TMI Blog2023 (4) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... nization, formation and registration of the organization and legal charges in connection therewith and infrastructure charges (for development of common area infrastructure) are independent from construction service. Even though any one or all of them is removed from the contract, the supply of services of construction of residential apartment / dwelling goes unabated. Therefore, the test that different elements are integral to one overall supply, even if one or more is removed, the nature of the supply would be affected, is not satisfied in the present case. So the nature of the other charges in respect of the above said independent services / activities which are not inextricably linked to a residential apartment shows that they don't fulfill the various tests of composite supply. Further the services provided would be considered as provided even when the entire consideration for the immovable property is received after issuance of Completion Certificate or Occupation Certificate. Here the services provided are clearly identifiable separately from the construction service. Further, other services provided can be offered only once and the purchaser of flat cannot offer such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is supplemented by a sale deed. 3.3. The construction services provided by the appellant are classified under SAC code 9954 and are covered under Entry 3 of Notification No. 11/2017- (Central Tax-Rate), (hereinafter referred as Rate Notification). As per Paragraph 2 of Rate Notification, value of transfer of land or undivided share of land is deemed to be l/3rd of the total value of construction services and the same is deducted from the total value of the construction services to arrive at the taxable value, for the purpose of levy and collection of GST. 3.4. As a part of terms of Agreement for Sale between appellant and customers, the Appellant is to provide certain other services (hereinafter referred as other services ). The consideration towards the other services is provided for in the sale agreement which is collected under the respective heads. They are distinctly identified in the sale agreement. 3.5. As per the documents submitted, the residential project doesn't fall under affordable housing category and the appellant is collecting GST and discharging the liability at the rate of 12%. 3.6 Presently the appellant has been collecting and discharging GS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of residents and associated legal cost. 9 Infrastructure charges Additional charges for development of common area infrastructure. 10 Legal fees Charges for legal cost of the transaction of sale of residential apartments, 4. The order of Advance Ruling Authority: - 4.1 The Appellant had filed an application before the Advance Ruling Authority (AAR) to seek the answers for following two questions in respect of other charges recovered from the customer. (a) Whether the Other Charges received by the company will be treated as consideration for construction services of the Company and classified under HSN 9954 along with the main residential construction services of the Company or whether the same will be treated as consideration for independent service(s) of the respective head? (b) Consequently, what will be the applicable effective rate of GST on services underlying the Other Charges? 4.2. The AAR passed an order rejecting the contention of the appellant that other services are part of a composite supply with construction se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2020 till 2.10.2021 shall stand excluded. Consequently, the balance period of limitation remaining as on 15.3.2021, if any, shall become available with effect from 03.10.2021. 5.2 Thus, the period from 27.8.2021 to 3.10.2021 will stand excluded from the period of limitation. As a result, appeal application filed on 02/11/2021 is treated as filed in time and it is admitted for disposal. 6. The Grounds of Appeal: - 6.1 The impugned order is erroneous and bad in law and has not properly appreciated the factual and legal position. 6.2 The AAR has overlooked the submissions made by the Appellant and has mechanically ruled that services supplied in respect of other charges are not naturally bundled. 6.3 The impugned order is liable to be set aside as it is arbitrary and based on fallacious presumptions. 7. Personal Hearing The personal hearing in the matter was conducted on 10.11.2022. It was attended by Mr. Gaurav Sugani, Advocate on behalf of the Appellant. Shri. Sugani, reiterated the submissions made in writing. He described the services provided by the Appellant and emphasised that supply of construction services and other services is a composite su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or example, service of stay in a hotel is often combined with a service or laundering of 3-4 items of clothing free of cost per day. Such service is ancillary service to the provision of hotel accommodation and the resultant package would be treated as services naturally bundled in the ordinary course of business. d) Other illustrative indicators, not determinative but indicative of bundling services in ordinary course of business are - - There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use. - The elements are normally advertised as a package - The different elements are not available separately - The different elements are integral to one overall supply- if one or more is removed, the nature of the supply would be affected. 8.4 The Appellant has submitted that principles laid down in the Education Guide are applicable in the present case in terms of, a) perception of the service receiver, b) majority of service providers provide similar bundle of services, c) other charges are in the nature or incidental or ancillary services, d) they are advertised as single pac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to a residential apartment or dwelling. Without these aspects, the property may not be used. However certain other charges like advance maintenance, club house maintenance, infrastructure charges, share money application and entrance fee of the organization are not expected by every customer. These are not inextricably linked to the construction services in respect of residential projects. 9.3 In the said education note on which the appellant has relied heavily, other illustrative indicators which are indicative of bundling of services in ordinary course of business are provided (cited supra). The analysis of indicative indicators of bundled services show that they are largely not applicable to the case in hand. The other charges are received separately. It means indicator no a) and c) of para 8.3 are not complied with/ fulfilled. All the aspects may be or may not be advertised as a package. The submission of the appellant is silent on this aspect of the transaction. In fact, he has submitted that the charges are received separately to ensure transparency with the customer. Therefore first part of the indicator no. d) is absent i.e. there is a single price or the customer pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Even the benefits arising out of building will be available to promoter/Appellant only. 9.8 There is another clause that grants Promoter the right to use some of the common areas and external facilities to adjoining plot or any other plot in the vicinity of the said property (clause 33 (g)). All these clauses bring out the real nature of the services provided other than construction services. The property in such services (in terms of use, ownerships, etc.) isn't fully transferred to the customers. Hence it is logical and legal to treat such services as not having any inextricable link to the construction services and need to be treated as independent supply of services. 9.9 The Appellant has relied upon the case of Advance ruling authority order dated 26.12.2019 in respect of M/s Joyville Shapoorji Housing Private Limited (herein after referred as Joyville ).However the facts of the case are different from the present matter. Firstly, the project of the appellant doesn't fall under Affordable House Category while Joyville was a project under affordable housing category. In said case, the issue before authority was to decide whether the expression the gross amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whole and the position of a particular unit in the context of the complex. Thus, it is an attempt on part of the appellant to subsume various other charges collected on the guise of Construction Services provided by him. The other charges collected by the appellant is clearly distinguishable from the main services provided. 10. Hence, in view of the above facts and discussion, it is clear that charges in respect of some services are inextricably linked while other services are independently provided to the customer. The dominant intention test and principles for determination of naturally bundled services point out the independent nature of some of the services. Therefore, following services are clearly identifiable as bundled services: (i) Water connection charges; (ii) Electric meter installation and deposit for meter; (iii) Development charges; (iv) Legal fees. These aforesaid services are considered as naturally bundled services and taxable as per the rate of construction services. On the other hand, services of: (i) Club House Maintenance; (ii) Advance Maintenance; (iii) Share of Municipal Taxes (pertaining to period after occupancy) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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