Applicability of GST

[Bharat Cholleti]

Dear sir,

Applicant has given sum loan to the builder in the year 2020. Builder purchased a piece of land in the year 2021and completed the Construction in the year 2022 received OC from competent authority, now the the applicant wants to take a flat from the builder by paying the balance amount to the builder. Will there be GST applicability to the applicant please clarify.

[Shilpi Jain]

Was interest paid by the builder during the period the loan was granted?

[Bharat Cholleti]

Dear Shilpiji,

Thank you,

What are the consequences interest paid or not paid in relation to the loan

[Shilpi Jain]

In case interest has not been paid then it could be regarded that the amount paid is not a loan but actually only an advance which is named as a loan. There could be thus a dispute from the department.

[Amit Agrawal]

Essentially, one needs to look at actual nature of transaction ...... If same was genuinely loan transaction & NOT 'an advance for property but camouflaged as loan' and sale of property transaction is completely independent of loan transaction, then, gst will not apply.

Department will always look such transaction/s with suspicion (as same can be 'camouflage' for tax-evasion).

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Padmanathan KV]

As discussed by experts, the whole issue will depend on the actual facts and circumstances.

1. Is there any document/agreement evidencing the loan in 2020?

2. It the amount accounted as "loan advanced" in books of the applicant and "loan availed" in books of the builder?

3. Is any interest paid? if so TDS under 194A deducted?

If the answer to all or most of the above question is NO, then it would be a difficult proposition in my humble opinion.

AI Summary

GST applicability depends on whether funds were a genuine loan or an advance camouflaged as loan, determining tax treatment.
GST applicability depends on whether the 2020 funds were a genuine loan-evidenced by a loan agreement, reciprocal accounting as loan, payment of interest and TDS-or instead an advance for property camouflaged as a loan; absence of these indicia permits the revenue to treat the payment as consideration for supply and challenge non application of GST.