Order Date – 24 August 2023

Facts – 

• The Applicant, M/s. Vinod Kumari Goyal, owns a land and has entered into a joint development agreement (JDA) with M/s. Total Environment Building Systems Private Limited, Bengaluru for development of residential apartments.

Issue – 

• Whether the applicant is liable to pay tax on sale of his share on or before issuance of Completion Certificate?

Order – 

• The AAR observed that the agreements for supply of constructed apartments with the prospective purchasers are entered by the applicant which is a supply of service as per section 7 of the CGST Act and there is no direct supply of construction services to the prospective purchasers by the developer.  The developer is only providing services to the applicant and not to the prospective purchasers.
• The applicant is acting as a supplier of works contract service to the prospective purchasers of apartments and hence he is a supplier under Section 7(1) of the CGST Act, 2017 liable to pay tax under Section 9(1) of the CGST Act, 2017.
• The option for the taxation as an ongoing project in Annexure IV of the Notification No. 11 / 2017 — Central Tax (Rate) dated 28.06.2017 as amended by Notification No.3/ 2019- Central Tax (Rate) dated 29.03.2019 does not arise as he was not registered at the time allowed for filing of such option and the option is only for the registered person. The claim that the developer has opted for such a scheme does not entitle the applicant for that scheme, as the developer is a different person from the applicant.
• Hence the applicant is liable to pay tax as per entries 3(I) to 3(id) of the Notification No. 11/ 20 17 — Central Tax (Rate) dated 28.06.2017 as amended by Notification No.3/ 2019- Central Tax (Rate} dated 29.03.2019 depending on the nature of the apartment.
• Further, Section 16(1) of the CGST Act stipulates that only a registered person shall be eligible to claim the input tax credit and the applicant is registered only from 13.01.2023, the eligibility of the claim of input tax credit only depends on the date of the invoice (i.e. time of supply of services) by the developer to the applicant.
• From the provisions to 3(I) to 3(id) , point out to the fact that input tax credit is not eligible to be claimed on any of the expenses other than the tax charged by the developer for the construction services subject to its eligibility if all other conditions are satisfied.