ITC Availment

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Dear All, In one of our real estate companies, we have been charging ITC on duplex and flats sold @ 5% but we are setting off the liability against brought forward ITC. we are not claiming any fresh ITC but adjusting against the past ITC brought forward. Now the query is since we are charging GST @ 5%, can this brought forward ITC be claimed or NO ITC be claimed against the liability. Another query is now during the current year itself, we will be selling some more flats and shopping complexes (another project but under the same company), can we charge GST @ 12% and claim all ITC. Is this switch over from 5% to 12% permissible during the year. thanks in advance.

Please reply as it is very serious issue we are facing.

Replies (1)

Hey Gangeshwar, this is a crucial GST query for your real estate business. Let me break it down clearly:

1. Can you claim ITC on GST charged @ 5% on flats and duplex when adjusting brought forward ITC?

  • When you sell flats or duplexes under the Affordable Housing Scheme or under GST Notification 11/2017, the applicable GST rate is 5% (without ITC).

  • Since you are charging GST @ 5% without ITC on outward supply, you cannot claim fresh ITC on inputs or input services related to these supplies.

  • However, you can adjust (utilize) the brought forward ITC balance (ITC accumulated from earlier periods or other projects) to pay the GST liability on these supplies. This is allowed because the liability has to be discharged, but no fresh ITC on input services for these supplies can be claimed.

2. Can you charge GST @ 12% on some other project (shopping complexes) during the same year and claim full ITC?

  • Yes, you can charge GST at 12% on non-affordable housing projects (like shopping complexes or luxury apartments).

  • You can claim ITC on inputs and input services used for these 12% taxable supplies as usual.

  • Switching between GST rates (5% without ITC for affordable housing & 12% with ITC for other projects) is permissible during the year, provided you maintain separate accounts and books to track ITC attributable to each type of supply (since the GST rates and ITC rules differ).

  • It is critical to avoid any ITC mismatch or misuse; for example, ITC used for 12% supplies cannot be diverted to 5% supplies, and vice versa.

Summary

Point Affordable Housing (5%) Non-affordable Housing (12%)
GST Rate 5% without ITC 12% with ITC
Claiming Fresh ITC No Yes
Adjusting Brought Forward ITC Allowed to pay liability Allowed to pay liability
Switching between rates Allowed with proper accounting Allowed with proper accounting

Important:

  • Maintain separate records for the two categories of supplies.

  • Follow the conditions prescribed in the GST notifications carefully.

  • Be prepared for possible GST audits to justify your ITC claims and tax rates charged.


 


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