GST ON OFFICE

[NILESH PITALE]

Dear Expert

Our Client Entered in to the Agreement in the Month of March-2024 which was duly Registered and O C Received in the Month of Sept-2024.

Builder has now raised GST Demand.... is it Correct ?

Please Guide

[Sadanand Bulbule]

Dear Nilesh

Was the agreement in March 2024 entered for purchase of office, when there was no OC? The date of sale agreement is crucial here as regards to the applicability of GST. Be specific on facts.

[Shilpi Jain]

At the time of paying the first advance by ur client if completion certificate is not received then GST liability will exist

[KASTURI SETHI]

Sh. Nilesh Pitale Ji,

(i) As per Schedule-II, Clause-5 (b), GST on construction service is NOT payable only if the entire consideration has been received after issuance of completion certificate or after its first occupation (whichever is earlier). The emphasis is laid on the words, 'only' 'entire' and 'after'.

 (ii) Even if the smallest amount is received prior to the issue of completion certificate or first occupation, GST will be applicable and then no exemption will be admissible at all.

(iii) Whether any amount was paid to the builder prior to the issuance of O.C. ?

(iv) Pl. elaborate your query with full facts. Without full facts correct reply is not possible.

[Mathi Bharathi]

Dear Sir / Madam

Our customer will purchase our product by presenting Invalidation letter  of EPCG .

To produce our product we need to import some components and we are planning to take AA for duty exemption .  Hope clear now and advice

[KALLESHAMURTHY MURTHY K.N.]

Dear Sirs, 

This is the continuity of the contents in Sl. No. 3. 

Where an agreement is entered into by a prospective buyer on advance payment or deferred payments for a property under construction, GST is applicable even on instalments paid after OC is received, as per the Judgement of Hon’ble Supreme Court of India in the case of Larsen & Tourbo Ltd. vs. State of Karnataka in relation to the law laid down in K. Raheja’s case.  

[KASTURI SETHI]

Sh.Kalleshamurthy Murthy Ji,

Sir, The judgement of Hon'ble Supreme Court mentioned by you was referred to Larger Bench reported as 2008 (12) STR.257 (SC). - 2008 (8) TMI 28 - SUPREME COURT Still not final as per EXCUS.

The appeal of K.Raheja Development Corporation - 2005 (5) TMI 7 - SUPREME COURT was dismissed by Hon'ble Supreme Court.

[KALLESHAMURTHY MURTHY K.N.]

Sri Kasturi Sethi Ji,

sir,

With respect, I would like to furnish the following to the contents in Sl. No. (6) above.

The Judgement of Hon’ble Supreme Court of India in the case of M/s L& T v/s State of Karnataka - 2013 (9) TMI 853 - SUPREME COURT vide Case No. Civil Appeal No. 8672 of 2013, in conformity with the case of M/s Raheja Development Corporation v/s State of Karnataka -2005 (5) TMI 7 - SUPREME COURT 2013 dated September 26, 2013.

The very gist of the case in precise is as under.

“The activity of construction undertaken by the Developer would be a works contract only from the stage the Developer enters into a contract with the Flat purchaser”.

There were cases assessed under the KVAT Act based on this Judgement.

Sir, please give your analysis on the same.

Thanking you Sir,

[Sadanand Bulbule]

Dear Murthy

While taking the liberty of Sethi sir, I am of the opinion that the law governing 'works contract' is well settled by the Hon'ble Apex Court in L&T - 2013 (9) TMI 853 - SUPREME COURT case in 2013 [supra]. "Purchase Contract" between the builder and the prospective buyer is umbilical cord to decide the taxable event. In the absence of any "contract",the works of construction is only on account of own construction by the builder. So he is not eligible to claim ITC and also not liable to pay OPT as there is no element of supply of works contract services.

This ratio applies to the current GST regime as well.

Sethi Sir to sum up.

[KASTURI SETHI]

Sh. Sadanand Bulbule Ji,

Sir, I have gone through all the judgements posted. The whole issue is required to be revisited. It is my humble request. Pl. peruse the following judgement of Supreme Court and let us interact afresh. The judgment of Hon'ble Supreme Court reported as L&T-2013 (9) TMI 853-SC stands overruled on 06.5.2014 reported as under :-

Overruled in (Supreme Court) in the case of KONE ELEVATOR INDIA PVT. LTD. Versus STATE OF TAMIL NADU - 2014 (5) TMI 265 - SUPREME COURT.

Pl. throw more light on the issue to quench my thirst for more knowledge.. Looking forward for your outlook please.

[Sadanand Bulbule]

Dear Sir

The Hon'ble Supreme Court in its judgement dated 06/05/2014 rendered in the case of Kone Elevator India Pvt Ltd Vs. State of Tamil Nadu & Others [2014 (5) TMI 519-SC] has overruled its own earlier judgement dated 17/02/2005 rendered inKone Elevators Vs. State of AP [2005 (2) TMI 519-SC] highlighting the distinguishing spinal facts determining the "sale of goods" and 'works contract'.

To be continued......

[Sadanand Bulbule]

Plz read it as 2014 (5) TMI 265-SC

[KALLESHAMURTHY MURTHY K.N.]

Dear Sirs,

I am submitting my views and understandings before the Experts for more clarity on the issue raised.

Clause (29A) was incorporated into Article 366 in the 46^th Amendment to the Constitution. The Hon’ble SC upheld this Amendment in the case of Builders Association v/s Union and others. On this plethora, the Constitutional Bench (SC), over-ruled in the case of Kone Elevator India Pvt. Ltd. vs State of Tamil Nadu and Ors. - 2014 (5) TMI 265 - SUPREME COURT its own judgement of the earlier decision of the three-member Bench re State of A.P. v. Kone Elevators (India) Ltd. - 2005 (2) TMI 519 - SUPREME COURT and held that the activity of manufacturing, erecting, installing and commissioning of a lift (an elevator) is indeed a ‘works contract’ and not a ‘contract for sale of goods in the similar way of L&T decision which is a Landmark Judgement standing still. 

With respects to all

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

I shall not give up. This is as per your latest post in Issue ID 119370.

[KASTURI SETHI]

Sh. Kalleshamurthy Murthy Ji,

Sir, I am well aware of all the judgements and status thereof. It is an undisputed fact that both 'Works Contract' and 'Works Contract Service' are different terms. It is also not in dispute that 'Works Contract Service' is a composite supply of service.

How the above judgements are relevant in GST regime, especially, in view of Para nos. 5 & 6 of Schedule-II ?

[KASTURI SETHI]

Dear Sir,

The ratio of the following judgement is also worth reading ::-

Service Tax and VAT are mutually exclusive---Supreme Court in the case of Image Creative Pvt. Ltd - 2008 (1) TMI 2 - SUPREME COURT. Emphasis is laid on ratio.

 

[Sadanand Bulbule]

Dear Sir

Your post at Sl.No 15 is indisputable.

"One cannot make an omelet without breaking eggs".

Let other experts double check the factual position and introspect the truth of the matter at hand. There is no point in pounding the dry husk.

[Sadanand Bulbule]

Dear all

Such discussion, this reminds me an  old saying:

” In search of frills, lose skirt”. 

[KALLESHAMURTHY MURTHY K.N.]

Sri Kasturi Serthi Ji, 

Sir, 

I know that you are more well aware of the orders and judgements. I have posted my submissions at Sl. No.12 for more clarity with regard to your postings at Sl. No. 6&9.

 With respects. 

[KASTURI SETHI]

Sh.Kalleshamurthy Murthy Ji,

Sir, All the above judgements of Hon'ble Supreme Court deal with the term, 'Works Contract' under VAT Act and NOT 'Works Contract Services' under Service Tax Law (Finance Act, 1994).

How the case laws pertaining to VAT Act can be relevant for Service Tax Laws or GST regime ?

What is the purpose behind 'Exclusion clause' mentioned in Schedule-II (Para No.5 (b)) ?

"-----------------except where the entire consideration has been received after issuance of completion certificate or after its first occupation, whichever is earlier.".

This exclusion clause also existed in Section 66D (b) of the Finance Act, 1994 (Service Tax Laws).

[KASTURI SETHI]

Dear Sir,

The following case law is also worth reading:-

"Works Contract Services were held to be outside the legislative competence of the State legislatures". ----CESTAT Delhi in the case of Raj Construction Company Vs. Commissioner of CGS - 2024 (11) TMI 11 - CESTAT NEW DELHI.

AI Summary

GST Demand on Office Purchase: Experts Clarify Applicability Based on Payment Timing and Completion Certificate Issuance. A client entered an agreement for an office purchase in March 2024, with the completion certificate received in September 2024. The builder has now demanded GST, prompting a query on its correctness. Experts discuss the applicability of GST, emphasizing that GST is applicable if any payment was made before the completion certificate issuance. They reference various Supreme Court judgments, including those involving works contracts and service tax laws, to clarify the legal position. The discussion also touches on the distinction between works contracts and works contract services under different tax regimes.