TaxTMI 
TaxTMI 
Can Unsecured Loan consider as advance received for a service?
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....an Unsecured Loan consider as advance received for a service? <br> Query (Issue) Started By: - Suresh Yadav Dated:- 3-3-2026 Goods and Services Tax - GST <br> Got 11 Replies <br> GST<br> <br> 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 afte....
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....r 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 aft....
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....er 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. --Reply By: Shilpi Jain The Reply: Substance over form - this concept very well....
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.... applies to these facts! --Reply By: KASTURI SETHI The Reply: The query needs redrafting. It must be clear and based on facts and not on future plans. From the query, it appears that the purpose of the query is to explore the possibility of availing exemption via this forum otherwise every Tom, Dick & Harry knows the difference between advance and loan. --- Sub-Reply By: KASTURI SETHI The Su....
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....b-Reply: Such plan, if executed, would boomerang. in the form of SCN demanding tax along with interest and imposing penalty. --Reply By: KASTURI SETHI The Reply: HUMBLE SUGGESTION We should be able to identify any hypothetical query so that our precious time is not wasted and also our peace of mind is not disturbed. --Reply By: Sadanand Bulbule The Reply: Plz peruse the following Section 2[....
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....31] of the CGST Act: (31) "consideration" in relation to the supply of goods or services or both includes-- (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Go....
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....vernment; Analysis: The unsecured loans were independent financial transactions, duly recorded in the books of account and fully repaid prior to execution of any agreement for sale or allotment of any unit. At the time of receipt, there was neither an identifiable supply nor any obligation to provide construction service. In terms of Section 7 read with Section 2(31), consideration must be in resp....
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....ect of or for inducement of a specific supply. As the impugned amounts were not received against any such supply, they do not qualify as consideration or advance for construction services. GST has been duly discharged on actual consideration received wherever applicable. --Reply By: Sadanand Bulbule The Reply: Yes Sir. Prima facie, it appears to be "well engineered" affairs to ascape GST liabil....
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....ity. Intent is more crucial than the event. --Reply By: Sadanand Bulbule The Reply: The querist is informed to come with clean facts on this forum. --Reply By: Mr. Heet Shah The Reply: To substantiate that funds recd are as unsecured loan there should be loan agreement, to prove the intent of loan. Further funds should have been credited in books a unsecured liability, interest should have b....
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....een provided to prove the nature of funds as loan rather than advances for flats. Also intent or benifit arising from such loan should be substantiated esp. where it is interest free. Developer may manage to prove the price difference in sale of property as compensation for funds as loan. Allotment or booking letter should be issued on repayment of funds not prior to it. --Reply By: ....
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....Raam Srinivasan Swaminathan Kalpathi The Reply: I am of the opinion that the entire transaction is a sham and will be definitely disputed by the GST department. The charade of an unsecured loan is only to disguise the advance amount received from a customer, on which GST is leviable, for a works contract. I for one would strongly advise RPs to refrain from such slight of hand methods and chinan....
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....eries. Without of an iota of documentation the trail of funds could easily be established by the department. Best wishes --Reply By: Raam Srinivasan Swaminathan Kalpathi The Reply: Profuse thank you respected Sri.Sadanandji for your endorsement of my views. Dont want to pour any further vitriol on the query. --Reply By: Suresh Yadav The Reply: Additional information:- Loan is returned by bui....
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....lder without interest. <br>***<br> Discussion Forum - Knowledge Sharing....