In a recent Trade Circular issued by the Maharashtra state Government, the Composition Scheme introduced for Builders and Developers are revised by the Government by amending the MVAT Act. The circular also speaks about the applicability of the scheme after the implementation of SGST.
As per the provisions of MVAT Act, a Builder or Developer is liable to pay VAT on execution of works contract. In the year 2010, the Government introduced a Composition Scheme under section 42(3A) of the Act as per which, the Developer is liable to pay 1% composition amount in lieu of tax on the registered agreement value or the value determined for the purpose of determination of stamp duty, whichever is higher.
The above amount becomes payable on the date on which the agreement is registered, irrespective of the fact whether the developer received any consideration or not. However, the benefit of the scheme was available to the Developer subject to conditions that the said Developer is not entitled to claim set-off and is also prohibited from issuing Tax Invoice.
The Scheme has expired on 31st May, 2017.
The country is heading towards the roll out of new Indirect tax Law, i.e, Goods and services Tax Act from 1st July, 2017.
As per the Maharashtra SGST Bill, the Developer would be a supplier of service and his liability to pay tax would arise at the time of supply which can be earliest of the date of issue of invoice or the date of receipt of payment or the date of provision of service.
The circular state that as per section 142(11)(c) of the Bill, the works contracts which are continued after the commencement of SGST Act, the said supplier would be liable to pay tax (GST) in respect of the supply that takes place after the commencement of SGST Act, irrespective of the fact that the Developer has discharged the liability of the value stated in the registered agreement. However, the said provision also provides that the Developer is entitled to credit of the tax paid under the MVAT Act to the extent of the supplies made on or after the date of SGST Act coming into force.
The Government further amended the Notification dt 09.07.2010 and under the revised Composition scheme, the developer, who has not registered the agreement to sale before 31st may 2017, is liable to pay 1% of the amount received as advance or otherwise, in respect of the flats, dwelings, buildings etc. The payment has to be made on or before 31st June, 2017.
A Developer who has registered/not registered the agreement to sale after 1st July, 2017 is also liable to pay 1% of the amount received as advance or otherwise, in respect of the flats, dwelings, buildings etc on or before the 21st day of the succeeding month in which the payment is received. The said amount has to be disclosed in the monthly return of the respective months.
Section 42 of the MVAT Act is also amended in this regard. As per the provision, the Developer in respect of the Works Contract Activity i.e, where supply is made after the commencement of the SGST Act, shall determine the composition amount on the basis of the advances received immediately before the date of commencement of the SGST Act and deduct such amount from the composition amount paid earlier under the registered agreement and take the credit of the remaining amount for the purpose of discharging the liability under the SGST Act that may arise as a result of supply taking place on or after the commencement of SGST Act.
Read the full text of the Circular below.
