2018 (12) TMI 536 – AUTHORITY FOR ADVANCE RULINGS, KARNATAKA – TMI – Levy of GST – Construction services – relevant date of completion of construction of the property – supply of services – GST on any amount received as consideration towards sale of completed offices, after the date of completion, where part of the consideration was received prior to the date of completion – GST on the consideration received as consideration towards the sale of completed offices, where the entire consideration is received after the date of completion of construction.
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Relevant date of completion of construction of the property – Held that:- Entry No.5 of Schedule II of CGST Act 2017, which stipulates that any construction of a complex or building or a civil structure or a part thereof would be treated as a supply of service and the constructions where the entire consideration has been received after the issuance of completion certificate, where required, by the competent authority or after its fi
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of completion of the property and if the entire amount Of consideration has been received after such date of completion, then that would not be treated as a taxable service, If any part of the consideration is received before such date, then the transaction would be treated as a supply of service as per clause 5 of schedule II to the GST Act and attracts the levy of GST.
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What constitutes “first occupation”? – Held that:- The word “first occupation” is not defined anywhere in the Act. The Bengaluru Mahanagara Palike Building Bye-Laws 2003, under clause 5.7, stipulates that nobody can occupy the building or portion of the building until the Occupancy Certificate is obtained from the competent authority – the relevant date, in the instant case, would be the date of occupancy certificate or the first occupancy, which can only be after the date of occupancy certificate, whichever is earlier.
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In the instant case the competent authority i.e. B.B.M.P., Bengaluru issues the completi
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ND DR. RAVI PRASAD M.P. MEMBER Represented by: Sri Jayesh Zaverchand Shah, Partner ORDER UNDER SUB-SECTION (4) OF SECTION 98 OF CENTRAL GOODS AND SERVICES TAX ACT, 2017 AND UNDER SUB-SECTION (4) OF SECTION 98 OF KARNATAKA GOODS AND SERVICES TAX ACT, 2017 1. M/s. Bindu Ventures, (called as the Applicant hereinafter), No.2, Bindu Galaxy, 1st Main, West of Chord Road, Rajajinagar Industrial Estate, Bengaluru – 560044, having GSTIN number 29AAPFB6663D1Z5, has filed an application for Advance Ruling under Section 97 of CGST Act,2017, KGST Act, 2017 read with Rule 104 of CGST Rules 2017 & KGST Rules 2017, in form GST ARA-01 discharging the fee of ₹ 5,000-00 each under the CGST Act and the KGST Act. 2. The Applicant is a Partnership firm and is registered under the Goods and Services Act, 2017. The applicant has sought advance ruling in respect of the following question: (a) Which date should be considered as the date of completion of the property – the date of receipt of necessary
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n rent. b. The applicant states that they had undertaken one such project by the name Bindu Galaxy which is a commercial complex situated at No.2, 1st Main, Industrial Town, West of Chord Road, Rajajinagar, Bengaluru 560044 and they had started the construction on this project in the month of February 2016 on land owned by them. The construction of the commercial complex Bindu Galaxy was completed in all aspects by the end of the month of November 2017. c. The applicant states that he entered into agreement to sell with the prospective buyers and receive advances towards booking of commercial offices. He also states that they have discharged VAT and service tax on advances received on or before 30.06.2017 and GST on advances received on or after 01.07.2017. He states that they are paying GST at the rate of 18% with 1/3rd of the amount being appropriated towards sale of land (Which is not liable to GST). d. The applicant states that subsequently, on receipt of the entire consideration f
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the construction of the building was complete in all respects by 01.12.2017. 4. The applicant has filed a statement containing his interpretation of facts and law in respect of the aforesaid questions and the same is as under: 4.1 Schedule II of the Central Goods and Services Tax Act, 2017/Karnataka Goods and Services Tax Act, 2017 in entry 5 states as under: 5. Supply of services The following shall be treated as supply of services, namely:- (a) renting of immovable property; (b) construction of a 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. Explanation.-For the purposes of this clause- (1) the expression "competent authority" means the Government or any authority authorised to issue completion c
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the amount of consideration, towards the sale of immovable property, is received prior to issuance of completion certificate, then, the entire amount, including the amount of consideration received after the issuance of complete certificate, shall be liable to GST. 4.4 The completion certificate may be obtained from the Government or any other prescribed governmental authority. However, in case where there is no requirement to obtain such certificate from the local government, then the same may be obtained from a. An architect registered with the Council of Architecture constituted under the Architects Act, 1972; or b. A Chartered Engineer registered with the Institute of Engineers (India); or c. A licensed surveyor of the respective local body of the city or town or village or development or planning authority. 4.5 Therefore, the applicant contends that in his opinion, the date mentioned on the completion certificate received from the Chartered Engineer shall be taken as the date of
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e applicant encloses a copy of the certificate obtained from Chartered Engineer certifying that the building is completed in all respects including all essential amenities such as BESCOM Power Connection, BWSSB Water Supply, Sanitation Connection by 1st of December 2017 and is ready for occupation . Thus, the Bangalore Mahanagara Palike Building Byelaws, 2003 provides a clear distinction between a completion certificate and an occupancy certificate and that it cannot be deemed to be a completion certificate as contemplated under the GST Law. 5.1 The applicant states that the GST Law also defines the word competent authority: as an explanation to clause 5 in Schedule II and the same is as under: Explanation.-For the purposes of this clause- (1) the expression "competent authority" means the Government or any authority authorised to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from
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ion is received after the first occupancy. Hence, it would be of utmost importance to understand the meaning of the phrase first occupation used in the provision. While the GST Law at present does not provide the meaning of this phrase, supportmay be drawn from its ordinary meaning: Meaning of the word first , as per Cambridge English Dictionary, Merriam-Webster Dictionary & Oxford English Dictionary respectively is as under: Coming before all others in time or order (a person or thing) coming before all others in order, time, amount, quality, or importance. Preceding all others in time, order, or importance. Meaning of the word occupation as per Cambridge English Dictionary, Merriam-Webster Dictionary & Oxford English Dictionary respectively is as under: The action of living in or using a building or other place An occasion when someone moves into and starts using a building The act or process of taking possession of a place or area. The applicant states, read together, the ph
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deeds for purchase of respective property. They also furnishes a copy of Electricity Bill of the complex dated 01.12.2017, for the period 04.08.2017 to 30.11.2017, wherein the reading of the sub-meters installed for each is worked out, in support of their claim towards evidence of occupation of the building during the aforesaid period. The applicant requests to accede to their submissions. PERSONAL HEARING:/PROCEEDINGS HELD ON 03.04.2018. 6. Sri. Jayesh Z Shah, Partner, M/s. Bindu Ventures appeared on behalf of the applicant before the Authority for Advance Ruling on 21.03.2018 and submitted that the Applicant is into the business of construction of commercial complexes; they started construction of Bindu Galaxy in February 2016 & all necessary approvals are received in November 2017; no occupancy certificate is obtained but the office space is occupied; completion certificate from Chartered Engineer is obtained , Service Tax & GST has been paid on the advances received since
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ere the entire consideration has been received after the issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier, are exempt. 7.4 The stress here is on the words entire consideration ; after the issuance of completion certificate by the competent authority, where required and first occupation The competent authority is defined in clause (29) of section 2 of the Central Goods and Service Tax Act, 2017 and the same reads as under: (29) competent authority means such authority as may be notified by the Government; Clause (80) of section 2 of the Central Goods and Services Tax Act provides for the meaning of the words notified and the same reads as under: (80) notification means a notification published in the Official Gazette and the expressions notify and notified shall be construed accordingly; In the instant case, therefore, the crucial aspect which decides the tax liability is the date of completion certificate
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inspection of the building (including whether the owner had obtained commencement certificate as per section 300 of the Karnataka Municipal Corporations Act, 1976 and compliance regarding production of all required documents including clearance from the Fire Service Department in the case of high rise buildings at the time of submitting application) and intimate the applicant within thirty days of receipt of the intimation whether the application for occupancy certificate is accepted or rejected. In case, the application is accepted, the occupancy certificate shall be issued in the form given in Schedule IX provided the building is in accordance with the sanctioned plan. (b) Physical inspection means the Authority shall find out whether the building has been constructed in all respects as per the sanctioned plan and requirement of building bye-laws, and includes inspections by the Fire Service Department wherever necessary. 7.6 The complete extract of Bye-law 5.6 brings out that once t
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wever, rests with the BBMP. Therefore the certificate is only of the nature of a supportive document and the law does not recognize it as the document which is enough as the competent authority is mandated to necessarily inspect and then certify whether the building is fit for occupation. b. Clause (b) of Bye-law 5.6 provides a further insight into why the Bye-law 5.6 mandates an inspection and it also brings out the character of the certificate that is finally issued. Clause (b) provides that during inspection of the building, the authority will examine in detail the compliance of all the building bye-laws and the sanctioned plan. The sanctioned plan and building bye-laws are guidelines which take into account the habitat fitness of the buildings. In other words these building bye-laws, once complied with in totality ensure that the building is complete in all respects and is ready to be occupied. This brings us to a point where we see that the terms Occupancy Certificate and Completi
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pinion that the Occupancy Certificate is akin to Completion Certificate and is a must, 7.7 The Applicant has submitted affidavits from two buyers to the effect that they had occupied the building in September 2017 itself and the Occupancy Certificate is yet to be obtained. In this regard we find that bye-law 5.7 is relavent. The said bye-law is reproduced below: 5.7 Occupancy or letting of the new buildings – No person shall occupy or allow any other person to occupy any new building or part of a new building for any purpose whatsoever until occupancy certificate to such buildings or part thereof has been granted by an officer authorised to give such certificate if in his opinion in every respect the building is completed according to the sanctioned plans and fit for the use for which it is erected. The Authority may in exceptional cases (after recording reasons) allow partial occupancy for different floors of a building. The bye-law clearly provides that the building or any part of th
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ion of the property and if the entire amount Of consideration has been received after such date of completion, then that would not be treated as a taxable service, If any part of the consideration is received before such date, then the transaction would be treated as a supply of service as per clause 5 of schedule II to the GST Act and attracts the levy of GST. 7.9 The next issue before us to decide is what constitutes first occupation . The word first occupation is not defined anywhere in the Act. The Bengaluru Mahanagara Palike Building Bye-Laws 2003, under clause 5.7, stipulates that nobody can occupy the building or portion of the building until the Occupancy Certificate is obtained from the competent authority. Therefore the question / situation of occupying the building / part of the building before obtaining the occupancy certificate does not arise and hence the date of first occupation can only be after the date of occupancy certificate. Thus the relevant date, in the instant c
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anning authority; In the instant case the competent authority i.e. B.B.M.P., Bengaluru issues the completion certificate in the name of Occupancy Certificate and hence the date of occupancy certificate need to be considered. In view of the above, the date of first occupation is irrelevant to the instant case & hence can h be considered at all as the completion certificate ( Occupancy Certificate ), is required to be obtained mandatorily by the applicant from the competent authority i.e BBMP, Bengaluru, Karnataka. 9. In view of the foregoing, we rule as follows: RULING 1. The date of Occupancy Certificate issued by the competent authority, i.e. Bruhat Bengaluru Mahanagara Palike should be treated as the date of completion of the construction. 2. If any part of the consideration is received before such date of completion, then the transaction would be considered as the supply of services in terms of entry 5 of Schedule II to the GST Acts, and liable for GST. 3. If the entire consider
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