QUESTION

There is a registered GST taxpayer (a private limited company) who is engaged in providing of GTA service. It had booked a flat in Year 2015 (before GST) in 03 crores & capitalized it in its books. Further, before registration of this flat & obtaining completion certificate, it resold this flat in the Year 2018 in 04 crores. Query-
(1) Is GST applicable on this transaction. If yes, what is GST rate applicable?
(2) Moreover, does this transaction fall within the purview of business as the main business of the company is GTA service & he is not a builder/developer? Provide relevant Section/Rule/Notification/Circulars in this respect.

ANSWER

FACTS OF THE CASE:

A registered person booked a flat in pre GST Regime and is selling the same in GST Regime before obtaining the completion certificate.

LAW APPLICABLE:

1. Para 5 of Schedule III is laid as under;

"5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building."

2. Section 2(17) CGST defines business. Clause (c) of this subsection is reproduced hereunder as follows;

"(17) 'business' includes

(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction..."

INTERPRETATION:
Section 2(17) clause (c) highlights that a low volume or frequency of a transaction can not be a ground for it to be considered not in the course of business. Therefore even a single transaction of sale of flat that is capitalized in the books would constitute as a transaction in the course or furtherance of business.
Para 5 of schedule III dictates that the sale of a building (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.) shall be considered as neither supply of goods nor service.
Since in the current case, flat is being sold before issuance of a completion certificate or first occupancy therefore this is not covered under the ambit of schedule III and thus will be considered as a "supply".
To grasp the concept, since completion certificate is not issued for the flat yet, therefore a "flat" does not exist as of now and what is being sold is not an immovable property. Rather a right in immovable property is being sold. Therefore this is a supply of a service.

CONCLUSION:
Tax will be levied since this is not sale of immovable property. (Reply dt. 30/12/2021)