Real Estate Sector and GST Implications
This content delves into the real estate sector's current tax structure, the impact of GST, and sector-specific issues. It explores the transition from the previous tax regime to GST and how it affects construction contractors. The summary provides a comparison of tax rates and total contract values under GST, facilitating a comprehensive understanding of the real estate industry in the GST era.
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Presentation Transcript
REAL ESTATE SECTOR REAL ESTATE SECTOR & GST & GST By CA. Jatin Harjai
CONTENTS CONTENTS Industry Introduction Current Tax Structure GST Structure and its effects Sector Specific Issues / Transitional Issues
Industry Introduction Industry Introduction
INDUSTRY INTRODUCTION INDUSTRY INTRODUCTION
INDUSTRY INTRODUCTION INDUSTRY INTRODUCTION
Current tax structure Current tax structure Construction contractors are issued with Material and Labour. Service tax is charges under works contract service with following two option: Service tax on 30% value including value of material and land Service tax on 40% value including value of material VAT : VAT is charges as per state government rules in difference state. Rate of VAT on Works Contract in Rajasthan is 3% %. Some important case : Larsen and Toubro Apex Court: Works contract is Indivisible contract BSBK LTD, L&T judgement overruled and works contract can be divided between material and labour Kone Elevator Case: Supply and installation of elevator was supply contract initially but subsequently changed to
GST Impacct on Real Estate -- Summary Tax rate 18% 12% 5% Present tax 761.00 761.00 761.00 Net increase with ITC 1,039.00 439.00 (261.00) Net Increase without ITC 1,888.60 1,245.40 495.00 Total contract value Rs 10000/-
Scenario 1 (GST Rate 18%) Service Tax VAT Particualrs Basic Rate Amount Rate Amount Total Land Cost Construction cost Gross cost Input tax credit Net Cost Profit Basic Sale Price Output tax on sale Total Sale value 4000 4000 8000 4000 4440 8440 240 8200 2000 10200 561 10761 6% 240 240 240 5% 200 200 Less : 8000 2000 10000 0 200 Add: 0 200 102 302 4.5% 459 459 1% 10000 CGST SGST Particualrs Basic Rate Amount Rate Amount Total Land Cost Construction cost Gross cost Input tax credit Net Cost Profit Basic Sale Price Output tax on sale Total Sale value 4000 4000 8000 4000 4720 8720 720 8000 2000 10000 1800 11800 9% 360 360 360 9% 360 360 360 Less : 8000 2000 10000 0 0 Add: 0 0 9% 900 900 9% 900 900 10000 Net Increase With ITC 441 598 1039 CGST SGST Particualrs Basic Rate Amount Rate Amount Total Land Cost Construction cost Gross cost Input tax credit Net Cost Profit Basic Sale Price Output tax on sale Total Sale value 4000 4000 8000 4000 4720 8720 9% 360 360 9% 360 360 Less : 0 0 0 8000 2000 10000 360 360 8720 2000 10720 1929.6 12649.6 Add: 360 360 9% 964.8 1324.8 9% 964.8 1324.8 10000 Net Increase Without ITC 865.8 1022.8 1888.6
Scenario 2 (GST Rate 12%) Service Tax Amount VAT Particualrs Basic Rate Amount Rate Total Land Cost Construction cost Gross cost Input tax credit Net Cost Profit Basic Sale Price Output tax on sale Total Sale value 4000 4000 8000 4000 4440 8440 240 8200 2000 10200 561 10761 6% 240 240 240 5% 200 200 Less : 8000 2000 10000 0 200 Add: 0 200 102 302 4.5% 459 459 1% 10000 Amount CGST Amount SGST Particualrs Basic Rate Rate Total Land Cost Construction cost Gross cost Input tax credit Net Cost Profit Basic Sale Price Output tax on sale Total Sale value 4000 4000 8000 4000 4720 8720 720 8000 2000 10000 1200 11200 9% 360 360 360 9% 360 360 360 Less : 8000 2000 10000 0 0 Add: 0 0 6% 600 600 6% 600 600 10000 Net Increase With ITC 141 298 439 Amount CGST Amount SGST Particualrs Basic Rate Rate Total Land Cost Construction cost Gross cost Input tax credit Net Cost Profit Basic Sale Price Output tax on sale Total Sale value 4000 4000 8000 4000 4720 8720 9% 360 360 9% 360 360 Less : 0 0 0 8000 2000 10000 360 360 8720 2000 10720 1286.4 12006.4 Add: 360 360 6% 643.2 1003.2 6% 643.2 1003.2 10000 Net Increase Without ITC 544.2 701.2 1245.4
Scenario 3 (GST Rate 5%) Service Tax Amount VAT Particualrs Basic Rate Amount Rate Total Land Cost Construction cost Gross cost Input tax credit Net Cost Profit Basic Sale Price Output tax on sale Total Sale value 4000 4000 8000 4000 4440 8440 240 8200 2000 10200 561 10761 6% 240 240 240 5% 200 200 Less : 8000 2000 10000 0 200 Add: 0 200 102 302 4.5% 459 459 1% 10000 Amount CGST Amount SGST Particualrs Basic Rate Rate Total Land Cost Construction cost Gross cost Input tax credit Net Cost Profit Basic Sale Price Output tax on sale Total Sale value 4000 4000 8000 4000 4720 8720 720 8000 2000 10000 500 10500 9% 360 360 360 9% 360 360 360 Less : 8000 2000 10000 0 0 Add: 0 0 2.5% 250 250 2.5% 250 250 10000 Net Increase With ITC -209 -52 -261 Amount CGST Amount SGST Particualrs Basic Rate Rate Total Land Cost Construction cost Gross cost Input tax credit Net Cost Profit Basic Sale Price Output tax on sale Total Sale value 4000 4000 8000 4000 4720 8720 9% 360 360 9% 360 360 Less : 0 0 0 8000 2000 10000 360 360 8720 2000 10720 536 11256 Add: 360 268 628 360 268 628 2.5% 2.5% 10000 Net Increase Without ITC 169 326 495
Sector Specific / Transitional issues Sector Specific / Transitional issues Input Credit : Section 17(4)(c) & (d) : Credit eligibility in case of immovable property: a) Works Contract service to Works contract service ALLOWED b) Works Contract service to Imm. Prop. being Plant & Machinery : ALLOWED c) Works Contract Service to any other Imm. Prop. : NOT ALLOWED d) Goods & Services for own Imm. Prop. Being P&M: ALLOWED e) Goods & Services for own Imm. Prop. (Not Being P&M) : NOT ALLOWED Hence input credit can not be availed by builders when he sell the flats which will be taxable under the category of construction service. Input credit will also not be available on construction of commercial complex by developer where income will be under the renting category.
Sector Specific / Transitional issues Sector Specific / Transitional issues Intra State Contract V/s Inter State Contract : (47) fixed establishment means a place, other than the place of business, which is characterised by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services, or to receive and use services for its own needs; Hence if contractor is from Haryana executing a contract in Jaipur, he need to take registration in Rajasthan. Will site office maintained be treated as place of business?
Sector Specific / Transitional issues Sector Specific / Transitional issues Free issue material: Free issue material will be added to the value of supply which may lead to double taxation of material. Land Cost : Land cost will be included in the value of supply. There is no abatement for the value of land.
Sector Specific / Transitional issues Sector Specific / Transitional issues 3. Lease of Land / Commercial Complex will also be supply (1) Supply includes (a) all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business, CBEC Notification No. 41/2016-Service Tax dt. 22 Sept. 2016 [F. No. 354/51/2016 -TRU] There is exemption of service tax on lease of land for the period exceeding 30 years by Government undertaking and Corporation. There is no such exemption under GST. construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or before its first occupation, whichever is earlier. In case building which has been constructed on lease land and transferred after obtaining the completion certificate, still GST can be applicable since it is transferred on lease.
Other Issue / Transitional issues Other Issue / Transitional issues works contract means a contract wherein transfer of property in goods is involved in the execution of such contract and includes contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property; If work contract has been carried out for movable property such as repair of car with spare parts : Composite supply
