GST on sale of flat

[SANTOSH PATIL]

Dear Experts,

A builder client of mine entered into sale agreement of shop for ₹ 980000 in 2009 and received 730000 till 2013. In the financial year 2021-22 he got balance amount of 250000. In his books of accounts till date it was shown has stock in hand, Now my question is in financial year 2021-22 he has done sale deed. my question is with regards to GST tax does he needs to pay gst on entire amount or on bal amount of 250000, he had not paid service tax on above amount received, he got himself registered in service tax in 2013. Kindly guide me with your expert opnion and advise

[Shilpi Jain]

Gst to be paid on 250000 only.

For the amounts received earlier, levy was under ST. Even if not paid then, as on today the period within which the department can demand has expired.

[Rajagopalan Ranganathan]

Sir,

Rule 4A (1) of erstwhile Service Tax Rules. 1994 provides that every person providing taxable service shall issue an invoice, bill or challan within 30 days from the date of completion of such taxable service or receipt of any payment towards value of the taxable service whichever is earlier. Thus invoice is required even when the advance is received. Therefore you have to pay service tax on the entire amount and interest is payable on ₹ 730000 from the date of receipt of the amount till the date of payment of service tax on it.

[KASTURI SETHI]

Sh.Santosh Patil Ji,

The builder (the assessee) will have to tax on the whole amount.

RULE 3. Determination of point of taxation (POTRs, 2011)

(a) __________

(b) ____________

Explanation - For the purpose of this rule, wherever any advance by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance.].

[KASTURI SETHI]

Time-bar is out of picture, it being also continuous supply. See the definition of continuous supply in ST & GST.

I fully agree with Sh.Ranganathan, Sir.

[Ravinesh Sinha]

No GST is payable on the said balance amount of ₹ 250000 as it is supposed that occupancy certificate had already been issued prior to july 2017. If not issued before receipt of the said balance amount, GST is payable only on ₹ 250000 as transaction prior to GST period can not be treated as supply under GST.

[KASTURI SETHI]

Pre-GST period and post-GST regime both are integrally linked.

[KASTURI SETHI]

Sale deed was executed in the year 2021-22. The balance amount was received in the year 2021-22. The builder applies for completion certificate to the Competent Authority only after receipt of full payment. He would also not allow occupation prior to the receipt of full payment.The assessee is bound by the date of advance , the date of completion of service. and the date of invoice. In this case no completion certificate was issued prior to the year 21-22.

[KASTURI SETHI]

Sh.Santosh Patil Ji,

Has you client received a letter or SCN from the department ?

[Shilpi Jain]

Completion certificate is applied for based on the stage of completion in the project and is generally not dependent on whether amounts are received from the customers or not.

Also, the time when the liability to pay tax on a particular amount arises, that year will be the year of liabbility and the limitation period should be calculated. Merely because it is a continuous supply of service the demand cannot be extended upto the last instalment received. Else, in that case the constcution asseessees will have to maintain books for very long time, which is not the purpose.

[Ravinesh Sinha]

Taxability(GST orST) of construction of flat ceases after issuance of completion certificate or occupancy cerficate as per law .so this is vital for taxability of flat

[KASTURI SETHI]

Delve deep into the issue.

[RangaRao Kilaru]

on 730000 received till 2013, it is time barred and your client need not pay service tax. refer rule 6(b) of POT rules for due date of payment.

with respect to 250000, it is being treated as stock in trade which means service is completed but amount is not received. For determining point of Taxation (POT) and liability to pay service tax if any, we should know since what date it is being treated as stock in trade. if such date is beyond 5 years, prima facie tax is not payable.

[Amit Agrawal]

In my personal view, no GST is payable on the subject transaction even when flat was not ready for occupation before 01.07.2017 and even if construction was completed only in FY 2021-22.

Demand of service tax for Rs. 7,30,000/- is now time-barred, being even beyond extended period of limitation under service tax regime.

And, service tax is payable on balance amount of Rs. 2,50,000/- with reference to date 30.06.2017 (i.e. date of paying service tax as 05.07.2017) This is assuming that delay in getting this balance payment in on account of delay in construction from builder and NOT because of any delay in any payment from the buyer.

And extended period to demand service tax on above-said Rs. 2,50,000/- has still not lapsed as yet and Tax-Dept. has time till 15.08.2022 to issue SCN demanding service tax on said Rs. 2,50,000/-.

All above are strictly personal views of mine and the same should not be construed as professional advice / suggestion.

AI Summary

Point of taxation: GST applies to post regime receipts tied to completion certificate; earlier receipts face service tax limitation. GST exposure depends on whether the construction service was completed before the GST regime or whether the balance receipt constitutes post regime supply. Point of taxation is governed by advance receipt and invoice rules and by issue of completion/occupancy certificate; pre GST receipts fall under the service tax regime and may be time barred, while amounts received after GST commencement are potentially taxable under GST unless prior completion fixes liability earlier.