GST on Commercial Property Development by Individuals
The Maharashtra Authority for Advance Ruling decided that individuals developing commercial property for sale or rent are conducting a business under GST.
- Ruling
- NO.GST-ARA- 54/2020-21/B- 51 Mumbai, dt. 30/03/2026
- Dated
- 30 Mar 2026
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Developing commercial units is considered a business activity under GST.
- Input tax credit is denied for construction intended for leasing.
- Sales made after receiving a completion certificate are not taxable.
In short
A retired individual asked if building commercial units on their own land counts as a business. The authority ruled that selling or renting these units is a business activity, making the owner liable for GST.
What has changed
How it worked before
Many individual property owners assumed that developing their own land for rental income or occasional sales was a personal investment rather than a commercial business.
What has changed
The authority confirmed that such activities fall under the definition of business. While you can claim input tax credit for units sold before the building is finished, you cannot claim it for units you intend to lease out.
Who this affects
Individuals or small investors who own land and plan to build commercial units for sale or rental income.
An example
Imagine a business owner, Mr. Sharma, who decides to build a small office complex on his vacant plot to earn rent. He asks if he can claim GST back on the cement and steel used for construction. Based on this ruling, he would likely be told he cannot claim that credit because the building is for leasing, and he must pay GST on the rental income he earns.
What you should do
If you are in a similar position, consult a tax professional to review your specific project. Remember that an advance ruling only binds the person who asked and their local tax office; it is not a universal law for everyone else.
If you do nothing
If you assume this ruling applies to you and claim input tax credit incorrectly, you risk a tax audit and penalties. A tax officer may demand the repayment of the credit plus interest. Never treat a ruling as a blanket rule for your own tax filings.
The terms explained
- Input tax credit
- The GST you pay on your business purchases that you can subtract from the GST you owe on your sales.
- Completion certificate
- An official document issued by local authorities confirming that a building is finished and safe to occupy.
- In the course or furtherance of business
- A legal phrase meaning any activity done as part of a commercial venture or to support one.
The ruling in detail
Authority for Advance Ruling
M/s. Sunil Vishvasrao Khune
NO.GST-ARA- 54/2020-21/B- 51 Mumbai, dt. 30/03/2026 · Maharashtra
Questions before the authority
- Whether the activity of construction / developing commercial units on vacant plot of land being acquired as capital asset out of surplus funds be treated as in the course or furtherance of business in respect of income generated on account of following transactions: a. Sale of commercial units to prospective buyers b. Rent received on leasing of commercial units
- If yes, whether input tax credit be eligible for inputs & input services used for the construction of commercial units in case of above transactions i.e. a. Sale of commercial units to prospective buyers b. Rent received on leasing of commercial units
Facts
The applicant, a retired individual, proposed to develop a commercial building on a vacant plot of land held as a capital asset to generate rental income and funds for retirement. The applicant sought to sell some units to fund the construction and lease out the remaining units. The applicant contended that this was not a business activity but rather the management of a personal investment.
Ruling
| Question | What the authority ruled |
|---|---|
| Whether activity is in course or furtherance of business | Yes, both sale and rental activities are in the course or furtherance of business. Sale of units after receipt of completion certificate is not subject to GST. |
| Eligibility for Input Tax Credit | ITC is available for units sold prior to completion certificate; no ITC for units leased out. ITC is restricted under Section 17(5)(d) for immovable property constructed on own account. |
The authority ruled that the sale of commercial units and the receipt of rent are activities in the course or furtherance of business. Consequently, the applicant is liable to GST on these transactions, subject to specific conditions regarding the timing of the sale. Regarding input tax credit, the authority held that it is available for units sold before the completion certificate but denied for units intended for leasing.
Reasoning
The authority determined that the activities constitute a supply under Section 7 of the CGST Act and are in the course or furtherance of business, regardless of the source of funds or the applicant's status as an individual. It relied on Section 17(5)(d) of the CGST Act, which restricts input tax credit for the construction of immovable property on one's own account. The authority clarified that the definition of plant and machinery does not include land or buildings, thereby excluding the applicant from claiming ITC for the construction of the commercial premises. It further noted that the sale of units after the completion certificate is not a taxable supply.
Provisions relied on
- Section 7 of the CGST Act
- Section 16 of the CGST Act
- Section 17(5)(d) of the CGST Act
- Section 2(17) of the CGST Act
- Notification No. 11/2017 CT (Rate) dated 28.06.2017
For the practitioner
This ruling clarifies that **individual investors** developing commercial property for sale or rent are considered to be engaged in business under GST. It reinforces the **strict application of Section 17(5)(d)**, which denies input tax credit for construction of immovable property on one's own account, even if the property is used for business purposes. Practitioners should note that the timing of the completion certificate is **decisive for GST liability** on sales.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/4-sunil_vishvarao_khune_ara_order_compress.pdf
Legibility of the scan, as read: high.
Prepared 11-10-2026.
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