HC ruling on GST payment for flat purchasers

The Karnataka High Court has ruled that buyers who reserved flats prior to the construction of the residential complex are required to pay Goods and Services Tax (GST) at the time of purchasing the property. This directive was issued during the dismissal of writ petitions filed by B.G. Parameshwara from Mallathahalli and others, challenging a notice from the Bengaluru Development Authority (BDA) regarding GST payment.

According to the ruling, under the Central Goods and Services Tax Act (CGST) of 2017, it is mandatory to pay GST prior to the registration of flats. The court stated that if buyers had made partial or full payments before the issuance of the building's Completion Certificate (CC), those payments would be considered as services rendered, thus attracting GST.

The single-member bench, led by Justice M.G.S. Kamal, cited several Supreme Court judgments to clarify that any agreement entered into before the completion of construction would be treated as a service agreement, necessitating the payment of GST at a specified rate.

The court clarified that if the flat registrants had not registered their flats yet, they would be eligible to complete the transaction and receive their flats only after paying the GST as per the legal requirements.

**Case Background:** The buyers were allocated a two-bedroom flat in the BDA's Valaagerehalli Phase 6 on April 9, 2018. While the construction was ongoing, they had paid partial amounts for the flat. The construction was completed by December 31, 2018, and when the buyers approached for registration, the BDA informed them that they must pay the remaining amount, including GST, as required by the CGST Act. This requirement led the buyers to approach the High Court for relief.