Question25: My client is into the business of real estate (including renting out of properties). He has GST registration in Delhi and property which is let out is situated in Haryana. He invoices from Delhi to Haryana on IGST basis.
Now he has demolished one of his property and outsourced the demolition work to a contractor. As per the terms of contract the contractor agreed to pay him a consolidated sum of Rs. 15 lakhs and the contractor was entitled to all forms of building scrap including Bricks, Wood, Iron & Steel, Electrical cables, Sanitary items etc. The labour cost of demolition was to be borne by contractor.
Is GST applicable in the present secnario. If so what would be the rate. Further the Head office of the client is at Delhi. The property is situated at Haryana. Would he require to get himself registered in the state of Haryana. He is already registered under GST in Delhi.

Answer: The property is sold in scrap form after it is demolished
we can not say that the property is sold before it is demolished as immovable property because that will subject to registry etc
So the goods which are sold are different forms of scrap i.e dust , clay , wood, Iron and steel etc.
Now as per section 15(2) (b) the value of supply also includes "any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both"
Therefore the cost of demolition should be included in transaction value.
The goods sold are scraps generated after the process of demolition which is a process incidental for converting building to scrap. Therefore Section 15 should apply.
Now the next point comes is the question of classification & rate of tax since you are taking lump sum price for all types of scrap. therefore it will be covered under definition of mixed supply and accordingly the tax will be the Highest rate of tax applicable to any item of scrap which is sold in mixed supply . In this case it may be 18% because if you are taking lump sum prices for all the items then there are chances that at least one of item may attract tax @ 18% or more.
Please note that scraps in many cases attract low rate of tax.
Here we have a suggestion that instead of giving contract for demolition of Building. First get the building demolished & then sale the scrap with bifurcation in different heads. This way you can do some tax planning without doing tax evasion. But how much this suggestion is possible in practical will very from case to case (Reply dt. 28/3/2018)