The Advance Ruling Authority (AAR), Goa has held that the advance amount received for sale of villas on or after the appointed day prior to issuance of occupancy certificate by the local panchayat is considered as ‘construction services” and GST is applicable on two third of the total amount charged for such supply.
The applicant is a limited Liability Partnership Firm engaged in the business of building villas for sale in Goa. They construct villas for sale when they are ready and after getting the occupancy certificate. During the last year due to financial constrains they borrowed money from Mr. Zubin Dubash amounting to 5,50,00,000/- on 30/03/2017 and during this year they received and advance of Rs. 11,23,74,756/- from said person and the applicant has paid GST accordingly. The applicant submits that they have inadvertently paid the GST on the borrowings.
As per the provision of GST Law construction of a complex, building, civil structure or apart thereof, including a complex or building intended for sale to a buyer, wholly or partly, 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.
The authority noted that in case of supply of services specified above involving transfer of property in land or undivided share of land, as the case may be, the value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, as the case may be. Such supply shall be deemed to be one third of the total amount charged for such supply. Here total amount means sum of total consideration charged for aforesaid service and amount charged for transfer of land or undivided share of land as the case may be.
It was further noted that the applicant has failed to produce supporting documents to prove that he has borrowed money from Mr. Zubin Dubash and the amount received by the applicant is accounted in the books of accounts of the applicant as loan and advances.
“In absence of the supporting documents the amount received by the applicant has been considered as advances received towards sale of villa. The applicant has received advance towards sale of villa prior to issuance of completion certificate. Hence, the same is taxable under GST Act @ 12%,” the authority said.
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