Sale of immovable property treated as 'Supply'

[Guest]

Under MGST Law, Clause 5 (b) of Schedule II [transactions to be treated as 'Supply'] states that :

'construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or before its first occupation, whichever is earlier.'

broadly construed to mean that transfer of property under construction (where entire consideration has been received after issuance of completion certificate) shall be treated as supply of services & by implication, transfer of completed structures are outside purview of Supply & consequently, of GST levy.

The above clause is borrowed from sec 66 (E)(b) of 'Declared Services' of Finance Act, 1994, except for the 2nd exception: 'or before its first occupation, whichever is earlier'.

My query is:is first occupation exception linked with receipt of entire consideration or not?

If yes, it means sale of building is not a supply if: entire consideration is received either

(a) after issuance of Completion Certificate [CC] or

(b) before 1st occupation, whichever is earlier.

This seems confusing. Does it mean that when entire consideration is received before 1st occupation, it would not be a supply. So regardless of whether entire consideration is paid by buyer after CC or before 1st occupation, it would not be a supply.

Alternately, if first occupation exception is not linked with receipt of entire consideration, it could mean in cases of occupation before issuance of CC, transaction would not be supply.

Kindly clarify

CA Nandakumar Konkar

[KASTURI SETHI]

Dear Sir,

Note the words, "In GST there is no separate meaning for goods and services." written by Sh.M.Govindarajan, Sir in his article dated 1.2.17.

[KASTURI SETHI]

Pl. read "Goods or Services" instead of "goods and services".

[Guest]

Sir,

My query is not whether sale of immovable property is 'goods' or ;services', but whether the 2nd exception relating to 1st occupation is linked with receipt of entire consideration or not.

Regards

CA Nandakumar Konkar

[KASTURI SETHI]

Dear Sir,

I am expressing my views what I understand:-

ST is leviable if property is under construction and not treated as sale of goods unless completion certificate is there(in draft GST now "or first occupation" also proposed to be added). It means here consideration is received before property/building is ready for sale. Hence service.

ST is not leviable in case of property is sold where completion certificate is there and entire consideration is received afterwards.

So the emphasis is on " whether entire consideration is received "Before Or After" completion of property. It is natural that first occupation will also be after completion of the property.

So the essence of definition remains the same whether pre-GST era (at present) or after proposed GST era.

AI Summary

Timing of consideration: whether receipt before completion or before first occupation determines GST supply classification. The classification of sale of immovable property as a Supply under Clause 5(b) of Schedule II turns on whether the phrase 'before its first occupation' is linked to receipt of the entire consideration; one reading links the first-occupation exception to timing of full payment (excluding supply where full payment is received after completion certificate or before first occupation), while an alternative reading treats first occupation as an independent temporal test. The practical advisory view stresses that the emphasis is on whether the entire consideration is received before or after completion/first occupation, with pre-completion receipts treated as services.