TMI Blog2022 (2) TMI 1101X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yal, CA Deepak Goyal, CA Note: Under Section 100 of the CGST/RGST Act, 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/RGST Act, 2017, within a period of 30 days from the date of service of this order. At the outset, we would like to make it clear that the provisions of both the CGST Act and the RGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the RGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / RGST Act would be mentioned as being under the GST Act . The issue raised by M/s Richwell Enterprises Private Limited, S 21, G 1, Western Heights, Shyam Nagar, Sodala, Jaipur-302019, RAJASTHAN -(hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (b),(d) (e) (g) given as under:- (b) applicability of a notification issued under the provisions of this Act; (d) admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Question No 1. Whether recovery of charges for 'the ancillary charges' by builders would be considered as a 'composite supply' naturally bundled with 'Construction Services' under Section 8 of CGST and RGST Act, 2017? Firstly, the applicant is reproducing definition of composite supply as mentioned under Section 2(30) of the CGST Act as follows:- 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. Further, as per Section 8 of the CGST Act - i. 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. Furthermore, the meaning of Composite Supply has been clarified in a Flyer issued by CBIC and relevant extract has been produced below for ready reference:- i. The concept of composite supply under GST is identical to the concept of naturally bundled services prevail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause xvi, sub-clause (a)(ii)(C) of paragraph 4 of notification No. 11/2 017-CT(R) dated 28.06.2017, reproduced below, refers. C. Any other amount charged by the promoter from the buyer of the apartment including preferential location charges, development charges, parking charges, common facility charges etc. However the value shall not include stamp duty payable to the statutory authority, maintenance charges / deposits for maintenance of apartment or maintenance of common infrastructure. Government has specified list of charges to be bundled, are mere explanatory in nature. Accordingly, 'the ancillary services' would be bundled accordingly and GST would be payable as mentioned for construction services. Therefore, the applicant is of the view that the said supply of services should be considered as Composite Supply under Section 8 of CGST and RGST Act, 2017 wherein 'Construction Services' are considered as 'principal supply'. Question No 2. If answer to Question No. 1 is yes, whether the charges for the ancillary services would attract GST at the rate specified for Construction Services (principal supply), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier. 0.75 (CGST) + 0.75 (SGST)= 1.5% 1% (ia) Construction of residential apartments other than affordable residential apartments by a promoter in an RREP which commences on or after 1 st April 2019 or in an ongoing RREP in respect of which the promoter has not exercised option to pay central tax on construction of apartments at the rates as specified for item (ie) or (if) below, as the case may be. in the manner prescribed therein, 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. (id) Construction of residential apartments other than affordable residential apartments by a promoter in a REP other than a RREP which commences on or after 1st April, 2019 or in an ongoing REP other than RREP in respect of which the promoter has not exercised option to pay central tax on construction of apar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8% GST rate) then whether Input Tax Credit can be claimed in respect of GST paid on expenses incurred to provide the said ancillary services? Without prejudice to our submission / interpretation for Question 1 to 3 mentioned above, if the answer to applicant's question no. 1,2 and 3 is No, then 'the ancillary services' have been deemed to be unrelated to the construction services and shall be subject to outward tax liability at the rate of 18% as under category' Other services n.e.c. having SAC code 999799. As per Section 16 of the CGST and RGST Act, every registered person 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. Further, Section 17(5) does not disallow ITC in respect 'the ancillary services', same shall be eligible. Therefore, without prejudice to the applicant's interpretation for Question 1 to 3, if the ancillary' services are taxable at 18% then, ITC in respect of the said services (as mentioned in Para 5 above) shall be eligible as the same are incurred in the course or furtherance of business. B. QUESTIONS ON WHICH TH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction Services' under Section 8 of CGST and RGST Act, 2017 2. NA 3. NA 4. GST is levied on charges for 'the ancillary services' as individual respective service and shall be subject to outward tax liability at the rate of 18% as under category Other services n.e.c. having SAC code 999799. As per Section 16 of the CGST and RGST Act, every registered person 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. Further, Section 17(5) does not disallow ITC in respect of 'the ancillary services', same shall be eligible. On the other side, it can be further mentioned that,- a. If the ancillary services are not mentioned separately in the sale/ purchase agreement and they are not charged separately and the cost of these services are included in the land construction cost, and, b. If the stamp duty is paid on the amount of the basic land construction cost only and does not include the cost of the other amenities, then, 1. 'the ancillary services' would be considered as a 'composite supply' naturally bundled with 'Construction Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST is not applicable on flats / units sold post the issuance of Completion Certificate or after its first occupation, whichever is earlier. It may be inferred that charges recovered for 'the ancillary services' on flats / unit sold post issuance of CC or after first occupation would also not attract GST Liability. E. FINDINGS, ANALYSIS CONCLUSION: 1. We have perused the records on file and gone through the facts of the case and the submissions made by the applicant as well as the department. The issue is related to the classification of services, applicable tax rate thereon availability of Input Tax Credit under the GST Act. 2. The applicant, registered under GST ACT and engaged in the business of construction and sale of residential apartments, discharges GST in respect of such supply for which, consideration is received before receipt of Occupancy/Completion Certificate. 3. Applicant submitted that apart from consideration for the main construction activity, they also recover charges for 'the ancillary services' like JDA Lease Charges, Electrification Charges, Sewage Treatment Plant Charges, Non-refundable IFMS (Interest Free Maintenance Secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale' deciding the present issue. On perusal of the said 'agreement for sale, it seen that the charges for the construction of residential property and the other charges for providing different ancillary' services are mentioned separately. 8. To decide the issue, it is important to examine the concept of 'Composite Supply' as provided under the CGST Act, 2017. The relevant definitions in this regard, as provided under Section 2 of the CGST Act, are as under: 8.1 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: 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. 8.2 Principal Supply Section 2(90):- Principal supply means the supply of goods or services which constitutes the predominant element of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreement is common will not make it a supply of bundled services. 11. Therefore, in the present case, we find 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. 12. 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: 13 '3 (i) Construction of a complex, building, civil structure or a part t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t April, 2019, which shall be calculated in the manner as prescribed in the Annexure I in the case of REP other than RREP and in Annexure II in the case of RREP; Provided also that where a registered person (landowner- promoter) who transfers development right or FSI (including additional FSI) to a promoter (developer- promoter) against consideration, wholly or partly, in the form of construction of apartments,- (i) the developer- promoter shall pay tax on supply of construction of apartments to the landowner-promoter, and (ii) such landowner - promoter shall be eligible for credit of taxes charged from him by the developer promoter towards the supply of construction of apartments by developer- promoter to him, provided the landowner-promoter further supplies such apartments to his buyers before issuance of completion certificate or first occupation, whichever is earlier, and pays tax on the same which is not less than the amount of tax charged from him on construction of such apartments by the developer-promoter. Explanation . - (i) developer- promoter is a promoter who constructs or converts a building into apartments or develops a plo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x liability on the shortfall of inward supplies from unregistered person so determined shall be added to his output tax liability in the month not later than the month of June following the end of the financial year. 2. Notwithstanding anything contained in Explanation 1 above, tax on cement received from unregistered person shall be paid in the month in which cement is received. 3.Input Tax Credit not availed shall be reported every month by reporting the same as ineligible credit in GSTR-3B [Row No. 4 (D)(2)]. (ia) Construction of residential apartments other than affordable residential apartments by a promoter in an RREP which commences on or after 1st April, 2019 or in an ongoing RREP in respect of which the promoter has not exercised option to pay central tax on construction of apartments at the rates as specified for item (ie) or (if) below, as the case may be, in the manner prescribed therein, 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. (Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of paragraph 2 of this notification shall apply for valuation of this service) 3.75 (ie) Construction of an apartment in an ongoing project under any of the schemes specified in sub-item (b), sub-item (c), subitem (d), sub-item (da) and sub-item (db) of item (iv); sub-item (b), sub-item (c), sub-item (d) and sub-item (da) of item (v); and sub-item (c) of item (vi), against serial number 3 of the Table, in respect of which the promoter has exercised option to pay central tax on construction of apartments at the rates as specified for this item. (Provisions of paragraph 2 of this notification shall apply for valuation of this service) 6 Provided that in case of ongoing project, the registered person shall exercise one time option in the Form at Annexure IV to pay central tax on construction of apartments in a project at the rates as specified for item (ie) or (if), as the case may be, by the 10th of May, 2019; Provided also that where the option is not exercised in Form at annexure IV by the 10th of May, 2019, option to pay tax at the rates as applicable to item (i) or (ia) or (ib) or (ic) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e charges Amount recovered tor payment made by the applicant towards Lease charges payable to Jaipur Development Authority (JDA) Trade services of buildings 997213 2. Electrification charges : Amount charged by the applicant to lay down wires and cables from electricity consumption meter to the apartment. Installation services 995461 3. Sewage treatment plant charges Amount charged by the applicant towards construction, maintenance and operation of sewage treatment plain in the building. Sewerage and sewage treatment services 999411 4. Non-refundable IFMS (interest free maintenance security) Additional charges recovered by the applicant until the formation of Resident's welfare Association (RWA) for maintenance. upkeep and security of tine complex. Other services nowhere else classified. 999799 5. Club Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es applicable to both of the above services are different. 21. As tar as availability of Input Tax Credit (ITC) on goods services received for supply of the 'ancillary services' is concerned, we are of the view 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. 22. In view of the extensive deliberations as hereinabove, we rule as follows: - RULING (Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Rajasthan Goods and Services Tax Act, 2017) For reasons as discussed in the body of the order, the questions are answered thus: Question No.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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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