2020 (11) TMI 718 - AAR - GST

Exigibility of GST - supply of goods or not - sale of applicant s share (40%) of residential flats - revenue sharing basis - HELD THAT - Schedule Il to the CGST Act 2017 specifies certain activities / transactions to be treated as supply of goods / services. Clause 5(b) of the said schedule stipulates that Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly shall be treated as supply of service 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. In the instant case the applicant stated that that their share of residential flats have been handed over by the developer after the issuance of completion / occupation certificate dated 26.08.2019 and also clause 1.7 of the Area Sharing Agreement restricts the right of the applicant to execute any sale agreement or any conveyancing deeds till the issuance Of completion certificate and taking over of their share of units / flats. Thus the sale of said flats is not exigible to GST, if and only if they are sold after issuance of Completion / Occupancy certificate, in which case the said transaction is to be treated neither as supply of goods nor supply of services, in terms of clause 5 of Schedule III It is an admitted fact that the developer had the sole and exclusive right of marketing the entire project. The applicant is silent about the fact that whether the developer had executed any sale deeds on behalf of the applicant in respect of the applicant s share of units/flats. Thus if the applicant themselves or the developer on behalf of the applicant have sold the applicant s share of units/flats prior to issuance of completion certificate, then the transactions amount to supply of Works Contract Service are liable to GST - The time of supply in the instant case would be the time at which the constructed flats are handed over by the developer to the applicant. In the instant case the applicant claims / contends that they have received their share of units/flats after the issuance of Completion Occupancy certificate by Bruhat Bengaluru Mahanagar Palike for 74 units. Thus, the amounts received by the applicant, either by himself or through his agents, towards sale of their share of flats are not exigible to GST, if and only if the entire consideration related to such sale of flats is received after the issuance of Completion Certificate dated 26.08.2019, as the said activities are treated neither supply of goods nor supply of service in terms of schedule III of the CGST Act 2017 subject to Clause 5(b) of the Schedule-II of the CGST Act, 2017.

Summary

Issues:
1. Admissibility of the application filed by an unregistered person for Advance Ruling.
2. Exigibility of GST on amounts received towards the sale of the applicant's share of residential flats.
3. Interpretation of law regarding liability to pay GST on the sale of flats post-Occupancy Certificate issuance.

Analysis:

Issue 1 - Admissibility of the application:
The applicant, an unregistered person, filed an application seeking an Advance Ruling concerning the applicability of a notification, determination of tax liability, and whether the activity amounts to a supply. The application was admitted as it covered issues under Section 97(2)(b), (e), and (g) of the CGST Act 2017.

Issue 2 - Exigibility of GST on sale of residential flats:
The applicant entered into a Joint Development Agreement (JDA) with a developer, where the applicant received 40% share of undivided right in the land post-Occupancy Certificate issuance. The applicant contended that the sale of flats post-Occupancy Certificate is not subject to GST as per Schedule III of the CGST Act 2017 and Notification No. 11/2017 Central Tax (Rate).

Issue 3 - Interpretation of law on GST liability post-Occupancy Certificate:
The applicant argued that since the sale of flats occurred after the Occupancy Certificate was issued, it falls under the provision of Schedule III of the CGST Act 2017, treating it neither as a supply of goods nor services. The applicant supported their contention with sale deeds and receipts showing transactions post-Occupancy Certificate issuance.

Findings & Discussion:
The Authority considered the submissions and relevant facts. It noted that the sale of flats post-Occupancy Certificate issuance is not exigible to GST as per Schedule III of the CGST Act 2017. The transaction is treated neither as a supply of goods nor services unless the flats were sold before the certificate issuance, making it liable for GST as "Works Contract Service."

Ruling:
The Authority ruled that amounts received for the sale of the applicant's share of flats are not subject to GST if the entire consideration was received post-Occupancy Certificate issuance. This decision aligns with Schedule III of the CGST Act 2017 and Clause 5(b) of Schedule-II, exempting such activities from GST.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Authority's ruling on the matter.