TMI Blog2021 (8) TMI 1231X X X X Extracts X X X X X X X X Extracts X X X X ..... Services supplied in respect of the 'other charges' are different from the service of construction of residential flats. Therefore, it is observed that the 'other 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. Other Charges received will not be treated as consideration for construction services of the Company and is not classified under SAC 9954 along with the main residential construction services - The 'other charges' will be treated as consideration received against supply of independent service(s) of the respective heads. The amount or consideration is charged separately for different services. And even the stamp duty is also not paid on full amount collected from the customer along with the said other charges. Therefore, the other charges for the other 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' mentioned as above are held taxable as per their SAC under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of construction is supplemented by a sale deed. 2.3 The said construction services of the Applicant are classified under HSN 9954 and accordingly get covered at Entry 3 of the Notification no. 11/2017 - C.T, (Rate) ('said Notification'). As per Sr. No. 2 of the said Notification, value of transfer of land or undivided share of land is deemed as 1/3rd of the total value of such construction services, and the same is deducted from the total value of such services to arrive at the applicable GST liability in hands of the Company for such construction services. 2.4 Apart from consideration for the main construction activity, the Applicant also collects various other charges (hereinafter referred to as the 'Other Charges') from their customers at the time of entering into the Agreement and/or giving possession of residential apartments. Such charges are collected under the Agreement itself with their respective amounts separately identified in the Agreement. A list of such charges generally recovered by the Applicant for their various projects is provided in the table below: Sr.no. Description of charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T at the rate of 18% on the Other Charges collected from their customers in respect of sale of residential apartments. B. Statement containing the Applicant's interpretation of law and/or facts: POSITION OF LAW 2.6.1. As per Section 2 of the CGST Act, Composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply: Illustration : Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply. 2.6.2 As per Section 2(90) of the CGST Act, 2017, Principal supply means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary 2.6.3 Section 8 of the CGST Act provides manner of determining tax liability on a composite or a mixed supply. It states that: 8. The ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and parcel and for various elements of main service and thus entire consideration received was eligible for abatement. 2.6.8 Alternatively, in case such supplies are not treated as Composite supply, the same should be treated as supply of independent services of each head / description by the Applicant, taxability of which may be determined as per the nature of individual service head / description. 2.6.9 If the supplies pursuant to the Other Charges and the main construction services of the Company are treated as Composite supplies, as per Section 8 of the CGST Act, in such a situation, the entire value of the Other Charges should attract the effective rate of GST as applicable on the main construction services of the Company supplied under the same Agreement. In this case, the amounts pertaining to the Other Charges will be added in the total value of construction services of the Company and the 1/3rd deduction from total value applicable as per Sr. No. 2 of the said Notification will be applied on such entire total value. 2.6.10 In case these supplies are not treated as composite supplies, the applicable rate o f GST on services underlying the Other Charges would have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Both above are not related to the supply of apartments. Hence, these charges cannot be considered as a part of composite supply where the principal supply is construction. Hence GST @ 18% will be charged on such amounts POSITION OF LAW 3.5 COMPOSITE Supply [Section 2(30 )]: Composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply,' 3.5.1 Principal Supply [Section 2(90)] : Principal supply/ means the supply of goods or services which constitute the predominant element of a composite supply and to which and other supply forming part of that composite supply is ancillary 3.5.2 Section 8 of the CGST Act provides manner of determining tax liability on a composite or a mixed supply. It states that: 8. The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:- (a) A composite supply comprising two or more supplies, one of which is a principal suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and security deposit for meter, Water connection charges, municipal taxes, Advance maintenance, Club-house maintenance, Development charges, share money, entrance fee of organization, legal charges, legal fees, and Infrastructure charges on which, applicant is presently discharging GST at the rate of 18%. 5.4 Applicant feels that the 'Other Charges' mentioned in the Agreement are primarily for supply of construction services since they are received only from the customers to whom construction services are supplied and therefore the services underlying the 'Other Charges' may be treated as naturally bundled with supply of main construction services which are supplied in conjunction with each other, in the ordinary course of business. Hence, in case these services are treated as 'Composite supply', construction services may be treated as principal supply of such composite supply; since the same clearly constitutes predominant element of such transactions and is the primary supply giving rise to the associated or ancillary supplies. As per the applicant, in such a situation, the entire value of the Other charges should attract the effective rate of GST, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary . 5.7.1 Section 8 of the CGST Act which provides the manner of determining tax liability on a composite supply or a mixed supply, is reproduced as under: 8. The tax liability on a composite or a mixed supply shall be determined in the following Manner, namely:- (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply: and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. 5.7.2 In order to be held as 'Composite supply' as per Section 2 (30) of the CGST Act, 2017, there must be two or more taxable supplies of goods or of services or both or any combination thereof, which are naturally bundled and are supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. 5.7.3 In the present case, we observe from said sale deed agreement that, the applicant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure Charges. (x) ₹ 12,000/- towards Club House Maintenance Charges for 2 years. (xi) ₹ 1.00,372/- towards Services Tax, presently @ 15% as per Finance Act, 2016. 5.7.4 As per the provisions of the Bombay Stamp Act 1958, stamp duty is payable on sale of immovable property. From the receipt of the stamp duty paid by the applicant, it is seen that the applicant has paid stamp duty on the value of sale of flat having an amount of ₹ 86, 58,000/-only. The Applicant has not considered the value of other services supplied as above (i.e. other charges collected for which present ARA has been filed) for the payment of stamp duty to the government implying that, when the question of payment of stamp duty arises, the applicant treats these Other charges not as a part of supply of main construction service, but when question of payment of GST arises, the applicant tries to contend that the value of other charges collected is part and parcel of value of that main construction service. It is a legal principle that a party cannot be permitted to approbate and reprobate on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... model bye law by the Developer and also do all other acts, deeds, matters and things as the Developer may reasonable require for registration of the Organization of the said Flat purchaser. e) Only upon the construction of the said complex being completed all respects as-envisaged herein by the Developer by utilizing full development potential of the said Larger property as per the Development Regulation by use of FSI or TDR or any additional FSI by payment of premium or in any other manner and upon the Developer selling /transferring/allotting all the Flats constructed in the said complex, and upon the Developer receiving the entire payment (towards the consideration, deposits, outgoings or otherwise) due and payable to it under all Agreements for Sales executed with all Purchaser of the Flat, in the said Complex. If only Organization is formed of the said Complex, then said property will be transferred by Conveyance or Lease to the said Organization. In case of more than one Organization is formed. Developer will convey the super structure of respective building and grant perpetual lease of the plinth area of respect building to the respective Organization and all other resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .8.1 We find that Heading 9954, Entry No. 3 covers 'construction services of Notification No. 11/2017 CT (R) dated 28.6.2017. The entry no. 3 is reproduced as below: '3 (i) 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. (Provisions of paragraph 2 of this notification shall apply for valuation of this service). 5.8.2 The above entry is specifically related to 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. 5.9.1 Further, as per the explanatory note published by the Government, for the purposes of the CGST Act, 2017, the 'other services' provided by the applicant can be said to be classified under different SAC as under:- Sr.No. Description of charges Brief explanation Group of SAC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal charges in connection therewith Charges in respect of formation of future society of residents and associated legal cost. Legal Services 998214 9 Infrastructure charges Additional charges for development of common area infrastructure. Other Misc. services 999799 10 Legal fees Charges for legal cost of the transaction of sale of residential apartments, Legal Services 998216 5.9.2 Considering the above, in our opinion, the 'Construction services' and the 'other 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/amenties provided by the applicant to its customers for the limited period because, for these facilities created the customers have not been given perpetual rights as per the said agreement (please refer to clauses cited supra). The amount or consideration is charged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from the Other Charges. A plain reading of the items or the list of other charges itself shows that services supplied against the said charges have no connection with land and threfore, question of considering the 1 /3rd deduction or rebate towards land cost does not arise, particularly, as the entries applicable to both of the above services are different. 5.13 The applicant, in support of their contention has relied upon and referred to some case law's. We find that, the subject matter in the said case laws referred to, by the applicant, are on different facts and under different laws as compared to the subject issue. Further, the issue regarding payment of the stamp duty in those cases is also not clear. Thus the said case law's will not be applicable in the subject case. 06. In view of the extensive deliberations as hereinabove, we pass following order: ORDER (Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) NO.GST-ARA- 68/2019-20//B-52 Mumbai, dt. 27.08.2021 For reasons as discussed in the body of the order, the questions are answered thus Question:- (i) Whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
