The Kochi Zonal Unit of the Directorate General of GST Intelligence, which has jurisdiction all over Kerala and Lakshadweep, has detected GST evasion of around ₹420 crore. It has realized around ₹115 crore of the tax amount evaded in FY 2021-22 in various sectors.
The Unit also detected around ₹283 crore with a realisation of about ₹47 crore in the current financial year. The office has also made two arrests in FY 2021-22 and one more arrest in the current financial year for gross violations of the GST law.
Giridhar G.Pai, Additional Director General said, real estate sector being one such sector. They have initiated search/summons proceedings against 15 real estate firms operating in Kerala. Investigations revealed evasion through irregular utilization of the input tax credit, suppression of turnover and non-payment on landowners’ share.
Accumulation of Input tax credit
The builders are liable to pay GST on construction service on the units/ flats/apartments on which any payments were received from the customers before the date of completion or date of first occupation. There is no GST liability on units where payments are received after the date of completion or date of first occupation. The builders take input tax credits commonly for all the units and they are required to reverse the credit attributable to the inputs used in the units on which no GST is payable. By not doing so, they illegally accumulate input tax credit. This credit is then used for payment of GST instead of paying it in cash.
Most of the builders enter into joint venture agreements with landowners and the landowners get some share of constructed apartments as consideration for the same. GST is to be paid on all the units/ flats/apartments in the share allotted to landowners as payments are received in the form of development rights immediately on launch of the project itself. Some of these flats are booked by customers. The investigation revealed that GST is being paid only on those units in the land owner’s share which have been sold to end customer before the date of completion or date of first occupation and those that remain unsold are being wrongly treated as exempted and no GST was paid. The builder has a liability to pay GST on the construction services rendered to the landowner.
With effect from April 1, 2019, a new reduced tax rate without input tax credit benefit has been introduced for residential projects. All new projects launched after March 31, 2019 are required to pay GST in cash alone. It is found that some builders are discharging their GST liability at the new reduced rates using input tax credit.