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2020 (9) TMI 1249 - AAAR - GSTClassification of services - recovery of various charges including Preferential Location Charges (PLC) from the Buyers - applicability of GST rate of 12% or 18% where sale/transfer of constructed property has taken place before issuance of completion/Occupation certificate (CC/OC) - GST rate of 5% or 18% where sale/transfer of constructed property has taken place before issuance of CC/OC under new projects which commence on or after 01.04.2019? - PLS collected along with consideration for sale of properties is outside the scope of supply where sale/transfer of constructed property is entered into by the Applicant after issuance CC/ OC or not? - PLS attracts concessional rate of tax/exemption or not - adjustment/refund of the excess GST amount paid as (18% less 12%) or (18% less 5%) or (18% less Nil)? GST rates on construction service - HELD THAT - With one-third of the total transacted value of an immovable property being attributable to the Land/ share of Land, the 5% GST Rate, viz. two-third of (3.75 3.75), claimed by the Appellant pertains to the other than Affordable Residential Projects to commence w.e.f. 1.04.2019 - Similarly 12% GST Rate, viz. two-third of (9 9) claimed by the Appellant pertains to other projects including commercial projects - Similarly 12% GST Rate, viz. two-third of (9 9) claimed by the Appellant pertains to other projects including commercial projects. Preferential Location service - Whether Preferential Location Service (PLS), is Construction Service? - HELD THAT - It is clear from the Appellant's pleas that they are claiming the rates of 5% or 12% for Preferential Location service and simultaneously claiming these services as Construction Service/ a component of Construction Service. It is also clear that the claim includes entitlement to abatement of one-third from the value/ consideration of landed/ immovable property - As admittedly stated by the Appellant, the different rates of the houses can be on account of different locations. Thus premiumness of a location attracts a commensurate consideration which the buyer pays for an identified advantage, viz. view/ direction/ sunlight/ airiness/ vicinity/ serenity/ parking facility etc. etc., or a combination of these. This makes the provided service an exclusive service capable of providing even by a dealer in immovable property. The same therefore need not necessarily be a component of construction service. Conditions for taxation of PLS - whether the provisioning of Preferential Location Service (PLS) would be considered as provided even when the entire consideration for the immovable property is received after the issue of Completion Certificate or Occupation Certificate? - HELD THAT - The answer, even prima-facie, is yes, since the service is identifiable separately from the construction service in the same way as a property agent's service is separate from the sale of a landed property or renting of a landed property. Whether PLS is a component of immovable property? - HELD THAT - Preferential Location Service is integrally linked to, and is provided through, an Immovable Property/ Real Estate/ Landed Property but it is identifiable as a separate and exclusive Service - Construction of Complexes/ Buildings' and Preferential Location' are separate and different activities. Usually, all the houses/floors in a complex/building may not have preferential location. Therefore, a builder may not charge the PLC (preferential location charges) in respect of all the houses/floors. Thus, Construction of a Complex, Building etc. is an independent activity/ service in itself, even without Preferential Location, and vice-versa. Classification of PLS - HELD THAT - The construction service is the construction simplicitor whether in respect of single or multiple dwelling units or residential or commercial buildings. In the Scheme of Classification, the service of provisioning of preferential location is not classified/ classifiable under construction service - the PLS service can be offered/ provided even after issue of CC/ OC i.e. at the time of selling of the immovable property and thus would fall beyond the scope of Construction Service. Building Completion Finishing Services - Heading 9954/ Group 99547 - HELD THAT - From the descriptions it is clear that the Preferential Location Service cannot be classified under this Group/ any of the above Accounting Codes. Real Estate Services - Heading 9972 - HELD THAT - From the description of entries under Real Estate Services it is clear that PLS would classify under Group 99722 and the SAC 997222 or 997223. Classification of service - HELD THAT - The most appropriate entry wherein the instant Service, viz. to be provided by M/s. DLF Ltd., is classifiable is Heading 9972, Group 99722 and Service Accounting Code (SAC) 997222 viz. Building sales on a fee or commission basis or on contract basis . Where the sale of a piece of land is being made as a 'stock in trade' the preferential location service shall classify under SAC 997223 viz., Land sales on a fee or commission basis or on contract basis . Rate of GST - HELD THAT - PLS classifies under SAC 997222 and attracts the rate of 18% (9% under CGST Act vide Entry (iii) under Column (3) against the Serial Number '16' of the Notification 1 1/2017-CT(R) dated 28.06.2017 as amended.
Issues Involved:
1. GST rate applicability on Preferential Location Charges (PLC) collected before issuance of completion/occupation certificate (CC/OC). 2. GST rate applicability on PLC collected in new projects commencing on or after 01.04.2019. 3. Scope of supply for PLC collected after issuance of CC/OC. 4. Eligibility for adjustment/refund of excess GST paid on PLC. 5. GST rate applicability on differential prices for different properties/units within a real estate project. Detailed Analysis: 1. GST Rate Applicability on PLC Collected Before Issuance of CC/OC Issue: Whether PLC collected along with consideration for the sale of properties attracts a GST rate of 12% or 18% when the sale/transfer occurs before the issuance of CC/OC. Ruling: PLC collected along with the consideration for the sale of properties attracts a GST rate of 18% where the sale/transfer of the constructed property has taken place before the issuance of the completion/occupation certificate (CC/OC). 2. GST Rate Applicability on PLC Collected in New Projects Commencing on or After 01.04.2019 Issue: Whether PLC collected along with consideration for the sale of properties attracts a GST rate of 5% or 18% in new projects commencing on or after 01.04.2019. Ruling: PLC collected along with the consideration for the sale of properties attracts a GST rate of 18% where the sale/transfer of the constructed property has taken place before the issuance of the completion/occupation certificate (CC/OC) under new projects which commence on or after 01.04.2019. 3. Scope of Supply for PLC Collected After Issuance of CC/OC Issue: Whether PLC collected along with consideration for the sale of properties is outside the scope of supply when the sale/transfer occurs after the issuance of CC/OC. Ruling: PLC collected along with the consideration for the sale of properties, where the sale/transfer of the constructed property is entered into by the applicant after the issuance of CC/OC, is not outside the scope of supply. 4. Eligibility for Adjustment/Refund of Excess GST Paid on PLC Issue: Whether the applicant or customers can claim adjustment/refund of the excess GST amount paid on PLC if it attracts a concessional rate of tax/exemption. Ruling: No, the applicant or customers cannot claim adjustment/refund of the GST amount paid as there cannot be any excess GST paid in respect of the SAC 99799, which attracts the GST rate of 18% (CGST 9% + SGST 9%). 5. GST Rate Applicability on Differential Prices for Different Properties/Units Within a Real Estate Project Issue: Whether GST can be charged on the whole price at a similar rate when differential prices are charged for different properties/units within a real estate project due to various commercial factors such as the location of the apartment. Ruling: No, the Preferential Location Service is a separate service from Construction Service. Therefore, for determining the value of the same, Paragraph-2 ibid to the Notification 11/2017-CT(R) dated 28.06.2017, which is applicable exclusively to the Construction Service, shall not be applicable. Conclusion: The Appellate Authority for Advance Ruling, Haryana, has ruled that PLC attracts a GST rate of 18% both before and after 01.04.2019, irrespective of the issuance of CC/OC. PLC is not outside the scope of supply even after the issuance of CC/OC, and no adjustment/refund of excess GST paid is permissible. The differential pricing for different units due to location factors should not affect the GST rate, which remains at 18% for PLC.
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