| Particulars | Guj VAT | Service Tax |
| When it all started | K Raheja 2005….L&T 2013…..Defaulter Scheme GVAT 2013 | 01-07-2010 |
| Controversies in the initial periods | Contract of Immovable property | Contract of Immovable property |
| Treatment | Works Contract | Construction of Complex (a Description more specific than works contract). It may be also be classified as a works contract however the same is subject to litigation. |
| Changes in Law | No changes | 01-07-2012 |
| Any exemptions | No, except if the builder is not a dealer | Several exemptions like construction upto 12 units, Personal use till 1-7-12 and thereafter – single residential unit, govt quarters, low cost housing, sale of units to charitable trusts etc. |
| Presently continued | NA | Specified Low cost housing, Single Residential unit |
| Calculation of Taxable Turnover | Three options | Two options |
| Regular Method :- | ||
| Valuation | Identifying value of goods involved in a reverse way as per SC judgement of Gannon Dunkerley (1993) | Identifying value of services – no reverse way has been prescribed |
| ITC | Available for transferable goods, but restricted for capital goods under GVAT | Available for all Input Services and Capital Goods |
| Part Completion of construction before the date of booking | Non-taxable, however no valuation mechanism prescribed | Taxable if any money is received |
| Standard deduction / Abatement:- | ||
| Valuation | Prescribed labour deductions namely 30% after taking deduction of land | Prescribed deductions towards material and land at 70% |
| ITC | Available for transferable goods, but restricted for capital goods under GVAT | Available for all Input Services and Capital Goods |
| Part Completion of construction before the date of booking | Non-taxable, however no valuation mechanism prescribed | Taxable if any money received |
| Composition Scheme :- | ||
| Valuation | 0.6% scheme without ITC | No such scheme |
| ITC | No ITC | NA |
| Treatment of Land :- | ||
| Mention in law | No specific mention under GVAT | Specific mention about inclusion in value under the abatement scheme |
| Deduction of Land | Can be taken under Regular and Standard Deduction method but difficult under composition method if part of the same agreement | Can be taken under the regular deduction method but not under the abatement scheme |
| Valuation of land | No mention, can be taken at Jantri value as per some of the other states or if any other value as stated in the agreement | No mention, can be taken at Jantri value as per some of the other states or if any other value as stated in the agreement |
| Treatment of Sub-contractor :- | ||
| Mention in law | Specific mention | No specific mention |
| Deduction of Sub-contractor’s turnover | Mandatory deduction, if amounts paid to registered sub-contractor as per Apex court – L&T | Not available |
| Input Tax Credit | Debatable issue | Input Credit can be taken if sub-contractor has charged tax on his invoice |
| Exemption to sub-contractor | No provision | Exempt if doing material job for a builder who is claiming any exemption |
| TDS provisions :- | ||
| Applicability | Deduction required for payments made to sub-contractor | No TDS provisions except reverse charge as discussed above. |
| Other Issues :- | ||
| Part Completion of construction before the date of booking | Taxable (Debatable) | NA |
| Point of Taxation | Receipt / Billing. Also Milestones under the composition scheme | Receipt / Milestone / Billing / Provision of Service |
| Purchase Tax / Reverse Charge | Payable in all circumstances for purchase of materials from unregistered suppliers | Payable in specific circumstances – Corporate / Non-corporate |
| Relevance of BU (Building Use permission) | No tax on agreements / bookings done after BU | No tax on agreements / bookings done after BU |
Comparative table of key issues affecting Real Estate Sector under VAT and Service Tax
Published On - July 7, 2016
