2018 (9) TMI 974 - AAR - GST

Rate of Tax - sale of Flats/ Units to the prospective buyers - Pradhan Mantri Awas Yojana - Composite works contract service - inward supply. What is the rate of tax to be levied on the sale of Flats/Units to the prospective buyers? And whether registration of project under Pradhan Mantri Awas Yojana is required? - Held that - The applicant s case is covered under the tax rate of 12%, under Heading 9954 (Construction Services), (v) (da) of above mentioned Notification No. 11/2017, as amended since the project undertaken by them falls under the definition of Affordable Housing as stated by them in the application (Whether the housing project qualifies as affordable housing project or not, shall be determined by the applicant as per the definition of affordable housing given in the above mentioned notification.) The benefit of reduced rate would be available to them only in the cases of supply effected after 25.012018 i.e. the date on which Notification 1/2018-Central Tax (Rate) was issued. What is the rate of tax to be levied by. the supplier (who is registered under GST) from whom we intend to receive composite works contract service (Inward Supply of Composite works contract)? Will it be 12% or 18%? - Held that - At the time of hearing it was communicated to them that this question can only be raised by the supplier and not by them and they agreed to the same and the question is therefore not answered in this case. Input Tax Credit - Whether full ITC is allowable or it will be restricted to output GST liability? - Held that - The builder or developer will not be required to pay GST on the construction service of flats etc. in cash but would have enough ITC (input tax credits) in his books to pay the output GST, in which case, he should not recover any GST payable on the flats from the buyers. He can recover GST from the buyers of flats only if he recalibrates the cost of the flat after factoring in the full ITC available in the GST regime and reduces the ex-GST price of flats - The applicant will be eligible for ITC subject to fulfilment of conditions as prescribed under the GST Act. Ruling - The rate of tax to be levied is 12% (8% GST after deducting value of land) in case of Affordable Housing Project. If the project qualifies as an Affordable Housing Project, then registration under Pradhan Mantri Awas Yojana is not required to avail this benefit - The applicant will be eligible for ITC subject to fulfilment of conditions as prescribed under the GST Act.

Summary

Issues Involved:
1. Rate of tax on the sale of Flats/Units to prospective buyers and the requirement of registration under Pradhan Mantri Awas Yojana.
2. Rate of tax on inward supply of composite works contract service.
3. Admissibility of Input Tax Credit (ITC).

Issue-wise Detailed Analysis:

1. Rate of Tax on Sale of Flats/Units and Registration Requirement:
The applicant sought clarity on the tax rate applicable to the sale of flats/units in an affordable housing project and whether registration under Pradhan Mantri Awas Yojana (PMAY) is necessary. The relevant notifications, including Notification No. 11/2017-Central Tax (Rate) and its amendments, were examined.

The ruling clarified that:
- The tax rate applicable is 12% (8% GST after deducting the value of land) for affordable housing projects.
- The project qualifies as an Affordable Housing Project if it meets the criteria defined in the notification by the Ministry of Finance, Department of Economic Affairs, which includes using at least 50% of the Floor Area Ratio (FAR)/Floor Space Index (FSI) for dwelling units with a carpet area of not more than 60 square meters.
- Registration under PMAY is not required to avail the concessional tax rate if the project qualifies as an Affordable Housing Project.

2. Rate of Tax on Inward Supply of Composite Works Contract Service:
The applicant queried the tax rate applicable to the inward supply of composite works contract services from a registered supplier. During the hearing, it was communicated that such a question could only be raised by the supplier, not by the applicant. Consequently, this question was not answered.

3. Admissibility of Input Tax Credit (ITC):
The applicant inquired about the admissibility of ITC and whether it would be restricted to the output GST liability. The ruling referred to Sections 16 to 20 of the GST Act, which govern ITC eligibility and conditions. The GST Council's recommendations from its 25th meeting were also considered, emphasizing that builders/developers should not recover GST from buyers if they have sufficient ITC to cover the output GST.

The ruling concluded that:
- The applicant is eligible for ITC subject to the fulfillment of conditions prescribed under the GST Act.

Order:
- Question 1: The tax rate on the sale of Flats/Units is 12% (8% GST after deducting the value of land) for Affordable Housing Projects. Registration under PMAY is not required if the project qualifies as an Affordable Housing Project.
- Question 2: Not answered as the question should be raised by the supplier.
- Question 3: The applicant is eligible for ITC subject to the fulfillment of conditions prescribed under the GST Act.