At Sun City, Jodhpur, 2 days National Tax Conference event (4th and 5th Jan, 2020) has held jointly by the Rajasthan Tax Consultants’ Association, Jaipur (RTCA) and Tax Bar Association, Jodhpur. The evant has held at Dr. S.N. Medical College Auditorium, Residency Road, Jodhpur.
Hon’ble Chief Minister of Rajasthan Sh. Ashok Gehlot was the Chief Guest of event and he delivered his good wishes for the success of the event. He further said that “I am always stand with the professionals to make the compliance of taxation system easy”.
The Agenda of the tax conference is as under :
- To highlight the various important sections of Income Tax Act, GST Act, Companies Act.
- To highlight the major issues in GST in front of govt. for ease of compliance.
- To elaborate the most important part of GST Act “real estate transactions under GST”.
- To help professionals in understanding various aspects of E-Assessment and Re-Assessment in Income Tax & Insolvency and Bankruptcy Code.
Now, we are discussing the provisions of various acts, which are discussed by the experts at National Tax Conference :
(1.) REAL ESTATE AND GST (AUTHOR : ADV. ROHINI AGGARAWAL) :
GST has bearing almost all transactions in the real estate sector, be it sale of property or joint development agreement or development of plots or transfer of development rights or indexed floor space or renting or long term lease. The major aspects having GST impact are : taxability of transaction, taxable value and at times tax rate of transaction and also input tax credit available in context of a transaction
From a practical standpoint, the impact of GST real estate may be divided into two parts : One, the issues which may arise in interpreting the related GST provisions ; and two, how to best manage the GST costs by way of careful documentation and accounting in the given spectrum of these provisions.
Let us take a simple transaction of sale of property. Simply put, if the property is booked by the buyer before completion, where the buyer also pays some amount for the booking or otherwise before completion of construction, the transaction of sale of property is chargeable to GST ; and if the property is completed and then sold, it would be considered as sale of Immovable Property and GST would not be chargeable on such property.
As a general rule, if the transaction of sale of property is chargeable to GST, the seller can take benefit of ITC against the GST payable by him on sale ; and if, the transaction of sale of property is not chargeable to GST, the seller would not get any benefit for the corresponding input tax incurred by him. However, this general rule also has exceptions in case of sale of residential property or such commercial properties which are considered as part of Residential Real Estate Project (RREP).
The above legal position is set and acceptable to all in context of sale of property. Now comes the points of confusion and disputes in the different variants of above transaction. Talking about the taxability, even where a unit is complete before sale, the first point of difficulty arises when the complex or building is complete in terms of construction and the authority does not grant completion certificate for a long time which may spread into number of years also. In such cases, GST still applies on sale of property despite it getting completed. Though the law has provided an alternate to the completion certificate to hold that the property was completed before sale. That is, if the first occupation of ‘complex’ or ‘building’ is done before sale, then also it will be considered as completed an no GST would apply on its sale. This may not be much helpful given the confusion about whether any occupation in the complex or building would qualify as first occupation, or it is about occupation of first unit to be sold. If this be so, then the seller may have to rent out the unit for the purposes of qualifying ‘first occupation’ norm, before selling it.
In the GST law, though the govt. has partly taken care of the issues arisen from these judgments by prescribing the deemed value of land as 1/3rd of the total consideration charged to the buyer for the sale of property in the GST rate notification, however, no other optional mechanism has been provided in the law in case the seller wishes to identify the actual cost of land. The question now arises whether provision for ascertainment of the value of land by way of deeming fiction with the criteria of 1/3rd of the total value of property would meet the requirement of the basic principles of taxation or we are looking for the further litigations on this aspect.
Full article will be provided shortly…
(2.) EK GST ANEK GST (AUTHOR : GAJENDRA MAHESHWARI) :
Vijaya Mulay, the director of Doordarshan’s animated short film “EkChidiyaAnekChidiya” passed away recently. mulay’s film, that millions of Indians have grown up watching, carries a beautiful message about unity in diversity.
Almost concurrently, although diverse with the Mulay’s demise, the country witnessed another development in the form of variation of GST rates by various states as well as introduction of Flood Cess by the govt. of Kerala on the taxable supply of goods and services within the state (i.e. intra state). Such variance in the rate triggered a debate whether the GST tax is presumably “One Nation One Tax” is indeed “Ek”Tax or “Anek”Tax ?
“Is GST going to be like the Value Added Tax (VAT), where states started with three base rates and gradually deviated from them with the passage of time ?”, was the apt question addressed to me when i explained the constitutional framework to the participants in one of the GST events meant for Chartered Accountants.
“That is unlikely, primarily due to the design and inter-operability of the GST laws”, I replied and then explained the reasons :
- The design of GST law is conceptually much different from the Central Sales Tax, as in case of the latter the rates on inter-state supplies made to unregistered buyers were governed by the VAT rates applicable in the supplier state (instead of common IGST rates) and in any event the tax charged was non-creditable.
- Given this lawful model for tax arbitrage, states would be precluded from imposing any cess or increasing their CGST rates. Any enhancement in the effective state GST rates would discourage procurements from within the state and, thus, adversely impact the businesses based in this state.
To summarize, the impact of introduction of any cess or enhancement in State GST levy, in the longer run, would mainly be confined to low value B2C supplies. The loss of local business would act as a push factor for the state to realign their rates with the national rates.
Thus, the inclusive idea of nationally integrated indirect tax laws – Ek, AnekAur Ekta (One, many and Unity) is addressed through IGST – a centripetal force that discourages ‘anek’ and aims at ‘ek’ GST.
(3.) OVERVIEW OF INSOLVENCY & BANKRUPTCY CODE, 2016 :
The Insolvency and Bankruptcy Code, 2016 is one of the major economic reform bills that have been moved by the govt. and is the biggest reform in the economy after the Goods and Services Tax.
The main objective behind the enactment of the new code is to consolidate the laws that relates to the insolvency of the companies, partnership firms, limited liability partnership and individuals into a single code and to have a time bound insolvency and bankruptcy procedure for the maximisation of value of the assets of such person.
The pillars on which this code stands are as follows :
- Insolvency Professionals ;
- Adjudicating Authority ;
- Regulatory Body / insolvency & Bankruptcy Board of India
Application under Insolvency & Bankruptcy Code, 2016 (Section 7, 9, 10):
- By Financial Creditor (Section – 7) : A financial creditor may be itself or jointly with other financial creditors or any other person on behalf of the financial creditor, as may be notified by the Central Government, seek to initiate Insolvency Resolution Process by filing an application before the NCLT once a default has occurred (in Form-1). The code provides that within 14 days of an application having been filed, NCLT shall ascertain the existence of the debt and default and either admitor reject the application, after which consequences under the code would follow.
Full article will be provided shortly…