2019 (8) TMI 472 - AAR - GST

Levy of GST - Activity of construction related to immovable property - works contract - applicability of GST - Partially completed fiats having identified customers before GST regime - Partially completed flats where customers are identified after implementation of GST regime - Partially completed flats where no customers are identified - Pre and post GST regime - section 142(11) of CGST/KGST Act 2017 - transitional provisions. Levy of GST - Partially completed fiats having identified customers before GST regime i.e. 1/7/2017 - HELD THAT - In this situation the agreement with the customer was executed in pre-GST regime i.e. prior to 1/7/2017. Therefore the applicant is liable to pay service tax under the Finance Act proportionate to the services provided upto 30/06/2017 and from 1/7/2017 onwards liable to pay GST proportionate to the services provided effective from 1/7/2017 in terms of section 142(11)(b) of CGST Act 2017. Levy of GST - Partially completed flats where customers are identified after implementation of GST regime- HELD THAT - In these case agreements for supply has been entered with the probable customers on or after 1/7/2017. It implies that the agreement has been entered prior to completion of the construction and also before issuance of completion certificate from BBMP the competent authority - in the event that the agreements are entered into after 1/7/2017 the provisions of section 13 of the said act shall come into force and the applicant shall become liable to pay applicable tax. Value of supply for Partially completed flats where customers are identified after implementation of GST regime - HELD THAT - The applicant was engaged in the activity of construction on his own account - there was no event of supply to anyone - the value to be adopted for the computation of tax amount has to be the transaction value i.e. the value at which the supply has been agreed upon. Levy of GST - Partially completed flats where no customers are identified- HELD THAT - The applicant admits that no customers are identified. Here we again draw attention to the provisions of Para 5 of Schedule II of the CGST Act 2017. If the applicant completes the activity of construction and also obtains the occupancy/completion certificate from the competent authority and then -enters into a transaction with a recipient then the applicant is not liable to pay GST as such an activity/transaction then falls under Para 5 of Schedule III. In case the transactions are initiated prior to the issue of completion/ occupancy certificate then the scenario becomes identical to the second issue.

Summary

Issues Involved:
1. Applicability of GST on partially completed flats with identified customers before GST regime.
2. Applicability of GST on partially completed flats with customers identified after implementation of GST regime.
3. Applicability of GST on partially completed flats where no customers are identified.

Issue-wise Detailed Analysis:

1. Applicability of GST on partially completed flats with identified customers before GST regime:

The applicant is engaged in the construction and sale of residential apartments under a joint development agreement. The construction commenced during the pre-GST regime and continued into the GST regime. The applicant contends that construction activities relating to immovable property are treated as "Works Contract" under GST Law, classified as a supply of service, and are liable to GST. However, GST is not applicable where the entire consideration is received after the issuance of the completion certificate or after the first occupation, whichever is earlier.

The ruling states that the applicant is liable to pay service tax under the Finance Act 1994 proportionate to the services provided up to 30.06.2017 and GST proportionate to the services provided from 01.07.2017 onwards, in terms of Section 142(11)(b) of the CGST Act 2017.

2. Applicability of GST on partially completed flats with customers identified after the implementation of GST regime:

For partially completed flats where customers are identified after the implementation of GST (post-01.07.2017), the ruling specifies that agreements for supply entered into after 01.07.2017 imply that the agreement was made before the completion of construction and issuance of the completion certificate. According to Section 13 of the CGST Act, 2017, the liability to pay tax arises at the time of supply. Therefore, the applicant is liable to pay GST on the transaction value of the supply.

The applicant's contention that GST should only be on the value of work executed under GST Law was not accepted. The ruling clarifies that since no agreement was entered into with the customer before 01.07.2017, the value for tax computation should be the transaction value agreed upon post-GST implementation.

3. Applicability of GST on partially completed flats where no customers are identified:

For partially completed flats with no identified customers, the ruling draws attention to Para 5 of Schedule II of the CGST Act, 2017. If the construction is completed and the occupancy/completion certificate is obtained before entering into a transaction with a recipient, the activity is not liable to GST as it falls under Para 5 of Schedule III (not a supply of goods or services). However, if the transaction occurs before the issuance of the completion certificate, GST is liable to be paid on the transaction value of the supply, similar to the scenario in question 2.

RULING:

a) For partially completed flats with identified customers before the GST regime, the applicant must pay service tax under the Finance Act 1994 proportionate to services provided up to 30.06.2017 and GST proportionate to services provided from 01.07.2017 onwards.

b) For partially completed flats with customers identified after the implementation of GST, the applicant must pay GST on the transaction value of the supply.

c) For partially completed flats with no identified customers, the applicant is not liable to GST unless the supply is made before the issuance of the completion certificate, in which case GST is payable on the transaction value of the supply.