GST: Advance amount for villa sale pre-occupancy cert taxable at 12%

The Advance Ruling Authority held that the advance amount received for the sale of a villa before the issuance of the occupancy certificate is taxable under GST at 12%. The failure to provide supporting documents resulted in the advances being considered as received towards the sale of the villa, emphasizing the significance of proper documentation in transactions to prevent tax liabilities.

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Issues:
1. Determination of liability to pay tax on sale of villas after completion and obtaining necessary approvals from the competent authority.

Analysis:
The case involves an application filed under section 97 of the Goa Goods and Services Tax Act, 2017 and the Central Goods and Services Tax Act, 2017 by a limited Liability Partnership Firm engaged in building villas for sale in Goa. The applicant sought an Advance Ruling to determine the liability to pay tax on the sale of villas after completion and obtaining necessary approvals from the competent authority. The applicant had borrowed money and received advances from an individual, which they later decided to sell the villa to. However, the applicant failed to provide supporting documents to prove the borrowing, leading to the advances being considered as received towards the sale of the villa, taxable under GST at 12%.

The provision of GST Law states that construction of a complex or building intended for sale to a buyer is taxable unless the entire consideration has been received after the issuance of the completion certificate or after its first occupation, whichever is earlier. In cases involving transfer of property in land, the value of the supply of service and goods portion shall be equivalent to the total amount charged for the supply less the value of the land. The supply in such cases is deemed to be one third of the total amount charged. The advance amount received for the sale of a villa prior to the issuance of the occupancy certificate is considered as construction services, and GST is applicable on two-thirds of the total amount charged for such supply.

In conclusion, the Advance Ruling Authority determined that the advance amount received towards the sale of a villa before the issuance of the occupancy certificate is taxable under GST at 12%. The applicant's failure to provide supporting documents led to the advances being considered as received towards the sale of the villa, highlighting the importance of proper documentation in such transactions to avoid tax liabilities.

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