The Karnataka Authority of Advance Ruling (AAR) ruled that the amounts received towards sale of shares in flats not exigible to GST only if the entire consideration is received after issuance of Completion Certificate.
The Applicant, B.R.Sridhar being the owner of an immovable property has entered into a Joint Development Agreement with M/s Suprabhat Constructions, a partnership firm, authorizing them to construct residential flats by incurring the necessary cost together with certain common amenities and upon the development of the said property, the applicant gets 40% share of undivided right, title and interest in the land proportionate to super built up area and 40% of car parking spaces.
In view of this, the applicant has sought advance ruling on the issue whether the total amounts received by the Owner towards the advances or sale consideration of the flats fallen to his share of 40% in terms of the Joint Development Agreement and the subsequent Area Sharing Agreement are not amenable for payment of GST, since applicant has sold or agreed to sell or gifted, the flats after obtaining Occupancy Certificate and that Applicant has not received any part of the sale consideration prior to the said date of occupancy certificate, thus falling under Entry No.5 of Schedule III of CGST Act read with Notification No.11/2017-Central Tax (Rate) dated June 28, 2017 and the corresponding provisions of SGST Act.
The Coram consisting of Dr. Ravi Prasad M.P. and Mashhood Ur Rehman Farooqui admitted that the developer had the sole and exclusive right of marketing the entire project.
The AAR observed that 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 amount of the transaction to supply of ‘Works Contract Service’ are liable to GST, the AAR added.
Therefore, the Authority ruled that 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 August 26, 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 Il of the CGST Act, 2017.
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