Finally, the GST council in the 43rd Meeting held on 28th May 2021 has come with much-awaited relief to the construction industry by way of changing the Time of Supply provision in case of services of construction provided by Developer Promoter to Landowner Promoter and consequently, Landowner promoters shall be eligible to utilize the ITC charged by Developer promoter.
Let us understand the changes in provisions in this comparative table:
| Particulars | Old Provision | New Provision |
| Time of Supply | Time of supply of construction services supplied against Transferable Development Rights (TDR) or Floor Space Index (FSI) shall arise on the date of issuance of the completion certificate for the project or first occupation whichever is earlier. i.e., Developer – Promoter pays GST on supply of construction services to Land Owner – Promoter in the tax period in which completion certificate received or the first occupation takes place. Notification No. 06/2019 – Central Tax (Rate) |
Time of supply of construction services supplied against Transferable Development Rights (TDR) or Floor Space Index (FSI) shall arise “in a tax period not later than the tax period in which the date of issuance of the completion certificate, or the date of its first occupation, whichever is earlier. Notification No. 03/2021 – Central Tax (Rate) i.e., Developer – Promoter can now pay GST on supply of construction services to Land Owner – Promoter in the tax period anytime prior to the date on which completion certificate received or the first occupation takes place. |
| Availability of Input Tax Credit | In S. No 3 Column 5 of Notification No 11/2017 – Central Tax (Rate) as per clause (ii) of the fourth proviso Land Owner – Promoter is eligible to take credit of taxes charged by a developer for the supply of construction services if he satisfies the following conditions: 1. He further supply apartments before issuance of completion certificate or first occupation whichever earlier and 2. Payment of taxes should not be less than the amount of tax paid to developer promoter on the construction of such apartment. |
In serial number 3, against items (i), (ia), (ib), (ic) and (id) in column (3) , in the conditions in column (5), in the fourth proviso, in the Explanation, after clause (ii), the following clause shall be inserted, namely- “(iii) the landowner-promoter shall be eligible to utilize the credit of tax charged to him by the developer promoter for payment of tax on apartments supplied by the landowner-promoter in such project.” Notification No. 02/2021 – Central Tax (Rate) Earlier Landowner Developer was just eligible for a credit of taxes charged by the developer and now with this amendment, he can even utilize it for payment of tax on supply of apartments. |
| Issue | In case the supply of an apartment by the Landowner Developer is in a month earlier than the month of issuance of the completion certificate or first occupation then the ITC amount will become a cost to the Landowner Developer as he will discharge his liability prior to getting tax paid invoice from Developer Promoter. | Now after this amendment landowner promoter can plan with the Developer Promoter to issue a tax invoice in respect of its construction services anytime prior to the issue of completion certificate or first occupation and the Landowner promoter can consequently use this ITC for payment of its output GST liability on the sale of apartments |
