2020 (9) TMI 632 - AAR - GST

GST Ruling: Selling Flats After Commercial Completion Not Exempt from Tax. ITC Reversal Rules Explained

In Re : M/s V 2 Realty

The ruling determined that selling residential flats after the completion certificate of commercial shops or first occupancy in the building is not exempt ... Exemption from GST - selling of residential flats after date of completion certificate of commercial shops or after first occupancy in building - reversal of ITC on expenses incurred up to date of completion certificate shops - ITC on expenses incurred after date of completion certificate of commercial shops. Whether selling of residential flats after date of completion certificate of commercial shops or after first occupancy in building is exempt supply? - HELD THAT:- during the personal hearing, the applicant himself stated that they didn’t receive Completion Certificate in respect of their residential building (units). They have received only partial Building Use permission in respect of commercial units but not for residential units The applicant has received part Building Used Permission for the commercial Shops of Ground and First Floor and not for the Residential Flat. Accordingly, since no Building used permission has been issued by the competent authority in respect of residential flat and since no residential unit has been occupied by prospective buyer, supply of residential flats shall be treated as supply of service in terms Para 5(b) of Schedule-II of CGST Act, 2017. Manner of reversal of ITC on expenses incurred up to date of completion certificate shops - HELD THAT:- It is to rule that the manner of reversal of ITC on expenses incurred up to date of completion certificate shops is provided in Rule 42 and Rule 43 of CGST Act, 2017 read with Notification No. 16/2019-CT dated 29.03.2019. Manner of claiming ITC on expenses incurred after date of completion certificate of commercial shops - HELD THAT:- The manner of claiming Input Tax Credit has been provided under Sections 16 and 17 of CGST Act, 2017 read with Rules 42 and 43 of CGST Rules, 2017 read with Notification No. 16/2019-CT dated 29.03.2019. Issues:1. Exemption of selling residential flats after completion certificate of commercial shops or first occupancy in the building.2. Reversal of Input Tax Credit (ITC) on expenses up to the completion certificate date for shops.3. Claiming ITC on expenses after the completion certificate date for commercial shops.Issue 1: Exemption of Selling Residential Flats:The applicant, engaged in construction business, sought an advance ruling on whether selling residential flats after the completion certificate of commercial shops or after the first occupancy in the building is exempt from GST. The authority analyzed Para 5(b) of Schedule II to the CGST Act, 2017, which states that a complex or building intended for sale, except where consideration is received after completion certificate issuance or first occupation, shall be treated as a supply of services. The applicant received a completion certificate for commercial shops but not for residential flats. As no residential unit was occupied, the authority ruled that selling residential flats is considered a supply of service under Para 5(b) of Schedule II.Issue 2: Reversal of ITC on Expenses:Regarding the reversal of ITC on expenses incurred up to the completion certificate date for shops, the authority referred to Rule 42 and Rule 43 of the CGST Act, 2017, along with Notification No. 16/2019-CT dated 29.03.2019. The rules provide the manner in which ITC on expenses up to the completion certificate date should be reversed.Issue 3: Claiming ITC on Expenses:For claiming ITC on expenses incurred after the completion certificate date for commercial shops, the authority cited Sections 16 and 17 of the CGST Act, 2017, which outline the procedure for claiming Input Tax Credit. The rules mentioned for reversing ITC on pre-completion certificate expenses also apply to claiming ITC on post-completion certificate expenses.Conclusion:1. Selling residential flats after the completion certificate of commercial shops or first occupancy in the building is not exempt from GST.2. The reversal of ITC on expenses up to the completion certificate date for shops is governed by Rules 42 and 43 of the CGST Act, 2017.3. The manner of claiming ITC on expenses after the completion certificate date for commercial shops is provided under Sections 16 and 17 of the CGST Act, 2017, along with the relevant rules and notifications.This detailed analysis of the judgment provides insights into the interpretation of relevant legal provisions and their application to the specific scenario presented by the applicant.