2018 (10) TMI 1142 - AAR - GST

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 ... Liability of tax - sale of villas after completion and obtaining necessary approvals from the competent authority - Held that:- The applicant has failed to produce supporting documents to prove that he has borrowed money from Mr. Zubin Dubash and the amount received by the applicant is accounted in the books of accounts of the applicant as loan and advances. In absence of the supporting documents the amount received by the applicant has been considered as advances received towards sale of villa. The applicant has received advance towards sale of villa prior to issuance of completion certificate. Hence, the same is taxable under GST Act @ 12%. Ruling:- The advance amount received for sale of villa on or after the appointed day prior to issuance of occupancy certificate by the local panchayat is considered as construction services and GST is applicable on two third of the total amount charged for such supply. 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.