The Karnataka High Court has held that the Goods and Service Tax (GST) is not payable on subsequent sale of under-construction property.
The bench of Justice S.R.Krishna Kumar has observed that when the constructed immovable property whether fully constructed or partially constructed is sold, as such, without providing any construction service subsequently, it would not attract Paragraph 5(b) of Schedule II and Section 7 of the GST Act, since there is no supply of goods or services or both in the transaction and consequently, the question of whether the building has received completion certification or not would be irrelevant.
Under Paragraph 5(b) of Schedule II, the activity of construction of complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier, is classified as a service.
The activity or the transaction covered under Paragraph 5(b) is the activity of construction of complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer.
The petitioner/assessee is in the business of development of real estate projects having various commercial and residential projects in and around Mangalore. The petitioner filed an application/refund claim before the respondents seeking refund of GST amount of Rs.14,32,64,614/-, pursuant to which, the department issued a Show Cause Notice proposing to reject the refund claim of the petitioner, who filed a detailed reply countering all the allegations made in the Show Cause Notice.
In pursuance of the same, the department passed the order rejecting the refund claim of the petitioner. The department rejected the refund claim of the petitioner.
The petitioner contended that Paragraph 5(b) and Section 7 of the GST Act to get attracted for a transaction, the basic requirement is that there should be a service provider and services receiver and the service provider should undertake construction activity for the service recipient. It was also submitted that there should be performance of a contract for construction of building by the service provider/supplier to the service receiver/recipient and when the same is absent in a case, then the Paragraph 5(b) has no applicability.
The court allowed the refund application/claim of the petitioner and directed the department to refund a sum of Rs.14,32,64,614 together with applicable interest in terms of Section 56 of the CGST/KGST Act back to the petitioner within a period of six weeks.
Case Details
Case Title: M/S Rohan Corporation India Pvt Ltd. Versus UOI
Case No.: Writ Petition No. 12700 Of 2023 (T-Res)
Date: 10/09/2024
Counsel For Petitioner: V Raghuraman., Senior Counsel
Counsel For Respondent: Madanan R. Pillai
Read More: CBIC and CII Forge New Pathways in Trade Facilitation at National Conference
