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ITC reversal

04 February 2021

my client in real estate business.he started 100 flats construction on 1-9-17.out of 100 flat 80 flat are book by coustomers and 20 flats are remain un sold till. to day.B.U.permission receive today.Now question is that client taken full ITC up to date in which how many ITC should reverse and in which formula,because after b.u.unsold flats become tax free.

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Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (4085 Points)
Replied 04 February 2021

The 34th GST Council held on 19 March 2019, announced the modalities for the lower effective GST rate for Real Estate Sector. The slashed GST rate i.e. 1% in case of affordable houses and 5% on construction of houses other than affordable house came into effect from April 1, 2019, through Notification No. 03/2019 – CT(R) dated 29th March 2019 to encourage the demands for properties.

However, these new GST rates were available subject to certain conditions, including the unavailability of ITC for builders/developers opting in for the benefits of low GST rate. In case of ongoing projects (projects for which construction and booking began before 1st April 2019 but not completed by 31st March 2019), the builder shall be liable to reverse Input Tax Credit (ITC) by applying the formula stated in Annexure of notification, within the due date of 20^th September.

Calculation of ITC Reversal

As stated in the Annexure of notification, the following builders/ developers are required to comply with the below-given formula to calculate the reversal of ITC.

Components of the formula

- Tx = ITC on inputs and input services attributable to the construction of residential and commercial portion, where ToS (time of supply) is on or after 01.04.2019
- T = Total ITC availed from 01.07.2017 to 31.03.2019 including transition credit (whether or not utilised)
- Tr = ITC attributable to construction of residential portion in the REP where ToS (time of supply) is before 01/04/2019.
- Tc = ITC attributable to the construction of a commercial portion in the REP.
- Tr = ITC attributable to construction of residential portion in the REP where ToS (time of supply) is before 01/04/2019.
- Te = ITC attributable to the construction of commercial and residential portion where ToS (time of supply) is before 01/04/2019 and Te shall be calculated as Tc + Tr.
- F1 = carpet area of residential apartment / Total carpet area of the residential and commercial apartment.
- F2 = Total carpet area of residential apartment booked before 01.04.2019 / Total carpet area of a residential apartment.
- F3 = Value of supply for residential apartment booked before 01/04/2019 where ToS (time of supply) is before 01/04/2019 / Total value of supply for such booked apartments.
- F4 = 1 % completion of construction as on 31.03.2019.