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Despite 'deemed completion,' sale of residential unit attracts GST due to denied completion certificate by the development authority.-AAR

11 Jun, 2024
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Company Background and Application Details:

M/s Savfab Buildtech Private Limited, an Indian company registered under the Companies Act, 1956 (now governed by the Companies Act, 2013), has its registered office at Plot No. 108, Katori Mill, Loni Road, Mohan Nagar, Ghaziabad, U.P. The company, identified by GSTIN-09AAOCS7407E2Z2, is engaged in developing a group housing project named 'Saviour Park' in Ghaziabad and holds GST registration in Uttar Pradesh for this project.

The company filed an application for Advance Ruling under Section 97 of the CGST Act, 2017, and the corresponding UPGST Act, 2017. The application, submitted in Form GST ARA-01, included a fee of Rs. 5,000/- each under both the CGST and UPGST Acts.

 

Questions for Advance Ruling:

  1. Whether selling residential units in the Saviour Park project after 'deemed completion' or 'first occupation' of Phase IV is taxable or an exempt supply.
  2. If the sale is taxable, from which date units sold should be treated as exempt from GST.

 

Facts and Relevant Information:

  • Company and Project Overview: Savfab Buildtech Pvt. Ltd. (SBPL) is developing 'Saviour Park,' a group housing project in Mohan Nagar, Ghaziabad. The project comprises 1150 units divided into four phases, with the first three phases completed and delivered to customers. Phase IV has 282 units, with 169 units already completed and delivered. The remaining 113 units were completed in April 2023.
  • GST Compliance: Initially, the company charged GST at 12% (6% CGST and 6% SGST), later opting for the new regime from 01.04.2019, charging GST at 5% (2.5% CGST and 2.5% SGST).
  • Completion Certification Process: After completing construction and obtaining necessary NOCs (e.g., fire safety, structural stability), the company applied for a completion certificate from the Ghaziabad Development Authority (GDA) on 11.04.2023. No completion certificate or rejection was received within 15 days, leading SBPL to consider the project 'deemed completed' as per RERA guidelines and proceeded to give possession to customers.
  • Legal Context and Dispute: GDA later denied issuing the completion certificate due to pending dues, which are disputed and under litigation in the Allahabad High Court.

 

Legal Provisions Cited:

  • Section 9 of CGST Act, 2017: Tax is levied on the supply of goods or services except for the supply of alcoholic liquor for human consumption.
  • Section 2 (52) and 2 (102) of CGST Act, 2017: Definitions of goods and services.
  • Para 5 (b) of Schedule II of CGST Act, 2017: Construction of buildings intended for sale is a supply of services except when the entire consideration is received after the issuance of a completion certificate or first occupation.

 

Findings and Ruling:

  • Distinct Project Registration: Phase IV is independently registered under RERA, and its compliance must be assessed independently.
  • Completion Certificate Requirement: The application for a completion certificate, along with required NOCs, was submitted on 11.04.2023. As no response was received within the specified period, the company considered it 'deemed completed' by 21.04.2023.
  • GDA's Denial and Legal Implications: GDA’s later denial of the completion certificate was based on pending dues, not construction quality, making it invalid as per GDA byelaws and RERA order.
  • First Occupation and Sale Deeds: Possession was given, and sale deeds executed from 25.04.2023 onwards, supporting the claim of first occupation.

 

The ruling concluded that:

  1. Taxability: The sale of residential units in Phase IV is considered a supply of services, hence taxable under GST.
  2. Exemption Date: Units sold will be exempt from GST only after obtaining the official completion/occupancy certificate from GDA.

 

Topic-Savfab Buildtech Private Limited

Citation-2024 TAXONATION 1188 (UTTAR PRADESH-AAR)

 

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