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2019 (3) TMI 924 - AAR - GSTValuation of supply of services - services provided from July 1, 2017 - two separate agreements, viz., one for Sale of undivided share of land and the other for Construction with the customers - CGST ACT 2017 read with Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017(as amended from time to time) - Held that - Though there are two Agreements with separate consideration for this transaction, it is a single supply which is squarely covered under Sl.5 (b) of Schedule II making this transaction a supply of service as Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly where consideration is being paid while construction. For the Supply of Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier , the value of the supply of service has been notified by the Government as per Section 15(5) of the CGST Act as the total amount charged for such supply less the value of land or undivided share of land, as the case may be, and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply where the total amount means the sum total of consideration charged for construction service and amount charged for transfer of undivided share of land, as the case may be. The value of supply of services provided by the Applicant in the project One Crest in Chennai, wherein the Applicant has entered into two separate agreements, viz., one for Sale of undivided share of land and the other for Construction with the customers, the measure of levy of GST on the supply of service of Construction shall be 2/3rd of the total value charged for construction service and amount charged for transfer of undivided share of land, as per entry No. 3(i) of Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 as amended and No.II(2)/CTR/532(d-14)/2017vide G.O. (Ms) No. 72 dated 29.06.2017 as amended.
Issues Involved:
1. Determination of the value of supply of services provided from July 1, 2017, under the provisions of CGST Act 2017 read with Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (as amended). Detailed Analysis: 1. Nature of Agreements and Transactions: The Applicant, engaged in construction activities, has a residential project named 'One Crest' in Chennai. They enter into two separate agreements with customers: one for the sale of an undivided share in the land (Land Agreement) and another for the construction of a super-structure (Construction Agreement). These agreements are registered for stamp duty purposes and are intrinsically connected, meaning one cannot exist without the other. 2. Supply of Services under GST: The Applicant's activity involves the construction of apartment units on land owned by them. When a customer purchases a unit, they also purchase a portion of the land. According to Section 7 of the CGST Act, 2017, the term "supply" includes all forms of supply of goods or services for a consideration. Schedule II of the CGST Act specifies that the construction of a complex or building is treated as a supply of service except where the full consideration is received after the issuance of a completion certificate. 3. Agreements' Co-existence: The agreements for the sale of undivided share of land and construction are co-existent and co-terminus, meaning they run concurrently and cannot be terminated independently. The Sale Deed is executed and registered only after the construction is completed and the completion certificate is received. This indicates that the transaction is not a sale of land as per Schedule III but a supply of service under Schedule II. 4. Determination of Value of Supply: The value of supply is determined under Section 15 of the GST Act. Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended, provides the applicable rate of CGST and SGST for the construction of a complex or building. According to Paragraph 2 of the notification, the value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, deemed to be one-third of the total amount charged. 5. Ruling: The measure of levy of GST on the supply of service of 'Construction' in the Applicant's project 'One Crest' shall be two-thirds of the total value charged for construction service and the amount charged for the transfer of undivided share of land. This is in accordance with entry No. 3(i) of Notification No. 11/2017-C.T.(Rate) dated 28.06.2017, as amended. Conclusion: The value of supply of services provided by the Applicant in the project 'One Crest' shall be calculated as two-thirds of the total value charged for construction service and the amount charged for the transfer of undivided share of land, as per the specified notification.
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