2026-VIL-117-AAR
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SGST Advance Ruling Authority

GST – Maharashtra AAR - Construction and sale of commercial units as business activity – Applicant previously earned rental income from property held as capital asset, proposed to construct commercial units on vacant land acquired as personal capital asset using surplus funds, intending to sell some units for meeting construction costs and lease remaining units for rental income - Whether the activity of constructing and developing commercial units on vacant plot of land and selling such units to prospective buyers, as well as leasing commercial units on rental basis, amounts to supply under GST and constitutes activity in course or furtherance of business – HELD - The activity of sale of commercial units to prospective buyers constitutes supply and is in course or furtherance of business under GST, irrespective of the source of funds used for construction, whether derived from individual savings, bank borrowings or any other source, as the source of funds is immaterial in determining whether an activity amounts to supply - Further, leasing of commercial premises on rent is also a commercial activity which amounts to supply in furtherance of business, and the scale, volume or frequency of such activity is immaterial under the definition of business under GST. However, sale of commercial units where entire consideration is received after completion certificate from competent authority would not be subject to GST – The sale of commercial units to prospective buyers prior to completion certificate and rental income from leased units are taxable supplies in course of furtherance of business – Ordered accordinglyrnrnInput tax credit eligibility for construction of immovable property leased on rental basis -Whether input tax credit is available on inputs and input services used for construction of commercial units which are leased out on rental basis – HELD - As per section 17(5)(d) of the CGST Act, no input tax credit is available on goods or services received for construction of immovable property on own account, including when such goods or services are used in course or furtherance of business - No input tax credit is available on inputs and input services used for construction of commercial units leased on rental basis.rnrnInput tax credit eligibility for construction of immovable property sold prior to completion certificate - Whether input tax credit is available on inputs and input services used for construction of commercial units sold to prospective buyers prior to receipt of completion certificate – HELD - Input tax credit is available on inputs and input services used in construction of commercial property which is sold to customers before receipt of occupation certificate or completion certificate from the concerned municipal authorities – The ITC is available on inputs and input services used for construction of commercial units sold to prospective buyers prior to receipt of completion certificate, calculated on proportionate basis.
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