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2021 (4) TMI 184 - HC - GSTAccrual of GST liability - agreement for the sale of flats in a project being undertaken by Shanklesha Constructions - when is the date of receipt of payment where no tax invoice is issued under Section 31? - HELD THAT - Explanation (ii) of section 13 of GST Act tells that the date of receipt of payment is the earlier of (i) the date on which the payment is entered in the books of account of the supplier or (ii) the date on which the payment is credited to the supplier s bank account - the entire amount of ₹ 15 crores was paid between January and June 2015, before the GST Act came into force on 8th July 2017. Saifee Developers exercised its option on 14th June 2018, just under a year after the GST Act became operative. In 2018, 25 agreements for sale were executed, and 10 of these were registered. These are said to account for ₹ 3 crores from the ₹ 15 crores, and Saifee Developers has paid ₹ 35,50,200/-. Now that Saifee Developers has exercised its options to buy flats, and Shanklesha Constructions has agreed to supply these, is not Shanklesha Constructions liable to pay GST on the balance, and is this not recoverable from Saifee Developers? - Saifee Developers construct is actually self-defeating. It accepts that on 14th June 2018 it opted to treat the entire amount as a purchase price. The wrangle is about the number of flats. That is immaterial for my purposes. Whether it is one huge flat or a hundred smaller flats will make no difference to the applicability of GST or to the concept of time of supply of services under Section 13. Once the nature of the transaction is determined, then the Section begins to operate. Notably, Section 13(2) uses earliest not once, but twice. The first time is in the main sub-section (2). It is repeated in Explanation (ii). The emphasis, therefore, is clearly to peg the time of supply of services to the logically earliest possible date when the service was provided or when the payment was received in Section 13(2)(b); and, if a question of date of payment arises, then the earlier of the entry in the books of account or date of receipt of payment - Shanklesha Constructions entry in its books is after the date of receipt of payment. The earlier of the two must apply. It is nobody s case that the GST regime will be reckoned back to a time when it did not exist. Hence, logically, if the payment was already in received in Shanklesha Constructions account on the date the GST Act came into force, that must be the date taken for the time of supply of services . Saifee Developers had absolutely no justification in not paying the remaining GST and interest. It is unclear whether it has even paid the stamp duty on the MoU/Agreement as yet. It cannot be in default and yet continue to squat on a protective ad-interim order granted in exercise of equitable and discretionary jurisdiction - the Review Petition, being entirely without merit, is dismissed.
Issues Involved:
1. Whether Saifee Developers is liable to pay GST on the balance payment made to Shanklesha Constructions for the purchase of flats. 2. Whether the Review Petition filed by Saifee Developers should be allowed. 3. Whether the Interim Application filed by Shanklesha Constructions should be allowed. Issue-Wise Detailed Analysis: 1. GST Liability of Saifee Developers: The primary issue revolves around the interpretation of Section 13 of the Central Goods and Services Tax Act, 2017 (GST Act). Saifee Developers contended that no GST was payable as no 'service' had been rendered yet, arguing that the flats had not been delivered. On the contrary, Shanklesha Constructions maintained that GST was due as the payment was received, and the liability to pay GST arose accordingly. The court examined Section 13(2)(b) of the GST Act, which states that the time of supply of services shall be the earlier of the date of provision of service or the date of receipt of payment. The explanation to this section clarifies that the 'date of receipt of payment' is the earlier of the date the payment is entered in the supplier's books or credited to the supplier's bank account. The court found that the entire amount of ?15 crores was paid before the GST Act came into force but was treated as consideration for the purchase of flats after the Act became operative. Therefore, the GST regime applied from the date the Act came into force. The court concluded that the 'time of supply of services' under Section 13(2)(b) was pegged to the earliest possible date, which in this case was when the payment was received, thereby making GST applicable. 2. Review Petition by Saifee Developers: Saifee Developers sought a review of the order dated 28th February 2020, which noted their commitment to pay GST. The court dismissed the Review Petition, stating that there was no error apparent in the order. The court clarified that the statement made by Saifee Developers' counsel regarding GST payment was correctly founded in law, and the interpretation of the GST Act supported the liability to pay GST. 3. Interim Application by Shanklesha Constructions: The Interim Application by Shanklesha Constructions sought to vacate the interim relief granted to Saifee Developers. The court allowed this application, noting that Saifee Developers had failed to comply with the requirement to pay GST. The court emphasized that a party cannot continue to claim protection under a court's order while not complying with its requirements. Conclusion and Order: The court dismissed the Review Petition filed by Saifee Developers and allowed the Interim Application filed by Shanklesha Constructions. The order of 15th July 2019, which provided interim relief to Saifee Developers, was recalled and vacated. The court directed that if Saifee Developers paid the GST and interest by 15th April 2021, Shanklesha Constructions would register the sale agreements for 15 additional flats. If the payment was not made, Shanklesha Constructions would not be required to register any additional flat purchase agreements. The court also vacated the embargo on creating third-party rights in respect of the additional commercial area. The court left the parties to bear their own costs and rejected the application for a stay of the order.
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