Fact: M/s Bindu Ventures (“the applicant”) is engaged in the business of real estate which undertakes construction of commercial complexes which are subsequently sold or given on rent. The applicant has undertaken one project by the name “Bindu Galaxy” which is a commercial complex situated in Bengaluru. The construction was started in the month of February 2016 on a 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.
Further, the applicant entered into agreement to sell with the prospective buyers and receive advances towards booking of commercial offices. They had 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.
Issues Involved: The applicant has sought advance ruling in respect of the following questions:
(a) Which date should be considered as the date of completion of the property – the date of receipt of necessary approvals from BBMP / Karnataka Pollution Control Board / Karnataka Electricity Board or the date of receipt of completion certificate from a registered Chartered Engineer?
(b) Whether the applicant is liable to pay 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 as determined in question (a) above?
(c) Whether the applicant is liable to pay 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 as determined in question number (a) above?
Applicant’s Contention of Law: The applicant states that, if part of 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. Further the completion certificate may be obtained from the Government or any other prescribed governmental authority. The certificate in Schedule VIII is a certificate from registered architect / engineer / supervisor stating that the building is complete in all respects. The applicant encloses a copy of the certificate obtained from a Chartered Engineer certifying that the building is completed in all respects including all essential amenities and is ready for occupation”.
Thus, the Bangalore Mahanagara Palike Building Byelaws 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.
Held: The Hon’ble AAR of Karnataka vide Advance Ruling No: KAR ADRG 32/2018 dated December 03, 2018 held that Occupancy certificate (OC), which is a legal requirement acts like a Completion Certificate (CC), would be 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 in other words Occupancy certificate (OC) is in nature of CC because unless construction is completed it cannot be occupied while observing that OC is akin to CC and is a must and that chartered engineer’s certificate cannot substitute the same. Further, 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. In case, if the entire consideration is received after the date completion, then the transaction would not be liable to GST.
Citation: [2018] 100 taxmann.com 207 (AAR – KARNATAKA)