Commercial construction for sale and lease qualifies as business supply, with limited GST credit only for pre-completion sales.
Commercial development of units for sale and leasing was treated as activity in the course or furtherance of business, so the transactions constituted supply under GST. The ruling read "business" broadly to cover commercial construction, and held that the source of construction funds was irrelevant. Input tax credit on construction inputs and input services was blocked for immovable property built on one's own account, including leased commercial units, because building and civil structures are excluded from plant and machinery. Credit was allowed proportionately only for commercial units sold before completion or occupation certification.
Issues: (i) Whether construction and development of commercial units on the vacant plot, and the sale and leasing of such units, constitute activities in the course or furtherance of business and amount to supply under GST; (ii) whether input tax credit is admissible on inputs and input services used for construction of the commercial units, particularly in relation to units sold before completion and units leased on rent.
Issue (i): Whether construction and development of commercial units on the vacant plot, and the sale and leasing of such units, constitute activities in the course or furtherance of business and amount to supply under GST.
Analysis: The expression "business" under the GST law is wide enough to cover trade, commerce and analogous activities, whether or not undertaken with volume, frequency or continuity. A commercial construction project undertaken for sale of units and letting out of the remaining units was treated as a commercial activity. The source of funds used for construction was held to be irrelevant. Sale of under-construction commercial units and leasing of commercial units were both treated as supplies made in the course or furtherance of business.
Conclusion: Yes. Sale of commercial units to prospective buyers and rent received on leasing of commercial units are activities in the course or furtherance of business and amount to supply under GST.
Issue (ii): Whether input tax credit is admissible on inputs and input services used for construction of the commercial units, particularly in relation to units sold before completion and units leased on rent.
Analysis: Input tax credit is generally available only for goods or services used in the course or furtherance of business, but it is blocked where goods or services are received for construction of an immovable property on one's own account, other than plant and machinery. Since building and civil structures are excluded from plant and machinery, credit on construction inputs for the leased commercial property was denied. For units sold before receipt of the completion or occupation certificate, credit was allowed proportionately to the extent of such pre-completion supplies.
Conclusion: ITC is available on inputs and input services used for construction of commercial units sold before completion, but no ITC is available on inputs and input services used for construction of commercial units leased out on rent.
Final Conclusion: The ruling treats the commercial development activity as taxable business activity, while permitting only limited input credit for pre-completion sales and denying credit for the portion used to create leased immovable property.
Ratio Decidendi: A commercial construction project intended for sale and leasing is a business activity under GST, but credit on construction of immovable property on one's own account is blocked by the statute except to the extent the units are sold before completion.
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AI Drafter ✕
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