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Treading GST path - XL - GST for ongoing constructions

Doubt on applicability of valuation under Para 2

Sir, I have different view in the subject matter which I post for your perusal.
It is mentioned in the above article that in case-II, ST @15% is paid on 40% of amount of Rs. 10 lakhs (Rs. 20 lakhs less Rs 10 lakhs towards UDS of Land) (how UDS land value is ascertained?) and on the balance amount of Rs. 30 lakhs received after 1.7.2017 also GST@ 12% (18% on 2/3rd value) is to be paid. But it appears to me that it is not correct. As per 3(i) of Notfn No. 11/2017-CT(R), GST rate is 9% (with addition of equal SGST total GST would be 18%) and as per Para.2 of said notification which reads as follows:
“2. In case of supply of service specified in column (3) of the entry at item (i)……….at serial no. 3 of the Table above, involving transfer of property in land or undivided share of land, as the case may be, the value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, as the case may be, and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply.
Explanation.–For the purposes of paragraph 2, “total amount” means the sum total of,-
(a) consideration charged for aforesaid service; and
(b) amount charged for transfer of land or undivided share of land, as the case may be.”
The amount of Rs. 30 lakhs received after 1.7.2017 do not inclusive of land value as land value was already realized prior to 1.7.2017. Hence, scope of the supply for which subject Rs. 30 lakhs is charged , do not involve ‘transfer of property in land or undivided share of land’ and therefore valuation under para.2 is not applicable. Accordingly, valuation shall be in terms of Section 15 for payment of tax and GST payable @ 18% on Rs. 30 Lakhs. Even if it is considered that para.2 is applicable, the taxable value would be equal to 2/3rd of Rs 40 lakhs (Rs 30 lakhs plus Rs.10 Lakhs). But still it appears to me that taxable value should be Rs. 30 lakhs only. Please re-examine the issue.

mallikarjun reddy c 27/12/2017

Re :Doubt on applicability of valuation under Para 2

You have raised a valid point. On the face of it and on the basis of plain reading of the provision it appears that 18 % is payable on 30 lakhs. But it may be noted that had GST not been introduced, on all amounts received (even after realisation of uds value) ST would have been payable on 30 % of such realisation. If we take a pure case under GST on all amounts received, GST is payable only on two third value. The rationale is 70 % of the total amount is presumed to be towards goods and land in ST regime and 1/3 of the total value is presumed to beof land value under GST regime. The fact that in between ST was replaced by GST should not dilute this basic principle. They should have made specific provison for dealing with such transitional cases. So, going by the spirit of the provisions, i feel that my suggestions are legally valid, though the alternative view is also quite possible.

jaikumar seetharaman 27/12/2017

Re :Doubt on applicability of valuation under Para 2

Thank you very much Sir,
It is mentioned in the article that ST of Rs.60,000 was paid (under Case II) prior to 01.07.17 @15% on 40% value of Rs.10 lakhs on the ground that Rs.10 lakhs out of Rs 20 lakhs is towards value of UDS of land. Hence, my view is that the balance amount of Rs. 30 lakhs can't be considered as the amount inclusive of land value and thereby valuation in terms of Para 2 of subject notification is not applicable in such case.
With regards

mallikarjun reddy c 27/12/2017