UPDATE ON SALE OF IMMOVABLE PROPERTY UNDER GST

This note intends to discussthe definition of Goods/Services as given under the CGST Act read with Sec. 17(3) which creates ambiguity for understanding in the Sale of Immovable property after getting completion certificate.

Currently as regards definition of Goods is concerned it specifically states for movable goods, so it is understandable from the said definition that immovable property is excluded.
Sec.2(52) “goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply; thereby we may say that immovable goods / property is excluded from the said definition.

Further, the definition of services also specifically excludes goods from the said definition, which gives the sense that sale of immovable property will not be excluded in the definition of service mentioned under Sec. 2(102) “services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.

Therefore, from the above definitions we can say that sale of Immovable property is not covered under Goods but it is not excluded from the definition of services.

At the same time, clause 5 of schedule 3 of the CGST Act, specifically states that sale of building will neither be termed as supply of goods nor supply of services. It is reproduced here for ready reference.
“Schedule III clause (5) Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.”

A combined reading of the definition of goods, services and schedule 3 results in conclusion that sale of building will neither be treated as supply of service nor supply of goods.
It is at this point of time where section 17(3) plays spoil sport by stating the following:
The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building
It classifies sale of building as an exempt supply thereby contradicting the combined effects of definition under section 2 and the schedule 3.

The very basic question that arises is that if a transaction is ousted from the definition of goods, services and supply, whether it can be subsequently classified as an exempt supply. This issue is sure to invite litigation's in the future.

The content of this GST update is for educational purpose only and not intended for solicitation.

You can reach us at www.capradeepjain.com, at our facebook page on https://www.facebook.com/GSTTODAYBYPRADEEPJAIN/ as well as follow us on Twitter at https://www.twitter.com/@capradeepjain21

Comments

UPDATE ON SALE OF IMMOVABLE PROPERTY UNDER GST

Post a Comment

Query