23 June 2022
Dear Sir, Sub: ITC Credit in the case of Real Estate Company. We are a real estate company, acquired land and we will sell out developed plots, construct Building for Commercial, residential then it to sell out. I want to know, if there are availability of ITC credit or RCM to pay for the followings:-
Purchases:- 1. Building Materials- Cement,Sand, Bricks, Bajri, Tiles, Steel Bars/Rods, Paints, Sanitary Items, Electrical Items. These purchases may be from Registered Dealers or Unregistered Dealers. ITC Credit available or RCM to be payable. 2. There are some expenses for advices from Architectures, Legal Practitioners, they would charge GST on their invoices, its credit is available to us or not. 3. There are other purchase of Stationery, advertisement expenses, Computer Purchases, RO Purchases, ie Office Equipments. 4. Machineries- Tractor, JCB, Borewell, Water Tankers, Concrete Mixer Mould for paver etc. 5. Labour from sub contractors. Sales:- 1. At the time sell of Developed Plots GST Rate applicable rate. 2. Commercial Building Completed in all respect- Completion Certificate obtained GST Rate? 3. Commercial Semi Finished Building- Incomplete - GST Rate? 4. Residential Building Completed in all respect- Completion Certificate obtained -GST Rate? 5. Residential Building Incomplete- GST Rate. With best regards, M.K.Mandal Mobile No. 9459701937.
09 July 2024
In the context of a real estate company involved in the development and sale of properties, here's how Input Tax Credit (ITC) and Reverse Charge Mechanism (RCM) apply to various transactions:
### Purchases:
1. **Building Materials (like Cement, Sand, Bricks, etc.):** - **ITC Availability:** You can claim Input Tax Credit (ITC) on GST paid for building materials purchased from registered dealers. However, for purchases from unregistered dealers, you cannot claim ITC, and RCM may apply where you have to pay GST on such purchases under reverse charge.
2. **Professional Services (Architects, Legal Practitioners, etc.):** - **ITC Availability:** ITC is available on GST paid for professional services like architectural services, legal consultancy, etc., which are used for business purposes (i.e., construction and development).
3. **Other Expenses (Stationery, Advertisement, Office Equipment, etc.):** - **ITC Availability:** ITC can be claimed on GST paid for office-related expenses such as stationery, advertisement expenses, and purchases of office equipment like computers and RO systems, provided these are used for business purposes.
4. **Machineries (Tractor, JCB, etc.):** - **ITC Availability:** ITC can be claimed on GST paid for machineries used in construction activities, such as tractors, JCBs, borewell equipment, water tankers, etc., which are used in the course of business.
5. **Labour from Subcontractors:** - **ITC Availability:** ITC can be claimed on GST paid for services provided by subcontractors for construction labor, subject to compliance with GST rules.
### Sales:
1. **Developed Plots:** - **GST Applicable:** GST is applicable on the sale of developed plots. The rate of GST varies depending on whether the plots are residential or commercial and other factors like whether infrastructure development work has been completed.
2. **Commercial Building (Completed):** - **GST Rate:** For a completed commercial building where a completion certificate has been obtained, GST is applicable at the prevailing rate for commercial properties.
3. **Commercial Building (Semi-Finished/Incomplete):** - **GST Rate:** The GST rate for semi-finished or incomplete commercial buildings could differ based on the progress of construction and whether substantial completion criteria are met. Specific advice from a tax professional may be required to determine the applicable rate.
4. **Residential Building (Completed):** - **GST Rate:** Similar to commercial buildings, GST for completed residential buildings with a completion certificate is applicable at the prevailing rate for residential properties.
5. **Residential Building (Incomplete):** - **GST Rate:** For residential buildings that are incomplete or under construction, GST implications can vary. Generally, a lower rate may apply compared to completed properties, but specific rules and conditions should be checked based on the project status and legal requirements.
### Conclusion:
- Ensure proper documentation and compliance with GST rules for claiming ITC on eligible purchases. - Determine GST rates applicable to your sales of developed plots and completed/incomplete buildings based on project status and completion certificates. - Consider consulting with a tax professional or chartered accountant who specializes in real estate transactions to ensure compliance and maximize the benefits of ITC under GST regulations. They can provide tailored advice based on your specific circumstances and transactions.
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