FIRST OCCUPATION OF PROJECT

[PANKAJ CHUGH]

Hello,

Kindly guide on the following:

As per clause 5(b) of Schedule II of GST which read as under:

The following shall be treated as supply of services, namely :-

(b) 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 after its first occupation, whichever is earlier.”

Brief Facts:

During the construction of the commercial project, in the state of haryana, for which Completion Certificate is not yet obtained, the builder let out two units for office purposes to his subsidiary companies.

Query:

In the context of rule 42 of the CGST Rules, Whether the activity of letting out of units in under construction project may be treated as first occupation of the project ? and the ITC should be reversed.

AI Summary

First occupation principle: letting out under construction units generally does not trigger input tax credit reversal.
Whether letting out units during an under construction project amounts to first occupation for GST and requires reversal of input tax credit is disputed. Commentators distinguish sale (transfer of ownership) from letting out (temporary grant of use without transfer), concluding that letting out does not constitute first occupation and thus does not trigger the ITC reversal mechanism under the GST rule.