Realty Sector – Filing of Annexure IV – confusion compounded – 08-05-2019

MAY 08, 2019

By S Sivakumar, LL.B., FCA, FCS, ACSI, Advocate

THE Commissioner of Commercial Taxes, Karnataka has issued a circular bearing No.KGST.CR.19/2019-20 dated 04-05-2019 addressed to the Joint Commissioners located in Karnataka, on how the Form IV is to be filed by the Developer Promoters, in terms of Notification No (03/2019) No. FD 48 CSL 2017 dated 29-3-2019, which again, is based on Notification 3/2019-CT(Rate) dated 29-3-2019, issued by the Central Government.

I have reproduced the text of this circular dated 04-05-2019 duly signed by the Additional Commissioner of Commercial Taxes, (Policy & Law), Bengaluru –

The Residential Real Estate Projects have been brought under a differential treatment as per the amendment made to the Notification (11/2017) No. FD 48 CSL 2017 dated 29-06-2017 by Notification (03/2019) No. FD 48 CSL 2017 dated 29-03-2019. They this the Residential Real Estate Projects are liable to tax at lower rates without the benefit of input tax rebate. Please refer these notifications for details.

2. However in case of any ongoing real estate project as on 31-3-2019, the Promoters are given an option either to continue in the old scheme or to adopt to the new scheme in relation to such projects. The Promoters desirous of continuing in the old scheme are required to submit an application manually, GSTIN wise, in FORM, as prescribed in ANNEXURE-IV to the above notification dated 29-03-2019. The same is required to be submitted before 10th of May 2019.

3. Further the eligible input tax credit (Te) as calculated and certified duly by a chartered accountant or a cost accountant shall be submitted by the Promoters to the Commissioner or an Officer authorised by him who may fix Te in such cases if required.

4. The Commissioner of Commercial Taxes (Karnataka) vide Order No. KGST.CR.19/2019-20 dated 04-05-2019, has delegated the powers of accepting the above applications and fixing the Te to the jurisdictional Joint Commissioners of Commercial Taxes/Administration) DGSTO.

5. It has come to the notice of this office that the application opting for continuing with the old scheme has been submitted in certain cases to the LGSTOs / SGSTOs. In such cases those applications shall be transferred to their jurisdictional DGSTOs.

6. The Joint Commissioners of Commercial Taxes (Administration) are informed to instruct their LGSTOs not to reject any applications already received by them / likely to be received in future. They shall get such applications transferred to their office for necessary action at their end.

In para 2 of this circular, the State Government states that the Form IV has to be filed GSTIN wise. My understanding arising from a reading of Notification No. 3/2019-CTR dated 29-3-2019 is that, the said ANNEXURE IV has to be filed in respect of each Residential Real Estate Project.

More importantly, take a look at Para 3 of this Circular, which states that the Chartered Accountant/Cost Accountant’s certificate is to be submitted to confirm the eligible input tax credit, i.e. ‘Te’, along with ANNEXURE IV. The State GST Authorities seem to be oblivious of the fact that the need to file the CA certificate arises only in a situation where the Developer is opting to pay GST in respect of an ongoing project under the new 5% Scheme, in which case, there is a need to reverse eligible ITC attributable to the commercial or residential portion in the REP, which has time of supply on or before March 31, 2019.

In other words, the Developer would be required to file ANNEXURE IV, only in respect of ongoing projects for which, he is opting to continue under the old scheme by classifying his output services under SAC 9954 (if) or (ie). Where then is the need to specify the requirement of filing the CA/Cost Accountant certificate while filing ANNEXURE IV? This fact is clearly brought out in Notification No. 3/2019-CTR dated 29-3-2019.

Realty players operating in Karnataka, who have been assigned to the Karnataka State Government, would do well to note these requirements specified by the State Government in its circular dated 04-05-2019, which, as aforesaid, reflects a complete lack of understanding of the issues governing the new GST regime for the Realty Sector. One would expect the State Government to modify its aforesaid circular so that, Realty Developers who are assigned to the State Government are not put to undue hardship.

Before parting…

One would wonder as to the plight of the Realty Developers in transitioning to the new regime, if the understanding of the State Government, as mentioned above, could be in such a stark contrast with that of the Central Government.

Given the all-around confusion prevailing, the Central Government could think of extending the time for filing the ANNEXURE IV by the Developers.

(The views expressed are strictly personal)

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