pay 12 percent Goods and Services Tax on balance amount due to the builder if the housing project has been granted completion certificate by March 31, 2019, the Central Board of Indirect Taxes and Customs has said.

Builders who have received a completion certificate for an ongoing project before April 1, 2019, will have to charge 12 percent GST from buyers on the balance amount due towards the purchase of the flat.

Issuing the second set of FAQs for real estate sector, the CBIC said that builders will not be able to adjust the accumulated credits in ongoing projects in case they opt for lower new GST rate of 5 percent for normal and 1 percent for affordable housing.

The first set of FAQs for real estate sector was issued last week to clarify doubts with regard to migration of real estate developers to new GST rates for the sector which has come into force from April 1, 2019.

The GST Council, headed by Finance Minister Arun Jaitley and comprising state counterparts, had in March allowed real estate players to shift to 5 percent GST rate for residential units and 1 percent for affordable housing without the benefit of the input tax credit from April 1, 2019.

For the ongoing projects, builders have been given the option to either continue in 12 per cent Goods and Services Tax slab with ITC (8 percent for affordable housing), or opt for 5 percent GST rate (1 percent for affordable housing) without ITC and communicate to their respective jurisdictional officers the same by May 20.

To a query on what shall be the rate of GST applicable on projects in respect of which occupation certificate has been issued prior to April 1 but the balance demands are pending, the FAQ said: “Time of supply of the service by way of construction of apartments in such projects falls prior to April 1, 2019, and accordingly the rates as existed prior to April 1, 2019, would apply to such balance demands.”

AMRG & Associates Partner Rajat Mohan said, “This clarification has tightened the grip on taxpayers who intended to take benefit of lower taxes rates with the aid of deferred invoicing.”

On whether accumulated ITC can be adjusted against new tax liability of 5 percent and 1 percent, the FAQ said: “No. GST on services of construction of an apartment by a promoter at the rate of 1 percent/ 5 percent is to be discharged in cash only. ITC, if any, may be used for discharging any other supply of service.”

“Developers opting for new tax regime for ongoing projects now has another reason to refrain from new scheme,” Mohan said.

The CBIC further clarified that exempted goods procured by a builder under the new tax regime would not be counted within the 80 percent limit set for procurement from registered dealers.

“This could entail an additional tax of 18 percent on value of exempt supplies, credit of which would not be available to developers,” Mohan added.

While deciding on lower GST rates for real estate sector, the Council had said that at least 80 percent of the inputs should be procured from registered dealer.

The CBIC has also clarified that developer and not the land owner will have the right to decide whether to opt for new GST rates or stick to old rates for ongoing projects.

EY Tax Partner Abhishek Jain said: “Clarifications on some technical ambiguities like non-applicability of new rates for projects completed before April, 2019, valuation of TDR, etc should help resolve some involved issues for this sector.”

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Source: Bloomberg Quint.