QUESTION
Mr. A is constructing villa during the June 2020 , and he has not taken any advance from prospective buyer during 2020-21, hence not paid GST under 9(4) for labor charges received from unregistered supplier, now during the year 2021-22 he will taken advance for un-constructed villa , which construction was started wef.June,2020, Query (i) what procedure he has to follow? (2) whether Mr. A has to pay GST u/s 9(4) for the year 2020-21 or not? (3) During the year 2021-22 when Mr. A take advance for these villa then he will be liable for tax.
ANSWER
FACTS OF THE CASE: Applicability of RCM u/s 9(4) for labour charges received from unregistered supplier for construction of villa.
LAW APPLICABLE: SECTION 9 OF CGST ACT
(4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both.
SCHEDULE II OF CGST ACT
5. Supply of services
The following shall be treated
as supply of service, namely:'
----------------------------
(b) construction of a complex, building, civil structure or a part thereof,
including a complex or building intended for sale to a buyer, wholly or partly,
except where the entire consideration has been received after issuance of
completion certificate, where required, by the competent authority or after its
first occupation, whichever is earlier.
SCHEDULE III OF CGST ACT
ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES
5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building
INTERPRETATION: In exercise of the powers conferred from Section 9(4), Government has issued Notification No. 07/2019-Central Tax (Rate) dt. 29.03.2019 to notify the services received from unregistered persons on which RCM will be applicable subject to some conditions. (Notification enclosed)
Further If the villas are sold before receipt of completion certificate/First occupation: This case is covered under clause 5(b) of Schedule II and is treated as supply of services and will be taxable at the rates as specified in Notification 11/2017 Central Tax (Rate).
However if villas are sold after receipt of completion certificate/First occupation: This case is covered under clause 5 of Schedule III and is treated as neither supply of goods nor supply of services. Since the transaction is out of GST, thus provisions of GST will not be applicable.
CONCLUSION: RCM u/s 9(4) will be applicable only on supplies specified in Notification No. 07/2019-Central Tax (Rate). (Reply dt. 27/12/2021)