Question16: 

A developer constructs flats. For period prior to 01.07.2017 (i.e. for Service Tax regime), he constructed 70 flats and sold 50 flats on payment of Service Tax (for cases where bookings were received prior to obtaining Completion Certificate).  He took Cenvat Credit on input services for construction of all 70 flats. After receipt of CC, he sold 10 flats on which no Service Tax was paid by him.  He is yet to sell remaining 10 flats. Thus, the developer provided declared services in respect of the 50 flats and for the remaining 20 flats, no service was provided / would be provided by him because of the exclusion clause in the definition of "service" at Sec. 65B since the same were sold / would be sold after getting CC. Thus, in absence of provision of "service", selling of the 20 flats cannot be considered as a taxable service and in terms of Rule 3(1) of the Cenvat Credit Rules, a person who does not provide a taxable service cannot take credit. Now since that he had taken full credit on all 70 flats, and only 50 such flats were for provision of "service' and remaining 20 flats were not for provision of service, should the developer calculate the amount of credit taken by him attributable to the said 20 flats on costing basis and reverse the same?   That is, say the developer had taken total credit of 'X', should the developer reverse the credit amounts as :- 20/70 x 'X'.

Answer:

The point is correct you have to reverse the credit as per calculation given by you but if the Trans 1 is already filed either you should amend it or you have to deposit the amount  in cash because the credit of GST  can't be used to pay service tax.  This payment is to be made as per Section 142(6). (Reply dt. 14/12/2017)