Ensuring statutory conformances by MEP designers during the designing process

 In an earlier blog, it was shared that 48 key Statutory Acts are directly applicable (for 13 key functions in the real estate & hospitality Industry). In addition, there are 34 statutory Acts indirectly relevant through supporting functions like corporate Finance, Corporate Services, HR, etc.

The number & provisions of Statutory Acts and activities listed in this blog are in the context of Indian Industry, and readers in countries other than India can modify these to meet similar type requirements of each country. 

For these 13 functions, eight types of statutory processes having 113 associated statutory activities have been identified as applicable.

For the Design of the MEP function, four types of statutory processes (out of 5 types) are directly relevant, with ten key statutory activities (out of 113 identified) required to be performed as summarised below.

·       Process1: Meeting statutory and taxation obligations; Activities =2 as below

1.    Publishing on web site RERA, Project wise details (The RERA Act,2016)

2.    Summary of inward/outward supplies along with payment of tax (The GST Act,2017) GST

·       Process 2: Obtaining Licenses, approvals, and maintaining statutory records w.r.t Statutory Acts; Activities =3 as below

1.    Complying with prescribed provisions of all applicable Acts & associated rules

2.    Maintaining statutory prescribed records

3.    Coordinating statutory inspections of business premises & documents

·       Process 3: Complying with IGST matters; Activities =4

1.    Filing returns towards inward/outward supply of goods and services, ITC -input tax credit availed, output tax payable under section 35(1)

2.    Complying with requirements w.r.t. imported goods or services under GST rule 56(1)

3.    Complying with requirements w.r.t GST payable, collected, paid, and ITC availed under GST rule 56(4)

4.    Complying with requirements w.r.t maintaining details of suppliers & customers with their GSTN registration number under GST rule 56(5)

·       Process 4: Deducting Income tax on services-TDS; Activities =1

1.    Computing the TDS amount on service charges as per applicable income tax rules & deduction of the same from dues payable to the service provider/consultant

At their discretion, the Central Government /statutory authorities may amend the applicability of statutory laws or various sections as mentioned in this blog.

Given below is the list of 14 activities that can adversely impact business is as below (if these are performed unethically or without proper diligence)

Statutory Process 1: Meeting statutory regulations and tax obligations and filing various key returns on the scheduled time =6

·       Obtain “certification for adherence to statutory /approved   sanctioned plans and project specifications and National Building code” through unfair means in case actual construction does not comply with sanctioned plans    

·       Bribe statutory agencies to obtain a “Completion Certificate” even before construction is completed to customers and realize payments through construction areas not yet ready for possession.

·       Publish on website project details that are inaccurate vis a vis RERA-Real Estate (Regulation and Development) Act 2016 (inputs to Architect team)

·        Non-timely capture of details vis-à-vis summary return of outward and inward supplies and services along with payment of tax compliance in respect of The Central Goods and Service Tax Act,2017. 

·       File returns inaccurately

·       File returns non-timely

MEP teams usually give details /inputs for the above to Finance & accounts or the legal team for meeting statutory requirements.

Statutory Process 2: Obtaining Licenses, approvals, and maintaining statutory records w.r.t Acts=2

·       Bribe the statutory inspectors during their visits to the construction site to validate that construction conforms to statutory approvals   

·       Not maintain or maintain and submit inaccurate statutory records and bribe visiting Statutory officials.

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Statutory Process 3: Complying with IGST matters=5

·       File return towards Inward and outward supply of MEP-related goods /services, ITC availed, output tax payable and paid under Sec 35(1)     

·       Comply with requirements w. r. t. Imported goods or services under GST rule 56(1)   

·       Comply with requirements w. r. t. GST payable, collected, paid, and ITC availed under GST rule 56(4)   

·       Comply with requirements w. r. t maintaining details of suppliers and customers with their GSTN registration number under GST rule 56(5)-   

·       Maintain record vis-à-vis inward or outward supply of MEP, design services, or inward collection of BOQ sample materials procured which are either incomplete or incorrect vis-à-vis amounts chargeable to GST or rate of GST or both 

MEP teams usually give details /inputs for the above to Finance & accounts or the legal team for meeting statutory requirements.

Statutory Process 4: Deducting TDS-services=1

·       Deduction of TDS (Tax deduction at source as per Income Tax Act,1961) at a rate different than prescribed. 

Handbook of the author 

You can read more about these 14 activities that can adversely impact business in Annexures 20B &21B and Chapter 3 of the author’s handbook ETHICS in the real estate and hospitality industry, Volume 1- Architectural, Interior design, and MEP services. “