Decided 10 September 2024. The Karnataka High Court has held that when a fully or partly constructed building is sold as it is, without the seller providing any further construction service after the agreement, the transaction is a sale of immovable property and not a supply under GST. The Court ordered refund of ₹14,32,64,614 with interest to a company that bought a partly built shopping mall in a liquidation auction.
Case at a glance
| Case | M/s Rohan Corporation India Pvt. Ltd. v. Union of India & Ors. |
| Forum | Karnataka High Court (Justice S.R. Krishna Kumar) |
| Case No. | Writ Petition No. 12700 of 2023 (T-RES) |
| Date of order | 10 September 2024 |
| Refund | ₹14,32,64,614 with interest under section 56 |
| Key provisions | Section 7; Schedule II para 5(b); Schedule III para 5, CGST Act |
| Result | Refund rejection quashed; refund allowed |
Facts of the case
A company under liquidation was building the Lotus Shopping Mall in Mangaluru. The NCLT-appointed liquidator auctioned the partly constructed mall, and the petitioner won the e-auction in May 2022.
The liquidator insisted on GST. The petitioner paid it under protest, and the sale certificate was executed on 23.08.2022 on payment of stamp duty of ₹5.96 crore. Its refund claim was rejected on 15.02.2023, holding that Schedule II para 5(b) applied.
Issue before the High Court
Is the sale of a partly constructed building, without any construction after the agreement, taxable as construction service under Schedule II para 5(b)?
What the High Court held
- Para 5(b) of Schedule II covers construction service provided to a buyer under an agreement made before or during construction. It is a service contract, not a sale of a building.
- If the agreement is entered after construction and no construction is undertaken after it, there is no supply of goods or services, whether or not a completion certificate exists.
- Sale of land and, outside para 5(b), sale of a building is neither a supply of goods nor of services under Schedule III para 5.
- The refund rejection was quashed and refund of ₹14,32,64,614 with interest under section 56 was ordered within six weeks.
Practical takeaways for taxpayers
- Buyers of partly built properties in IBC or bank auctions should not pay GST where no construction is to be done after the sale; if forced to, pay under protest and claim refund.
- The key test is whether construction service is rendered after the agreement, not whether a completion certificate exists.
- File the refund within two years of payment, as the petitioner did here.
Frequently asked questions
Is GST payable on purchase of an under-construction building?
If the seller will continue construction for the buyer, yes. If the building is sold as it is with no further construction, the Karnataka High Court held it is not a supply.
Does the absence of a completion certificate make the sale taxable?
No. The Court held the completion certificate is irrelevant when no construction service is provided after the agreement.
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This summary is based on the order of the Karnataka High Court in Writ Petition No. 12700 of 2023 (T-RES). It is general information, not legal advice; the outcome of any case depends on its own facts and the full text of the order.