Applicability of GST on partially completed flats having identified/ unidentified customers

Applicability of GST on partially completed flats having identified customers before/after GST regime or where no customers are identified – AAR Ruling

ABCAUS Case Law Citation:
ABCAUS 3116 (2019) (08) AAR

The Applicant was a company incorporated under the Companies Act 1956 and is registered under the Goods and Services Act, 2017.

The Applicant was engaged in construction and sale of residential apartments and residential complexes under joint development agreements.

The Applicant had executed projects under JDA with Land Owners for .an agreed ratio of built-up area. Construction was commenced during pre-GST regime and continued under GST regime. Substantial portion of the work had. been sub contracted to another registered person.

The applicant had sought advance ruling in respect applicability of GST on partially completed flats i.e.

(a) Partially completed flats having identified customers before GST regime

(b) Partially completed flats where customers are identified after implementation of GST regime, and

(c) Partially completed flats, where no customers are identified.

The Applicant had the following views on the question raised:

(a) Partially completed flats having  identified customers before GST Regime

Liable to Tax as per earlier law on the value of work executed under earlier law and liable to tax under GST Law only on the ·value of work executed under GST.

(b) Partially completed flats., where customers are identified after implementation of GST regime

Not liable to tax under earlier law on the portion of work executed under earlier la.w, as held by Hon’ble Supreme Court in L&T case that the activity / transaction amounts to work contract only from the stage of entering agreement with customer, and attract tax under GST Law on the value of work executed under GST Law.

(c) Partially completed flats, where no customers are identified

Not liable to tax under earlier law on the portion of work executed under earlier law, as held by Hon’ble Supreme. Court in L&T.case that the activity /transaction amount.s to works contract only from the stage· of entering agreement with customer, and attract tax under GST law on the value of work executed under GST Law only from the stage of entering agreement with customer.

Applicability of GST on partially completed flats

The Advance Ruling Authority gave the following rulings:

(a)  ln  respect  of  Partially  completed  flats  having  identified   customers before GST regime, the Applicant is liable to pay service tax under the F’inance Act 1994 proportionate to the services provided up to 30.06.2017 and from 01.07.2017 onwards liable to pay  GST proportionate to the service provided effective from 01.07.2.017 in terms of Section 142(11)(b) of the CGST Act, 2017.

(b) In respect of partially completed flats, where customers are identified after implementation of GST, the Applicant is liable to pay GST on the transaction value of supply.

(c) In respect of partially completed flats where no customers are identified the applicant is not liable to GST as no supply is involved. However, if the supply is made prior to the issuance of completion certificate then GST is liable to be paid on the transaction value of supply, as in (b) above.

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