2021 (7) TMI 928 - AAR - GST

GST Time of Supply Ruling for Flats - Possession Date Key

The Authority ruled that the time of supply and point of taxation for flats allotted before GST but constructed during GST is determined by the date of ... Time of supply - point of taxation - constructed complex - transfer of possession - conveyance deed - allotment letter - liability to pay tax on development rights - literal construction - noscitur a sociisConstructed complex - literal construction - noscitur a sociis - Meaning of the phrase 'Constructed complex' in Notification No.4/2018. - HELD THAT: - The Authority applied principles of literal construction and noscitur a sociis to construe the phrase 'Constructed complex' in the notification. The words 'building' and 'civil structure' that follow the phrase qualify its meaning, restricting the term to a building or a completed structure in its ordinary and popular sense. Accordingly, a constructed complex contemplates an existing building or completed structure before any transfer of possession or right under the notification can occur.'Constructed complex' refers to a building or a completed structure.Time of supply - point of taxation - transfer of possession - conveyance deed - allotment letter - liability to pay tax on development rights - Determination of the time of supply and point of taxation for development rights under Notification No.4/2018 where a supplementary agreement was executed prior to the GST regime but possession/right is transferred after introduction of GST. - HELD THAT: - Notification No.4/2018 fixes the time of supply for the taxable event of transfer of development rights at the moment when the builder/developer transfers possession or the right in the constructed complex to the person supplying development rights by entering into a conveyance deed or a similar instrument (for example, an allotment letter). A plain reading of the notification requires that (i) a constructed building or structure be in existence, and (ii) the transfer of possession/right be effected by a conveyance deed or similar instrument. Applying this to the facts, an agreement executed before the GST regime does not by itself satisfy these conditions where the actual transfer of possession/right occurs later; therefore the time of supply is the date of transfer of possession/right by conveyance/allotment, and liability to tax arises on that date. Where such transfer occurs after the commencement of CGST/SGST, liability arises under CGST & SGST.The time of supply and liability to pay tax on development rights is the date on which possession of, or the right in, the constructed building is transferred to the person supplying development rights by conveyance deed or similar instrument; it is not the earlier date of the supplementary agreement.Final Conclusion: The Authority ruled that 'constructed complex' means a building or completed structure and that, under Notification No.4/2018, the time of supply (and hence the point of taxation) for development rights is the date of transfer of possession or right by conveyance deed or similar instrument; an earlier supplementary agreement does not determine tax liability if possession/right is transferred later, and where transfer occurs after introduction of CGST/SGST the liability arises under those Acts. Issues:1. Time of supply and point of taxation regarding flats allotted before GST but constructed during GST.2. Date of allotment for payment of service tax.3. Compliance with service tax payment.4. Impact on future projects.5. Definition of 'Constructed complex' in the notification.Issue 1: Time of supply and point of taxation regarding flats allotted before GST but constructed during GST:The applicant sought clarification on the time of supply and point of taxation for flats allotted before GST but constructed during GST. The Authority analyzed the Notification No.4/2018 and ruled that the date of transfer of possession of the building or the right in it to the person supplying development rights determines the time of supply and liability to pay tax. The liability arises on the day of transfer, as per the notification.Issue 2: Date of allotment for payment of service tax:The applicant inquired if the date of the supplementary agreement should be considered as the date of allotment for service tax payment, despite construction continuing from May 2017 to November 2018. The Authority clarified that tax payment should align with the time of supply indicated in the ruling for Issue 1.Issue 3: Compliance with service tax payment:Regarding sufficient compliance with service tax payment, the Authority reiterated that the applicant must pay tax in accordance with the time of supply determined in Issue 1, dismissing the notion of remitting tax based on the supplementary agreement date.Issue 4: Impact on future projects:The question of the impact on future projects due to the transitional period did not arise in the ruling, as it was not deemed relevant to the current case.Issue 5: Definition of 'Constructed complex' in the notification:The Authority clarified that 'Constructed complex' refers to a building or a completed structure, providing a clear definition for the term used in the notification.Overall, the ruling provided by the Authority addressed the applicant's queries regarding the time of supply, tax liability, compliance with service tax payment, and the definition of 'Constructed complex' in the context of the GST regime. The application by M/s. Vajra Infracorp India Private Limited was disposed of based on the rulings issued by the Authority.