Sale of owner's share of property, developed in collaboration with developer, is not liable to GST if entire consideration is received after issuance of completetion certificate: AAR

Facts of Case

The Applicant had given irrevocable license to the Developer to execute and complete the project and till the developer’s share is entirely conveyed to the Developer or his nominees. The Developer shall at its sole cost, expense and responsibility, develop the schedule property in accordance with the specifications set out there in and the responsibility to obtain conversion orders, construction plans and other permissions from the respective authorities by the Developer.

The applicant is entitled to get allotted share of 40% of undivided share of land in right proportionate to the super built up area with car parking space and developer share pertains to 60 % of undivided share of land in right proportionate to the super built up area with car parking space, title and interest. Further the developer handed over applicant’s (Owner) undivided share of the land in right proportionate to the super built up area with car parking space after obtaining occupancy certificate from the statutory authorities on 26.08.2019.

The developer had sole and exclusive right of marketing the entire project. The applicant (owner) shall discharge VAT / service tax liability in respect of the owners share, if enters into agreement for sale of the allotted flats in terms of clause 9.3 prior to obtaining the occupancy certificate/ completion certificate.

The developer had obtained sanctioned plan vide BBMP/ADDL.DIR/JD South/ LP 016/16-17 on 21.2.2017 and commencement certificate on 16.6.2017, from the BBMP. The Sharing Agreement was entered between the applicant owner and the Developer vide Area Sharing Agreement dated 03.01.2018 i.e. during GST regime. Further, the Joint Director of Town Planning(South), Bengaluru has issued the occupancy certificate dated 26.8.2019 in respect of 74 units/flats in the said residential apartment.

Question before Authority

Whether the total amounts received by the Owner towards the advances or sale consideration of the flats fallen to his share of 40% in terms of the Joint Development Agreement dated 19.05.2016 and the subsequent Area Sharing Agreement dated 03.01.2018, are not amenable for payment of GST, since Applicant has sold or agreed to sell or gifted, the fiats after obtaining Occupancy Certificate dated 26.08.2019 and that Applicant has not received any part of the sale consideration prior to the said date of occupancy certificate, thus falling under Entry No.5 of Schedule III of CGST Act read with Notification No.11/2017-Centra1 Tax (Rate) dated 28.06.2017 and the corresponding provisions of SGST Act.

Ruling

The amounts received by the applicant, either by himself or through his agents, towards sale of their share of flats are not exigible to GST, if and only if the entire consideration related to such sale of flats is received after the issuance of Completion Certificate dated 26.08.2019, as the said activities are treated neither supply of goods nor supply of service in terms of schedule III of the CGST Act 2017 subject to Clause 5(b) of the Schedule-II of the CGST Act, 2017.

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