The Hon’ble AAR, Karnataka, in the matter of Sri. B.R. Sridhar [Order No. KAR ADRG 55/2020 (dated, November 7, 2020)] held that the amounts received by Sri. B.R. Sridhar (Owner/ Applicant), either by himself or through his agents, towards sale of their share of flats consequent to a Joint Development Agreement (JDA) are not exigible to GST if the entire consideration related to such sale of flats is received after the issuance of Completion Certificate (C.C).
Sri. B.R. Sridhar, being the owner of an immovable property, situated at Bikasipura Village, Uttarahalli Hobli, Bangalore, has entered into a JDA dated May 19, 2016 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.
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 JDA dated 19.05.2016 and the subsequent Area Sharing Agreement dated January 3, 2018, are not amenable for payment of GST, since Applicant has sold or agreed to sell or gifted, the flats after obtaining Occupancy Certificate dated August 26, 2019 and that Applicant has not received any part of the sale consideration prior to the said date of occupancy certificate.
The Hon’ble AAR, Karnataka, in Order No. KAR ADRG 55/2020 dated November 7, 2020 held as under:
Clause 5 of the Schedule-II of the CGST Act:
“5. Supply of services
The following shall be treated as supply of services, namely:-
(a) renting of immovable property;
(b) construction of a complex, building, civil structure or a part 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.
Explanation.-For the purposes of this clause-
(1) the expression “competent authority” means the Government or any authority authorised to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely:-
(i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972; (20 of 1972.) or
(ii) a chartered engineer registered with the Institution of Engineers (India); or
(iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority;
(2) the expression “construction” includes additions, alterations, replacements or remodelling of any existing civil structure;
(c) temporary transfer or permitting the use or enjoyment of any intellectual property right;
(d) development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software;
(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and
(f) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration.”
Schedule III to the CGST Act:-
“Activities or transactions which shall be treated neither as a supply of goods nor a supply of services-
5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building…..”.
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