While the ratio sounds logical on the ground that constructed portion as on the date of agreement (in the above example 30%) represents the value of construction undertaken by the developer on his on account and does not involve any transfer of property in the goods, however, it could result in various implementation issues like:
a. Reversal of Credits / Sub-con deduction on constructed portion on which no VAT / Composition tax is being paid;
b. In case of projects involving construction of 100s of residential units, computation of the value of the work done at the time of signing each and every agreement;
c. Impact of this decision on the Service Tax; and
d. Impact on excess tax remittances (on constructed portion) for the period prior to this judgment.
The impact of this decision would vary on a case to case basis and hence a proper analysis would be required to be done on the possible impact taking into consideration the valuation methodology for determining the value of work completed, impact on service tax position, reconciliation of construction receipts as per books with the VAT returns etc.