Can Unsecured Loan consider as advance received for a service?

[Suresh Yadav]

A builder received unsecured loan from many individuals before Commencement Certificate(CC). After obtaining CC Certificate, Builder returned the unsecured loan to individuals bank account & subsequently after 2-3 days took same amount as flat consideration through same bank account of individual and booked flat for same individuals & paid applicable GST. Can initial unsecured loan be considered as advance received for construction service (flat) from individual? Can GST department demand interest on the same?

In some cases builder returned unsecured loan after Completion Certificate & booked flat after 2-3 days of returning unsecured loan. No GST paid because after Completion Certificate it became exempt. Can GST be demanded by department considering unsecured loan as advance?

There is no written agreement available for unsecured loan between builder and individual. It is generally orally or mutual unserdtaing.

[Suresh Yadav]

Additional information:- Loan is returned by builder without interest.

AI Summary

Treatment of unsecured loan as advance may affect GST liability and lead to interest demands on the builder. Whether unsecured receipts before issue of the Commencement Certificate are in substance advances for construction services depends on timing, transaction pattern and evidence; absence of written loan agreements and swift return-and-repayment sequences may lead authorities to treat such receipts as consideration, affecting GST liability and interest exposure despite any exemption after Completion Certificate.