New Rules for Refund of Unutilized ITC on Construction Services
Simplified Explanation of Notification No. 15/2023-Central Tax (Rate) – Amendments to Refund of Unutilized Input Tax Credit
Heading: Changes to Refund Rules for Input Tax Credit on Certain Construction Services
Purpose of the Notification:
This notification updates the rules regarding the refund of unutilized input tax credit (ITC) under Section 54(3) of the Central Goods and Services Tax (CGST) Act, 2017, specifically in the context of construction services.
Key Changes Introduced:
1. Revision in Refund Eligibility Criteria
- Old Wording:
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- Refers to the services specified in sub-item (b) of item 5 of Schedule II of the CGST Act.
- New Wording:
- “Of construction of a complex, building, or a part thereof, intended for sale to a buyer, wholly or partly, where the amount charged from the recipient of service includes the value of land or undivided share of land, as the case may be, 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.”
- Explanation: The new wording specifies that no refund of unutilized ITC will be granted for services related to the construction of a complex, building, or part of it if:
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- The amount charged includes the value of land or undivided share of land.
- The entire payment for the service is received after the completion certificate is issued or after the property’s first occupation, whichever comes first.
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- Example: If a construction company builds an apartment complex and the buyer’s payment includes the value of the land, the company cannot claim a refund on any unutilized ITC if the entire payment is made after the completion certificate is issued or after the first occupation of the apartment.
2. Effective Date
- Date of Implementation: These changes come into effect on October 20, 2023.
Summary:
The amendment in Notification No. 15/2023-Central Tax (Rate) changes the conditions under which a refund of unutilized input tax credit can be claimed for construction services. Specifically:
- Refunds will not be available for construction services if the charge includes land value and full payment is made after a completion certificate or first occupation.
This adjustment affects how construction service providers manage their input tax credit and refund claims starting from October 20, 2023.