9911796707
TMI Blog2023 (9) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... nd has entered into a joint development agreement (JDA) with M/s. Total Environment Building Systems Private Limited, Bengaluru for development of residential apartments. 3. The applicant has sought advance ruling in respect of the following questions:- i. Whether Applicant being land owner not executing construction work, is liable to pay tax in respect of agreements to be entered with customers for sale of apartments (other than affordable) belonging to the Applicant's share before issuance of Completion Certificate in a project under JDA, area sharing model, where construction work is executed by developer and the developer is liable to pay tax on the portion of apartments to be handed over to the Applicant on or before issuance of Completion Certificate? ii. If Applicant is liable for tax, applicable rate of tax on sale of apartments before issuance of completion certificate? iii. If Applicant is liable for tax, whether Applicant can claim credit of tax charged by developer on the portion of apartments belonging to the Applicant where developer has opted for payment of tax under old scheme i.e., 18%? iv. If Applicant is liable for tax, whether Applicant can claim i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom Bruhat Bengaluru Mahanagara Palike vide Certificate No. 15/2015-16, Dated: 02/03/2016. The developer is registered under the GST Law, having GSTN -29AABCT9452F1Z2, registered office at No. 78/1, ITPL Main Road, Imagine Campus, EIPI Zone, Whitefield, Bengaluru. 5.4 The applicant states that with effect from 01.04.2019 onwards GST structure on real estate services relating to residential apartments has been altered by giving an option to the dealers to continue with old rate of tax with ITC for an ongoing project and new rate of tax i.e., 1% (for affordable residential apartment) / 5% (other than affordable residential apartments) without ITC. Developer has exercised an option to pay tax under old scheme i.e., 18% with ITC as envisaged under Notification No. 3/2019 dated: 29.03.2019. 6. Applicant's Interpretation of Law: 6.1 Applicant's view on question 1- The applicant submits that Section 7 deals with 'Scope of Supply' which inter alia include transactions in the nature of barter or exchange. The said provisions read as under: Section 7. Scope of supply. - (1) For the purposes of this Act, the expression - "supply" includes- (a) all forms of supply of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attracts tax under GST Law in the hands of developer in terms of Notification No. 6/2019, Dated: 29/03/2019 on or before issuance of Completion Certificate in respect of apartments to be handed over to the Applicant. 6.1.7 The applicant submits that, once the transaction is liable to tax in the hands of developer the same transaction cannot be made taxable in the hands of applicant when applicant sells the apartment to his customer even if agreements are entered with customers before issuance Completion Certificate which sans transfer of property in goods (whether as goods or in some other form) from Applicant to the prospective customers. 6.1.8 The applicant is of the view that, in case of construction of building or apartments, transfer of property in goods happens only once and not on multiple times. In other words, during execution of work by the developer, goods are incorporated in the building, therefore there is a transfer of property in goods from the developer to the Applicant. Thereafter, there is nothing left to the Applicant to transfer goods to the prospective customers. Therefore, the subsequent transactions cannot be taxed once again in the hands of Applicant, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... developer- promoter for construction of apartments and receives constructed apartments against such transferred rights and sells such apartments to his buyers independently. (iii) the landowner-promoter shall be eligible to utilise the credit of tax charged to him by the developer-promoter for payment of tax on apartments supplied by the landowner promoter in such project. 6.3.2 On perusal of the above provisions, the applicant is of the view that land owner is eligible to claim input tax credit charged by developer, irrespective of whether developer had opted for payment of tax under old scheme or new scheme. 6.3.3 The applicant submits that the recommendations of 43rd GST Council Meeting, makes clear that the intention of the Legislature was to avoid multiple taxes on the same transaction, therefore land owner has been allowed to claim and utilize the input tax credit which is charged by developer to the Applicant. 6.4 Applicant's view on question 4 - The applicant submits that they will be incurring expenses towards brokerage, marking and furnishing etc., for sale of apartments. As per input & input service definition U/s. 2(59) and 2(60) of the CGST & KGST Act, 2017, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments to be handed over to the Applicant on or before issuance of Completion Certificate? 10.1 The applicant is a landowner and he has entered into an agreement with the developer and getting the construction services done of his share of the developed property. The landowner wants to know that whether GST is attracted if the apartments of his share of developed property so being constructed are entered into agreement for sale before the completion certificate is issued. This issue is examined. 10.2 Supply is defined under Section 7 of the CGST Act, 2017 as under:- "7. Scope of Supply (1) For the purpose of this Act, the expression "supply" includes (a) all form of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; ............" "works contract" is defined in clause (119) of section 2 of the CGST Act as under: "works contract" means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n certificate which sans transfer of property in goods from applicant to the prospective customers is incorrect. The developer is providing construction services to the applicant and the applicant is providing again the construction services to the prospective customers. Hence there are two supplies involved, first from the developer to the applicant and the second from the applicant to the prospective customers. 10.6 It is also pertinent to note that the agreements for supply of constructed apartments with the prospective purchasers are entered by the applicant which is a supply of service as per section 7 of the CGST Act and there is no direct supply of construction services to the prospective purchasers by the developer. The developer is only providing services to the applicant and not to the prospective purchasers. 10.7 The applicant is acting as a supplier of works contract service to the prospective purchasers of apartments and hence he is a supplier under Section 7(1) of the CGST Act, 2017 liable to pay tax under Section 9(1) of the CGST Act, 2017. 11. Regarding the second question, whether the applicant, if liable for tax, what is the applicable rate of tax on sale of ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the developer promoter to him, provided the landowner-promoter further supplies such apartments to his buyers before the 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 developer a plot for sale, (ii) "landowner-promoter" is a promoter who transfers the land or development rights or FSI to a developer-promoter for construction of apartments and receives constructed apartments against such transferred rights and sells such apartments to his buyers independently. Provided also that eighty percent of value of input and input services, [other than services by way of grant of development rights, long-term lease of land (against upfront payment in the form of premium, salami, development charges, etc.) or FSI (including additional FSI), electricity, high-speed diesel, motor spirit, natural gas], used in supplying the service shall be received from registered supplier only; Provided also that inputs and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction 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. (Provisions of paragraph 2 of this notification shall apply for valuation of this service) 3.75 (ib) Construction of commercial apartments (shops, offices, godowns, etc.) 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. (Provisions of paragraph 2 of this notification shall apply for valuation of this service) 3.75% ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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) or (id) above, as the case may be, shall be deemed to have been exercised; Provided also that invoices for supply of the service can be issued during the period from 1st April 2019 to 10th May, 2019 before exercising the option, but such invoices shall be in accordance with the option to be exercised; (if) Construction of a complex, building, civil structure or a part thereof, including, - (i) commercial apartments (shops, offices, godowns, etc.) by a promoter in a REP other than RREP. (ii) residential apartments in an ongoing project, other than affordable residential apartments, 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 in the manner prescribed herein, but excluding supply by way of services specified at items (i), (ia), (ib), (ic), (id), and (ie) above 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffordable category or not and whether the project is a residential real estate project or a real estate project other than residential real estate project. 12. Regarding the third question: if the applicant is liable to pay tax, whether applicant can claim credit of tax charged by the developer on the portion of apartments belonging to the applicant where developer has opted for payment of tax under old scheme i.e. 18%?, the following are observed: 12.1 The fourth proviso to the entries 3(i) to 3(id) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 3/2019-Central Tax (Rate) dated 29.03.2019 reads as under:- "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 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, if the applicant is liable for tax, whether the applicant can claim input tax credit on other expenses, other than tax charged by developer for supply of apartments? the following points are observed: 13.1 The first proviso to entries 3(i) to 3(id) clearly mentions that the central tax shall be paid in cash, that is, by debiting the electronic cash ledger only. 13.2 Further, the second proviso clearly mentions that the credit of input tax charged on goods and services used in supplying the service has not been taken except to the extent as prescribed in Annexure I in case of REP other than RREP and in Annexure II in the case of RREP. 13.3. It is also stated in the third proviso that the registered person shall, pay, by debit in the electronic credit ledger or electronic cash ledger, an amount equivalent to the input tax credit attributable to construction in a project, time of supply of which is on or after 1st 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. 13.4 All the above, point out to the fact that input tax credit is not eligible to be claimed on any of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
