GST On Sale Of Immovable Property

The Indians have witnessed the biggest tax revolution ever in independent India on 1st July .

The Real estate industry in India however in the recent past has thus seen a phenomenal growth, and it is thus not just in the Tier 1 cities, but also in Tier 2 and Tier 3 cities and towns. The industry is thus in the cusp of the increased regulations, with the bills such as the Real Estate (Regulation and Development) Bill, which is thus pending for the approval in the side lines. GST is considered as another development that will however have a significant impact on this sector.

Even though the construction services has always been taxable under the VAT and service tax for a decade or so, the industry is however still plagued with an uncertainty on the key basic issues that however remains unsolved thus leading to intense litigation, especially on the issues like the transfer of development rights in land, taxability of the joint development agreements, taxable value for the goods and services, etc. While it is thus expected that the immovable property transaction, ie, transfer which is by the way of sale of the immovable property after the completion, would however continue to be outside the purview of GST and will also be liable only to the applicable stamp duties, the proposed shift to the GST regime is however expected in order to usher in the wings of change and also wipe the slate clean in a bid however for a fresh start on the indirect taxation of all the other real estate transactions. However, thus the foremost thought in everyone’s mind is thus whether GST is thus indeed the solution to an industry which is however riddled with complex structures and issues.

The purpose of this article however is to make the reader aware of the impact of GST on the sale of immovable property .

Though everything is thus set for GST there are also certain issues that however require attention and one of such is thus GST on immovable property.

Thus in this article we first explain certain provisions of the act which will however help us in order to understand the tax ability of sale of the immovable property in GST.

First of all let us see as to what is considered as movable and what is considered as immovable. Both the definition has however not been defined in the act. So we will thus have to take the reference of the various case laws that we however have in the excise regime that have however defined movable.The Supreme Court in case of the Municipal Corporation of greater Mumbai has however held that “if article can thus be moved to another place as such without any form of dismantling then it is thus considered as movable”. Also , In Sirpur Paper Mills Ltd. the apex court had held that “if a machine is however embedded to the earth only in order to ensure wobble-free functioning, that would however not be considered as immovable”.

And we also know that everything which is thus not movable is considered as immovable.

As per the GST act , the definition of goods is that “goods mean every kind of movable property other than the money and securities but it also includes the actionable claim, growing crops, grass and the things that are attached to or are forming a part of the land which are however agreed in order to be severed before the supply or also under a contract of supply”, so it is thus clear that the goods thus does not include any immovable property.

But the definition of service in the same act says that “Service means anything whihc is other than the goods, money and the securities but it also includes the activities relating to the use of money or its conversion by cash or either by any other mode, however from one form, currency or either denomination, to another form, currency or the denomination for which a separate kind of consideration is however charged”

Looking to both the definition one can however conclude that the definition of service thus also includes Immovable property. But our question is however whether tax will be levied on the sale of immovable property? Now for this , we are supposed to study the scope of supply as GST is thus levied of the supply of goods or service or both.

According to Sec 7 of the GST Act , supply includes all the form of the supply of goods or the service or either both such as sale, barter, exchange lease, renting etc. and it thus also includes the activities that are specified as the supply of goods or the supply of service as per the schedule II GST act. But also sec 7 does not thus treat the activities which are thus listed in the schedule III of the GST act, as the supply of goods or service or either both.

As per the paragraph 5 of the schedule III activities or the transaction in relation to the sale of land and also subject to clause b of paragraph 5 of schedule II, the sale of building shall however not be treated as supply.

Also , Clause b of the paragraph 5 of schedule II thus reads as “construction of a complex, building, civil structure or either a part thereof, including either a complex or building which is however intended for the sale to a buyer, wholly or partly, except where thus the entire consideration has however been received after an issuance of the completion certificate, where is however required, by the competent authority or either after its first occupation, whichever is however earlier”.

Now it is thus quite clear that the sale of land will however not attract GST and also the sale of building after obtaining the completion certificate or however after its first occupation will thus not attract GST.

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This article has been contributed by Simmi Setia, Content Writer at LegalRaasta, an online portal for Section 8 Company Registration, Nidhi Company Registration, IEC Registration, Fssai License, File ITR Online, Copyright Registration, Patent Registration, Trademark Registration.