QUESTION

An unregistered firm came in to existence W.E.F. 01-04-2019 has started construction of 24 flats. It has not accepted advance booking amount from any of the customers and all flats would be sold after B U permission. Its 65% inward supplies are from registered instead of 80% as notified vide Notification No 3/2019. Is the firm liable to get registration? Is firm liable to pay R.C.M. on shortfall of 15% inward supply?

ANSWER

Facts of the case:An unregistered firm came into existence after 1.04.2019 doing construction and is planning to sell all it's flats after obtaining the certificate of completion.

Law Applicable: As per para 5 of schedule III the following shall not be treated as supply of goods or service;
"Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building."

Interpretation: If a building is sold after first occupancy or completion certificate, whichever is earlier, the same shall be neither supply of goods nor service as per schedule III. Therefore any sale of flat after receiving the completion certificate shall not be treated as a "supply" in terms with schedule III and therefore shall not be added in calculating the aggregate turnover of the assessee. Also there would be no GST liability in this case on the outward supply of flats after the completion certificate.
If there is no GST liability  since there is no outward supply then notification 11/2017 CGST and 7/2019 CGST are not applicable.

Conclusion: The RCM liability under section 9(4) of CGST is attracted on inputs only if the tax rate is opted under notification 11/2017 CGST.
Since in this case there is no outward tax liability and therefore the notification 11/2017 CGST is not applicable and hence there is no RCM liability under 9(4) of CGST.(Reply dt.22-05-2020)