TMI Blog2023 (9) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... Applicant on or before issuance of Completion Certificate? HELD THAT:- The developer is providing construction services to the applicant and the applicant is providing again the construction services to the prospective customers - 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 - 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. Whether the applicant, if liable for tax, what is the applicable rate of tax on sale of apartments before issuance of completion certificate? - HELD THAT:- The question of the applicant to opt for the taxation as an ongoing project in Annexure IV of the Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices. 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? - HELD THAT:- The input tax credit is not eligible to be claimed on any of the expenses other than the tax charged by the developer for the construction services subject to its eligibility if all other conditions are satisfied. - DR. M.P. RAVI PRASAD AND SRI. KIRAN REDDY T, MEMBER Represented by : Sri Sanjay Dhariwal, Chartered Accountant ORDER UNDER SECTION 98(4) OF THE CGST ACT, 2017 AND UNDER SECTION 98(4) OF THE KGST ACT, 2017 M/s. Vinod Kumari Goyal, No. 579, 14th Cross, J P Nagar, Phase I, Bengaluru-560 078 (hereinafter referred to as The applicant'), having GSTIN 29AEOPG0891F1ZA have filed an application for Advance Ruling under Section 97 of CGST Act, 2017 read with Rule 104 of CGST Rules, 2017 and Section 97 of KGST Act, 2017 read with Rule 104 of KGST Rules, 2017, in FORM GST ARA-01 discharging the fee of Rs. 5,000/- each under the CGST Act and the KGST Act. 2. The applicant is a proprietary concern registered under the provisions of Central Goods and Services Tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below:- (i) Cost of construction shall be borne by Developer; (ii) Both the parties have agreed to share the apartments in the ratio of 32% (for Applicant): 68% (for Developer); (iii) Apartments belonging to their share shall be the sole and absolute properties of the Applicant and Developer respectively; (iv) In consideration of the Applicant permitting the Developer to develop the property, the Developer has agreed to pay refundable deposit of Rs. 4,50,00,000/- (v) The Applicant has agreed to pay the applicable tax on Applicant's share of construction activity, which is liable to pay tax in the hands of developer at the time of handing over apartments; (vi) The Applicant has also agreed to pay the statutory deposits and fees payable to the statutory authorities / local authorities i.e., BESCOM BWSSB etc., in respect of Applicant's share of apartments. 5.3 The applicant states that the Project is developed under the name The Magic Faraway Tree Phase 2 Phase 2A on phase-wise basis. Project is registered under RERA, bearing registration number PRM/KA/RERA/1251/310/PR/171015/000424. Presently the developer is constructing phase II and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for continuation of tax rate with old scheme i.e., 18% with ITC or new scheme i.e., 1.5% or 7.5% without ITC. Accordingly, developer has opted with old scheme (18% with ITC). 6.1.3 The applicant submits that under GST, the activity of construction of apartments to the extent of applicant's share in lieu of transfer of development right by the Applicant to the developer amounts to supply of service, which attracts tax in the hands of developer on or before the issuance of Completion Certificate in terms of Notification No. 6/2019, Dated: 29/03/2019. 6.1.4 The applicant submits that the above transaction falls under the definition of Works Contract' as defined under section 2(119) of the Act, which is classified as supply of service. 6.1.5 The applicant submits that one of the essential requirement for a transaction to fall under the definition of works contract is transfer of property in goods (whether as goods or in some other form) involved in the execution of such contract . In other words, a contract for building or construction of an apartment should involve transfer of property from one person to another. 6.1.6 The applicant submits that in the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... item (ie) (if) specifically mention that, an option to choose rate of tax was provided up to 20th May 2019. If such option was not exercised it shall be deemed that, registered person has opted the rate under new scheme i.e., 7.5% without ITC. 6.2.2 The applicant submits that, during the time of implementing the new scheme, applicant was not registered under GST Law, hence applicant could not able to exercise an option. 6.2.3 In view of the above legal premise, the applicant is of the view that, if their transaction i.e., sale of residential apartments (other than affordable) to the prospective customers before issuance of Completion Certificate, attracts tax, the rate of tax shall be 7.5% as prescribed at item (ia) SI.No. 3 of 11/2017 (Central Tax Rate) Dated: 28.06.2017 as amended vide Notification No. 3/2019 (Central Tax Rate) Dated 29/03/2019. 6.3 Applicant's view on question 3- The applicant submits that, under new scheme input tax credit is restricted to the developer but not for land owner. Therefore, they are eligible to claim credit of tax charged by the developer. 6.3.1 In this regard, applicant states conditions mentioned at column 5 of Notification N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 023 7. Sri Sanjay Dhariwal, Chartered Accountant and Duly Authorised Representative appeared for personal hearing proceedings held on 18.05.2023 and reiterated the facts narrated in their application. FINDINGS DISCUSSION 8. At the outset we would like to make it clear that the provisions of CGST Act, 2017 and the KGST Act, 2017 are in pari-materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the KGST Act. 9. We have considered the submissions made by the applicant in their application for advance ruling. We have also considered the issues involved on which advance ruling is sought by the applicant and the relevant facts along with the arguments made by their authorized representative and also their submissions made during the time of hearing. 10. The first question is taken into discussion first and the same reads as under: Whether Applicant being land owner not executing construction work, is liable to pay tax in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The following shall be treated as supply of services, namely: (a) . . . (b) 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 the issuance of completion certificate, where required, by the competent authority or after its first occupancy, whichever is earlier. ................... 10.4 From the above, it is clear that the activity on which the applicant has sought ruling is related to construction of a complex or building or a part thereof, and the same is made more clear by the inclusive portion of the above sub-entry i.e., a building intended for sale to a buyer. The exclusion for this is only where the entire consideration has been received after the issuance of completion certificate or after its first occupancy, whichever is earlier. Since in the present case, the applicant states that the agreement for sale of an apartment is going to be made before the receipt of completion certificate and a part consideration is going to be received at the time of agreement, the activity is a service as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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) 0.75% Provided that the central tax at the rate specified in column (4) shall be paid in cash, that is, by debiting the electronic cash ledger only; Provided also that 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 the case of REP other than RREP and in Annexure II in the case of RREP; Provided also that the registered person shall pay, by debit in the electronic 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of eighteen percent on reverse charge basis and all the provisions of the Central Goods and Services Tax Act, 2017 (12 of 2017) shall apply to him as if he is the person liable for paying the tax in relation to the supply of such goods or services or both; Provided also notwithstanding that anything contained hereinabove, where cement is received from an unregistered person, the promoter shall pay tax on supply of such cement at the applicable rates on reverse charge basis and all the provisions of the Central Goods and Services Tax Act, 2017 (12 of 2017), shall apply to him as if he is the person liable for paying tax in relation to such supply of cement; (Please refer to the illustrations in annexure III) Explanation . - 1. The promoter shall maintain project wise account of inward supplies from registered and unregistered supplier and calculate tax payments on the shortfall at the end of the financial year and shall submit the same in the prescribed form electronically on the common portal by the end of the quarter following the financial year. The tax liability on the shortfall of inward supplies from unregistered person so determined shall be added ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase 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 the 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) 0.75% (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 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d (ie) in column (3) shall attract central tax prescribed against them in column (4) subject to conditions specified against them in column (5) and shall not be levied at the rate as specified under this entry. (Provisions of paragraph 2 of this notification shall apply for valuation of this service) 11.2 With respect to the supply of works contract services i.e. construction services provided in the supply of apartments to the prospective purchasers of apartments, the applicable tax rate is to be determined by the entries from (ia) to (id) depending on the project whether the apartment is a :- (a) affordable residential apartments in a Residential Real Estate Project or (b) residential apartments other than affordable residential apartments an Residential Real Estate Project, or (c) commercial apartments (shops, offices, godowns, etc.) in an Residential Real Estate Project, or (d) affordable residential apartments in a Real Estate Project other than Residential Real Estate Project, or (e) residential apartments other than affordable residential apartments in a Real Estate Project other than a Residential Real Estate Projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst 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. 12.2 From the details provided by the applicant that he shall be further supplying the apartments to his buyers before the issuance of completion certificate or first occupation, whichever is earlier and developer promoter is charging the tax towards the supply of construction of apartments by the developer-promoter to him, the applicant is eligible to claim the input tax credit provided that the applicant pays tax on the supply of apartments which is not less than the amount of tax charged from him on construction of such apartments by the developer-promoter. Since the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er conditions are satisfied. 14. In view of the foregoing, we pass the following RULING 1. 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. 2. The applicant is liable to pay tax as per entries 3(i) to 3(id) of the 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 depending on the nature of the apartment, whether it is a residential or commercial apartment; if the apartment is a residential apartment, whether it is affordable category or not and whether the project is a residential real estate project or a real estate project other than residential real estate project. 3. The applicant is eligible to claim input tax credit on the tax charged by the developer for supply of construction services subject to the two conditions (a) he is a registered dealer on the date the time of supply of construction services falls (b) the amount of tax payable by the applicant for his supply of apartments ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
