Case Title, Court, Petition No., Category, Date, and Statutory Reference
Case: Sri B.G. Parameshwara v. Bengaluru Development Authority & Others and Sri K.S. Kunal & Others v. State of Karnataka & Others
Court: High Court of Karnataka, Bengaluru
Petition Nos.: W.P. No. 51001 of 2019 (BDA) and W.P. No. 7028 of 2022 (BDA)
Category: Levy of GST on immovable property – applicability of GST on completed apartments / works contract classification
Date of Judgment: 25 February 2025
Relevant Sections: Section 7 and Schedule II (entry 5(b)) of the CGST Act, 2017
Facts (Paras 3–4)
The petitioners had applied for residential units under schemes floated by the Bengaluru Development Authority (BDA) — one for apartments at Valagerahalli Phase 6 and another for duplex row houses at Alur Phase II.
In both cases, the petitioners paid the sale consideration in instalments between 2017 and 2019, before completion certificates were issued (31.12.2018 for Valagerahalli and 31.01.2019 for Alur). Subsequently, BDA demanded GST at 12%, contending that payments made before completion rendered the transaction a “supply of services” under Section 7(1) read with Schedule II, Clause 5(b) of the CGST Act.
The petitioners argued that they purchased ready-to-occupy houses with no pre-construction agreement, and hence, GST could not apply. They also alleged discrimination, as buyers in earlier phases (completed before 30.06.2017) were exempted from such levy.
Questions for Consideration (Paras 15–16)
Whether the petitioners’ transactions with BDA constituted a works contract attracting GST, or whether the flats were completed units exempt from tax since no service was rendered during construction?
Observations (Paras 17–25)
The Court examined the payment schedules and completion certificates. It found that in all cases, part of the consideration was paid while the projects were still under construction.
Referring to Section 7 of the CGST Act and Entry 5(b) of Schedule II, the Court emphasized that construction intended for sale before completion is deemed a supply of services, unless the entire consideration is received after issuance of completion certificate.
Citing Larsen & Toubro Ltd. v. State of Karnataka (2014) 1 SCC 708, the Court reiterated that an agreement entered before completion constitutes a works contract, whereas post-completion agreements do not.
Hence, the Court held that the petitioners’ transactions squarely fell within taxable supply, as payments were made during construction and not after completion.
Judgment (Paras 26–27)
The Court dismissed the writ petitions, upholding the BDA’s demand for GST.
It held that the transactions were taxable as works contracts, since part of the consideration was received before issuance of completion certificates.
However, it directed BDA to execute sale deeds and deliver possession after GST payment in accordance with law.
Summary of Cited Cases
| Case | Citation | Principle / Verdict |
|---|---|---|
| Larsen & Toubro Ltd. v. State of Karnataka | (2014) 1 SCC 708 | Construction for sale prior to completion is a works contract; GST/service tax applicable. |
| Total Environment Building Systems Pvt. Ltd. v. Deputy Commissioner of Commercial Taxes | (2022) 16 SCC 219 | Reaffirmed that tax applies when consideration is received before completion of construction. |
Between Fine Lines – Practical Takeaway
For builders and purchasers alike, timing of payment and completion certificate issuance is crucial. If even part of the sale consideration is paid before project completion, GST liability arises under Section 7 read with Schedule II(5)(b). Buyers of ready-to-occupy units post-completion escape GST, but partial payments during construction convert the deal into a taxable supply of services.
Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”
