Reverse Charge on Construction - VAT

Rule 6B : Any person constructing building, apartment, shopping complex or other similar structure prescribed by the Department worth more than Fifty Lakh Rupees for commercial purpose shall cause to construct such structure from a registered person.
﻿
Section 8(3) - Building or apartment or shopping complex or other similar structure as prescribed by the Department worth more than Fifty lakh to be constructed for commercial purpose even if it is made to be constructed by a person who is not registered, it shall be deemed as if it is constructed from a registered person and the tax shall be accordingly deposited. If tax is not deposited as required, tax shall be assessed and recovered from the person having ownership of such structure.
﻿
Value of 50 Lakhs
expenses like drawing, design, construction cost, supervision cost shall be included.
Financial Overhead shall not be included.
other costs directly related to construction shall be included.
Sanitation, interior decoration, painting shall be included.
Commercial Purpose
Constructed for selling.
apartment, shopping complex, other similar infrastructure.
Used to generate income by recording as fixed asset or current Asset. 
Other important points
No ITC is available for such VAT payment
The limit of 50 lakhs is for one building only and not for multiple building taken together.
No reverse charge on Personal buildings
RCM not applied on VAT bills.(i.e. bills from registered persons)
﻿
For eg. A pvt ltd. is an unregistered company constructing a factory building. Iron, Brick and other materials are Rs 40,00,000. VAT bill is issued for such items. also labour costs are 15,00,000 for which no VAT bill has been received. interior decoration charges from a registered person is 10,00,000. Here total cost exceeds 50 lakhs (40+15+10 = 65 lakhs). Hence RCM is applicable. But it is applicable only on the labour of 15,00,000. VAT of Rs 195,000 shall be deposited on RCM by A Pvt. Ltd. VAT paid by A ltd on Materials and interior decoration charges is available as credit but VAT paid on RCM of Rs. 195000 shall not be allowed as credit.
﻿