Is GST applicable on the sale of a partly constructed building acquired through liquidation proceedings?

No, held the Karnataka High Court in Rohan Corporation India Pvt. Ltd. vs. Union of India (W.P. No. 12700 of 2023 | Order dated: 10.09.2024 | 2025 (4) TMI 549 – Karnataka HC), ruling that such sale is a transfer of immovable property—not a “supply” under GST.

Brief Facts:
The petitioner purchased a partly constructed mall through a public auction conducted by the liquidator of a corporate debtor under IBC, 2016. GST was paid under protest, and a refund was claimed. The department rejected the refund, treating it as a taxable construction service under Para 5(b) of Schedule II.

Court’s Observations:
➡Schedule II classification applies only if the transaction first qualifies as a “supply” under Section 7.
➡In absence of a construction agreement between buyer and seller (liquidator), no construction service was involved.
➡Incomplete construction or lack of completion certificate alone does not trigger GST liability.
➡Reiterated reliance on L&T (2014) and Munjaal Manishbhai Bhat (2022)—tax applies only to value addition under a contract.

Author’s Comment:
This is a significant reaffirmation that sale of immovable property without any construction obligation post-agreement is not liable to GST. Entry 5 of Schedule III excludes such transactions from the scope of ‘supply’. The ruling will benefit buyers acquiring distressed or under-construction assets via liquidation.