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2018 (10) TMI 1140 - AAR - GSTSupply or not? - Whether the construction activity undertaken by the Company is a supply? - Held that - The construction activity undertaken by the Company falls within the definition of the business as it includes any adventure, whether or not for a pecuniary benefit Sec 2 (17) the Central and State GST Act - The reimbursement of construction cost by the Partners to the Company would fall within the definition of consideration under Sec 2(31) Central and State GST Act as it includes (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both - Hence, the construction activity is a Supply of Service as per the terms of section 7 of the Central and State GST Act. Whether in the facts and circumstances the pooling of land by way of amalgamation of the separate parcels viz Land 1 and Land2 as described in the Statement of relevant facts would constitute a supply under the Central Goods and Services Tax act, 2017 and Telangana Goods and Services Tax Act, 2017? - Held that - On a careful reading of Section 7 it can be inferred that the said activity of amalgamation of the land do not fall under any of the sub-clauses (1) to (3) of Section 7 of the CGST Act,2017. Further, in terms of clause 1(c) of Schedule II of the GST Act, 2017 any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods. But as per Section 2(52) of the CGST Act,2017, goods includes only moveable property but land is not covered under the definition of goods . Hence pooling of land by way of as described in the Statement of relevant facts of the subject Application would not constitute a supply under the Central Goods and Services Tax act, 2017 and Telangana Goods and Services Tax Act, 2017. Whether in the facts and circumstances construction activity undertaken by the Company with respect to the share belonging to the Partners would be treated a Supply of service under the Central and State GST act? - Held that - In terms of clause 5 (b) of Schedule II of the CGST, Act, 2017, 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 issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier shall be treated as supply of service - the activity undertaken by M/s Gowra Venture Pvt Ltd with respect to the share belonging to the said partners (as described in the Statement of relevant facts of the subject Application) is a supply of service under the Central and State GST Act, 2017. Whether in the facts and circumstances, the recovery of construction cost by the Company from the partners would be the transaction value for purpose of Section 15 of the Central and state GST Act to be valued in accordance with Sec 15 read with Rule 30 of the Central Goods and Services Tax Rules, 2017 and Telangana Goods an Service Tax Rules, 2017(Central & State GST Rules)? - Held that - The applicant is providing service to owners 2 to 8 who are related persons and therefore the value of the construction service supplied by M/s Gowra Ventures Pvt. Ltd shall be 110% of the cost of provision of the said service. Whether in the facts and circumstance the vesting of the constructed portion upon the Partners , would independently constitute a supply besides the supply on account of recovery of construction cost as aforesaid by the Company? - Held that - Parcels of land pertaining to the Owners 2 to 8 of the said MOU are amalgamated with the land of the assessee (Owner 1) and the title of the property of the parcels of land remained with the respective owners at any point of time. Further M/s Gowra Ventures Pvt Ltd have provided construction service on the amalgamated land for a consideration to the Owners 2 to 8. Neither any service nor any consideration has been received by owner1 for vesting of constructed portion to the partners (owners 2 to 8) and hence the same cannot be treated as an independent supply. Ruling - The pooling of land by way of amalgamation of the separate parcels viz Land 1 and Land 2 as described in the Statement of relevant facts would not constitute a supply under the CGST/TGST Act, 2017. The activity undertaken by M/s Gowra Venture Pvt. Ltd., with respect to the share belonging to the partners (as described in the Statement of relevant facts of the subject Application) is a supply of service under the CGST/TGST Act, 2017. The applicant is providing service to owners 2 to 8 who are related persons and therefore the value of the construction service supplied by M/s Gowra Ventures Pvt. Ltd shall be 110% of the cost of provision of the said service. The vesting of the constructed portion upon the partners cannot be treated as an independent supply as neither any service nor any consideration has been received by owner1 for vesting of constructed portion to the partners (owners 2 to 8).
Issues Involved:
1. Whether the pooling of land by way of amalgamation constitutes a supply under the CGST/TGST Act, 2017. 2. Whether the construction activity undertaken by the Company with respect to the share belonging to the Partners would be treated as a Supply of Service under the CGST/TGST Act, 2017. 3. Whether the recovery of construction cost by the Company from the Partners would be the transaction value for the purpose of Section 15 of the CGST/TGST Act, 2017. 4. Whether the vesting of the constructed portion upon the Partners would independently constitute a supply besides the supply on account of recovery of construction cost by the Company. Issue-wise Detailed Analysis: 1. Pooling of Land by Amalgamation as Supply: The pooling of land by way of amalgamation of separate parcels (Land 1 and Land 2) does not constitute a supply under the CGST/TGST Act, 2017. The activity does not fall under any of the sub-clauses (1) to (3) of Section 7 of the CGST Act, 2017. Land is not considered 'goods' under Section 2(52) of the CGST Act, 2017, which only includes movable property. Therefore, the amalgamation of land parcels for constructing a multi-storied building does not qualify as a supply. 2. Construction Activity as Supply of Service: The construction activity undertaken by the Company with respect to the share belonging to the Partners is treated as a Supply of Service under the CGST/TGST Act, 2017. According to clause 5(b) of Schedule II of the CGST Act, 2017, construction of a complex or building intended for sale, except where the entire consideration is received after the issuance of a completion certificate or after its first occupation, is considered a supply of service. Therefore, the construction activity by M/s Gowra Ventures Pvt. Ltd. is a supply of service. 3. Recovery of Construction Cost as Transaction Value: The recovery of construction cost by the Company from the Partners is the transaction value for the purpose of Section 15 of the CGST/TGST Act, 2017. Since the Partners are also directors of M/s Gowra Ventures Pvt. Ltd., they are considered related persons under Section 15 of the CGST Act, 2017. The value of the construction service supplied by M/s Gowra Ventures Pvt. Ltd. to the Partners shall be 110% of the cost of provision of the said service, as per Rule 30 of the CGST Rules, 2017. 4. Vesting of Constructed Portion as Independent Supply: The vesting of the constructed portion upon the Partners does not constitute an independent supply. The land and the superstructure have always remained the property of the respective parties as represented by their shares in the Project. No additional service or consideration has been received by owner1 for vesting the constructed portion to the Partners. Therefore, it cannot be treated as an independent supply. Advance Ruling: 1. The pooling of land by way of amalgamation of separate parcels does not constitute a supply under the CGST/TGST Act, 2017. 2. The construction activity undertaken by M/s Gowra Ventures Pvt. Ltd. with respect to the share belonging to the Partners is a supply of service under the CGST/TGST Act, 2017. 3. The value of the construction service supplied by M/s Gowra Ventures Pvt. Ltd. to the Partners shall be 110% of the cost of provision of the said service. 4. The vesting of the constructed portion upon the Partners does not constitute an independent supply.
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