The Karnataka High Court has held that the Goods and Service Tax (GST) is applicable on residential bookings made before completion certificate.
The bench of Justice M.G.S. Kamal has observed that if the transaction of booking a residential house is entered into before the completion of construction and the consideration was paid (partly or fully) before issuance of completion certificate, the same would amount to supply of services under GST and accordingly subject to GST.
By a notification dated 09.08.2017 the respondent- Bangalore Development Authority (BDA) had announced a scheme for residential apartments consisting of various sizes. Petitioner had applied for an allotment of two bedroom apartment in the said residential project of the respondent- BDA at Valagerahalli Phase 6. The petitioner was provisionally allotted an apartment bearing Flat No.B1-501 in terms of an Allotment Certificate dated 09.04.2018 and the petitioner had paid the entire sale consideration in a total sum of Rs.44,91,250. As indicated by the respondent- BDA as per the payment schedule. In addition, the petitioner had also paid Rs.2,00,000/- towards the car parking space as per the advertisement.
A petitioner had requested the respondent-BDA to inform the date of registration of the apartment allotted in his favour.
When things stood thus, respondent- BDA had issued an endorsement to the petitioner calling upon the petitioner to pay a sum of Rs.5,28,000/- towards the service Tax (GST) under the provisions of the Central Goods and Services Tax Act, 2017 fee and to produce challan as a proof for having made the said payment. Petitioner in response had made a representation as per Annexure-P informing the respondent-BDA that, what was offered to him was a full completed apartment and there was no pre-construction agreement between the petitioner and respondent-BDA.
There was no question of payment of any service tax. It is contended when there was no supply or exchange of any service between the petitioner and the respondent- BDA, the imposition of tax towards the GST was unjustified as the services tax is inapplicable in respect of a complete and ready apartment.
Consequently called upon the respondent-BDA to withdraw the aforesaid endorsement and to arrange for registration of the apartment in his name at the earliest. Non-consideration of the same and the demand made by the respondent- BDA for payment of Rs. 5,28,000 gave rise to the writ petition.
The petitioner contended that the apartment allotment certificate issued by the respondent-BDA and the payments made by the petitioner are not linked to the stage of construction. The petitioner made the final payment on 21.03.2019 while even according to the respondent -BDA the completion certification had been obtained on 31.12.2018. Thus, the payment made by the petitioner is subsequent to construction of the apartment. As such, Section 5 of Schedule II of GST is not applicable to the case of the petitioner.
The BDA contended that what was advertised and the petitioners responded to was at a stage when the project was still under construction. He submitted that the said fact has been clearly depicted in the very notification which was issued by the respondent- BDA calling upon the general public to apply for the apartments and the row houses.
The court while dismissing the petition has held that notwithstanding the dismissal of the petitions the petitioners would be entitled for completion of the transactions including execution of deeds of conveyance, delivery of possession, if not already executed and delivered, as the case may be, after the payment of GST as demanded by the respondent -BDA at the applicable rate in accordance with law.
Case Details
Case Title: Sri. B G Parameshwara Versus Bengaluru Development Authority
Case No.: Writ Petition No.51001 Of 2019 (BDA)
Date: 25/02/2025
Counsel For Petitioner: Monesh Kumar
Counsel For Respondent: G.S. Kannan Senior Counsel
