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2022 (2) TMI 1101 - AAR - GSTClassification of supply - composite supply or not - naturally bundled with 'Construction Services' or not - recovery of charges for the ancillary services by builders - rate of GST - charges for 'the ancillary services' would attract GST at the rate specified for 'Construction Services' (principal supply) at 1% or 5%? - recovery of the charges for 'the ancillary services' by builders, after completion certificate - composite supply naturally bundled with Construction Services - GST not attracted once completion certificate is issued - levy of GST for 'the ancillary services' as individual respective service (considering 18% GST rate) - Input Tax Credit can be claimed in respect of GST paid on expenses incurred to provide the said ancillary services? Whether the Charges for the 'Ancillary Services' recovered by the applicant will be treated as consideration for 'construction services' and classified under SAC 9954 along with the main residential construction services or whether the same will be treated as consideration for independent service(s) under the respective head. And consequently, what would be the applicable GST rate on such Charges collected for the 'Ancillary Services? - HELD THAT - There are more than two supplies which are independent supplies and so taxable separately, the supply of construction services of residential unit and the other supply of 'ancillary services' (as mentioned in 'Agreement for Sale' provided), viz. JDA Lease Charges, Electrification Charges, Sewage Treatment Plant Charges, Non-refundable IFMS (Interest Free Maintenance Security) and Club Membership from the residents. Ancillary Services supplied in respect of the 'other charges' are different from the service of construction of residential flats. Therefore, it is observed that the 'ancillary services' provided cannot be said to be naturally bundled and supplied in conjunction with each other in the ordinary course of business with main supply of residential flat in the subject case - services to be provided by the applicant covered under entry No. (i) or (ia) as the case may be, is specifically related to Construction of affordable residential apartments other than affordable residential apartments by a promoter in a Residential Real Estate Project (RREP). The 'Construction services' and the 'ancillary services' provided by the applicant are not naturally bundled and are not supplied in conjunction with each other in the ordinary course of business with main supply. These are the facilities/amenities provided by the applicant to its customers for the limited period because, for these facilities created the customers have not been given perpetual rights. The amount or consideration is charged separately for different services. Therefore, the other charges for the ancillary services provided is not covered under the scope of 'Composite supply of services'. Therefore, the contention of the applicant is found not acceptable - the other charges to be charged for ancillary services' mentioned as above are held taxable as per their SAC under the GST Act, at 18% in terms of the respective and appropriate entries in Notification No. 11/2017 CT (R) dated 28.6.2017 as they are covered under services, other than construction services. The consideration for providing the construction services by way of construction of residential unit and the consideration for the ancillary services (i.e. other charges collected) are considerations against separate independent services being provided by the applicant - the services for each of the service head/description are covered under Notification No. 11/2017 CT (R) dated 28.6.2017 and therefore, the Other Charges would attract GST @18%. Thus, the l/3rd deduction from total value as per Sr. No. 2 of the Notification (as claimed by the applicant) cannot be allowed as deduction from the Other Charges. Input Tax Credit (ITC) on goods services received for supply of the ancillary services - HELD THAT - As 'ancillary services' are subject to outward tax liability at the rate of 18% (without any abetment) therefore, as per Section 16 of the CGST and RGST Act, the applicant shall be eligible to take ITC of the GST paid on goods or services used or intended to be used in the course or furtherance of business subject to the conditions as prescribed and the provisions of sub section 5 of the Section 17 of the GST Act.
Issues Involved:
1. Whether recovery of charges for 'the ancillary services' by builders would be considered as a 'composite supply' naturally bundled with 'Construction Services' under Section 8 of CGST and RGST Act, 2017. 2. If yes, whether the charges for 'the ancillary services' would attract GST at the rate specified for 'Construction Services' (principal supply), i.e., 1% or 5%. 3. If yes, whether recovery of the charges for 'the ancillary services' by builders, after completion certificate, would not attract GST liability considering them to be composite supply naturally bundled with Construction Services which does not attract GST once completion certificate is issued. 4. If no, and GST is levied on charges for 'the ancillary services' as individual respective service (considering 18% GST rate), then whether Input Tax Credit can be claimed in respect of GST paid on expenses incurred to provide the said ancillary services. Detailed Analysis: Issue 1: Composite Supply The applicant argued that the ancillary services provided (JDA Lease Charges, Electrification Charges, Sewage Treatment Plant Charges, Non-refundable IFMS, Club Membership) are naturally bundled and supplied in conjunction with construction services in the ordinary course of business. Therefore, they should be treated as a composite supply with construction services as the principal supply under Section 8 of the CGST Act. However, upon examining the agreement for sale, it was found that the charges for construction and ancillary services are mentioned separately. The "composite supply" under Section 2(30) of the CGST Act requires that the supplies be naturally bundled and supplied together in the ordinary course of business, which was not the case here. Therefore, it was concluded that the ancillary services are independent supplies and not naturally bundled with construction services. Issue 2: GST Rate on Ancillary Services Since the ancillary services are not considered a composite supply with construction services, the applicable GST rate on ancillary services would be as per their respective SAC codes under Notification No. 11/2017 CT (R) dated 28.6.2017. The ancillary services fall under different SAC codes and attract GST at the rate of 18%. Issue 3: GST Liability Post Completion Certificate As the ancillary services are not considered a composite supply with construction services, the question of whether they would attract GST liability post-completion certificate does not arise. The ancillary services are treated as independent supplies and would attract GST at the rate of 18% regardless of the issuance of the completion certificate. Issue 4: Input Tax Credit (ITC) Since the ancillary services are subject to outward tax liability at the rate of 18%, the applicant is eligible to take Input Tax Credit (ITC) of the GST paid on goods or services used or intended to be used in the course or furtherance of providing the ancillary services. This is subject to the conditions prescribed under Section 16 and the provisions of sub-section 5 of Section 17 of the CGST and RGST Act, 2017. Ruling: 1. Question 1: No, the ancillary services would not be considered a composite supply naturally bundled with construction services under Section 8 of CGST and RGST Act, 2017. The applicable rate of GST on the ancillary services would be as per the SAC prescribed under Notification No. 11/2017 CT (R) dated 28.6.2017 and are liable to GST @ 18%. 2. Question 2: Not applicable as per the answer to Question 1. 3. Question 3: Not applicable as per the answer to Question 1. 4. Question 4: As per Section 16 of the CGST and RGST Act, the applicant is eligible to take Input Tax Credit (ITC) of the GST paid on goods or services used or intended to be used in the course or furtherance of providing the ancillary services, subject to the conditions prescribed and the provisions of sub-section 5 of Section 17 of the CGST and RGST Act, 2017.
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