Gujarat AAR: 18% GST On Commercial Units & Buildings Sold in One Premium

It was ordered by the Gujarat Authority for Advance Ruling (AAR) that 18% GST will be levied if the applicant gets a one-time premium on the allotment of completed commercial units or buildings.

The one-time premium received by the petitioner on the assignment of finished commercial units or buildings is taxable under Section 7 of the CGST/GGST Act, 2017, ordered by a bench of two judges, Amit Kumar Mishra and Millind Kavatkar.

The applicant is in the business of building immovable properties. The applicant wants to lease out developed units to potential owners for a longer period which is of 90 years. In fact, the applicant accepted bookings for a few units before receiving BU approval, and he has since applied the applicable rate of GST to the total amount of the bookings’ consideration before the BU’s permission.

The applicant requested an early decision regarding whether or not the one-time premium they paid for the allotment of a finished building would be considered a taxable supply.

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According to S. No. 5 of Schedule III, the transaction should be classified as neither a supply of goods nor a supply of services because this is a sale of a building for which consideration was received after the issue of a completion certificate.

AAR ruled that the applicant’s 90-year lease of the site does not regard it as a “sale of land,” but rather a lease. As a result, it is not under Schedule III, clause 5, of the CGST Act of 2017. Therefore, Section 7(1) of the CGST Act of 2017 applies to the business of leasing commercial units for a one-time lease premium and an annual premium as a “supply.” Following clause 2 of Schedule II of the CGST Act, 2017, which designates the lease of land or a building as a supply, this definition of supply refers to all forms of supply of goods or services or both that are made or agreed to be made for a consideration by a person in the course or furtherance of business.