2018 (4) TMI 1077 - AAR - GST

Levy of GST - Valuation - construction services / superstructure - undivided and impartible share of land - Entry 5 of Schedule III of the CGST Act, 2017 - Whether GST will be applicable on the sale of undivided and impartible share of land represented by Agreement to sell the land? - Held that - From a conjoint reading of Section 7 and Entry 5 of Schedule III of CGST Act, any activity/ transaction which is in the nature of sale of land is not covered within the purview of GST. Consequently, no GST is payable on the transactions resulting in the sale of land. Composite supply - Whether GST shall be applicable on sale of superstructure (which is under construction)? - N/N. 11/2017- Central Tax (Rate) dated 28.06.2017 - Held that - the measure of tax should be the value of goods and services supplied by excluding the value of land. However, since land cannot be separately sold, a deemed value of land need to be ascertained on which GST would not be payable. Under GST Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 - S. No. 3 r/w Paragraph 2, the deemed value of land or undivided share of land has been fixed at one-third of the total amount charged. Hence, in GST, the machinery provisions to ascertain the value of land is available in the notification which has been issued under Sub-Section (5) of Section 15 of the CGST Act, 2017 regarding value of taxable supply - The said Notification has been issued under Section 15(5) of the CGST Act, 2017 by the Government on the recommendation of the GST Council and hence, no separate Rule was required to be issued. Paragraph 2 of the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 is fully authorised by Section 15(5) of the CGST Act, 2017 to provide machinery provisions to ascertain the value of land for exclusion and to measures the value of supply of goods and services for levy of GST. The said machinery provisions cannot be equated with exemption Notification issued under Section 93(1) of the Finance Act, 1994 which were held to be insufficient by the Hon ble High Court 2016 (6) TMI 192 - DELHI HIGH COURT . Ruling - the value of land, or the undivided share of land, as the case may be, would be deemed to be one-third of the total amount, which is excluded from the value for the purposes of payment of GST Even if agreement between the applicant and the buyer is entered after part of the construction is already completed, whole of the consideration would be added for payment of GST. The applicable rate of GST on the said two-third of total amount is 9% (CGST) and 9% SGST under S. No. 3(i) of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 and parallel SGST notification.

Summary

Issues Involved:
1. Applicability of GST on the sale of undivided and impartible share of land.
2. Applicability of GST on the sale of superstructure (which is under construction).
3. Determination of the value on which tax is payable.
4. Applicable rate for charging GST.

Issue-wise Detailed Analysis:

1. Applicability of GST on the Sale of Undivided and Impartible Share of Land:
The applicant contends that the sale of land is outside the scope of GST as per Entry 5 of Schedule III of the CGST Act, 2017. This is supported by Section 7(2)(a) of the CGST Act, which states that activities specified in Schedule III are neither a supply of goods nor services. Consequently, the transfer of undivided and impartible share in land would not be leviable to GST. The judgment concurs, stating that the sale of land, including undivided portions, is an outright sale of immovable property and hence outside the scope of GST.

2. Applicability of GST on the Sale of Superstructure (Under Construction):
The applicant acknowledges that the construction of the superstructure attracts GST. According to Section 7(1)(d) of the CGST Act, read with Paragraph 5(b) of Schedule II, supply includes the construction of a complex or building intended for sale to a buyer, except where the entire consideration is received after the issuance of a completion certificate or first occupation. Therefore, if construction is done on behalf of the buyer, GST is payable.

3. Determination of the Value on Which Tax is Payable:
The judgment highlights that the supply in question is a composite supply consisting of land, goods used in construction, and services undertaken by the applicant. The value of the supply should exclude the value of land. Paragraph 2 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017, deems the value of land to be one-third of the total amount charged. Thus, GST is payable on two-thirds of the total amount, which includes the consideration for goods and services.

4. Applicable Rate for Charging GST:
The applicable rate of GST on the two-thirds of the total amount is 9% CGST and 9% SGST as per S. No. 3(i) of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017. This rate applies even if the agreement between the applicant and the buyer is entered into after part of the construction is already completed.

Ruling:
In the case of supply of services by way of construction of a complex, building, or civil structure intended for sale, GST is payable on two-thirds of the total amount charged, excluding the deemed value of land (one-third of the total amount). The applicable GST rate is 9% CGST and 9% SGST. This ruling applies regardless of whether the agreement is entered into after the construction has partially completed.