The Patna High Court has held that the builder is liable for Goods and Service Tax (GST) on Reverse charge Mechanism (RCM) Basis on construction services rendered in lieu of development rights under development agreement.
The bench of Justice Rajeev Ranjan Prasad and Justice Ashok Kumar Pandey has observed that the construction of a complex, civil structure etc. intended for sale to a buyer was made exigible to GST except where the entire consideration has been received after issuance of completion certificate or after its first occupancy, whichever is earlier.
The Petitioner/assessee is a Private Limited Company engaged in the business of construction of buildings/apartments in the State of Bihar.
The petitioner-company has questioned the order and the summary of order in Form GST DRC-07 passed by the Assistant Commissioner of Assistant Commissioner of State Tax, Muzaffarpur under Section 73(9) of the Bihar Goods and Services Tax Act.
The petitioner is liable to pay a total amount of Rs.4,61,72,628 on account of the CGST/BGST and IGST to the tune of Rs.2,37,59,706/-. The petitioner has been held liable to pay interest at the rate of 1.5% per month i.e. Rs.20017554/- and penalty of Rs.2,39,5368/-.
The petitioner has also challenged the Notification No.09/2023 dated 31.03.2023 as contained in Annexure-P8 and the Notification No.56 of 2023 dated 28.12.2003 present at An- nexure-P9 to the writ application. By these two Notifications, the respondent no.2 has extended the time limit specified under sub-section (10) of Section 73 of the CGST Act for issuance of order under sub-section (9) of Section 73 of the GST Act for re-
The petitioner contended that in case of a development agreement registered prior to coming into force of the GST laws with effect from 01.07.2017, the land stood transferred in favour of the builder. According to him, once the land stood transferred prior to 01.07.2017, the transaction under the development agreement would not fall within the purview of the CGST/BGST Act and the notifications issued thereunder. According to him, the development agreement was executed on 27.11.2014 and though the project was completed on 20.12.2018, the liability to pay tax in respect of such development agreement was notified under Notification No.04/2019 dated 29.03.2019.
The court while dismissing the writ application held that the supply of services of transfer of development rights remained taxable since introduction of the GST but by virtue of notification no.04/2018, the liability to pay Central tax shall arise only on the consideration received in form of con- struction services.
Case Details
Case Title: Shashi Ranjan Constructions Private Limited Vs UOI
Case No.: Civil Writ Jurisdiction Case No.6700 of 2024
Date: 05-05-2025
Counsel For Petitioner: D.V.Pathy, Sr. Advocate
Counsel For Respondent: Vikash Kumar
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