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2020 (1) TMI 789 - AAR - GSTConcessional rate of tax / GST - building completion and finishing services - Affordable Housing Project (AHP) - Entry (v) (da) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No.01/2018-Central Tax (Rate) with effect from 25.01.2018 - separate services or composite supply - benefit of reduced rate of tax - works contract services provided for the construction of the units and common areas and amenities on pro-rata basis. HELD THAT - The applicant s case is covered under concessional tax rate of 12% (8% GST after deducting value of land), 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 Project . The benefit of reduced rate would be available to them only in the cases of supply effected after 25.01.2018 i.e. the date on which Notification 1/2018-Central Tax (Rate) was issued and the benefit of this reduced rate would be applicable in case of only those flats which are of carpet area upto 60 sq mtrs - In case of other flats which have carpet area more than 60 sq.mtrs. or commercial units, the applicant would be required to pay GST at normal applicable rate, since the benefit of reduced rate is available only for residential units of carpet area less that 60 sq. mts. We agree with applicant s submission that entry (v) (da) of Notification 01/2018, mentioned above no-where restricts the benefit to a Developer only. The Notification entry is qua the supply of service and not qua the person and therefore once a project qualifies as an Affordable Housing Project, the benefit of concessional rate of tax would be available in respect of works contract services pertaining to Low Cost Houses, irrespective of it being supplied by the Developer or the Contractor - In the subject case, the project qualifies as an Affordable Housing Project, and the benefit of concessional rate of tax @12% GST, would thus be available to the applicant. Whether the building completion and finishing services be regarded as a separate service or would it be a composite supply of works contract service as covered under entry v(da) of Notification No. 11/2017 to avail the benefit of reduced rate of tax? - HELD THAT - In view of the terms of the contract, the building completion and finishing services would not be regarded as separate services. It would be a part of the composite supply of works contract services rendered by the applicant with principal supply of building construction, supply of finishing services will be covered under entry (v)(da) of Notification No. 112017 and applicant will be eligible to avail the benefit of reduced rate of tax i.e 12%, only in respect of dwelling units having area less than 60 sq.mtrs. What would be the appropriate rate of Goods and Services Tax on works contract services provided for the construction of the units and common areas and amenities on pro-rata basis which do not qualify the criteria of low cost houses ? - HELD THAT - The concessional rate available to applicant is only in respect of low cost houses along with amenities constructed by the applicant. We find that the common amenities and areas are a part of Affordable Housing Project and therefore the applicant will be entitled to benefit of concessional rate for the same, only when they are a part of low cost houses i.e. units less than 60 sq.mtrs. The applicant will thus have to discharge GST @ 12% (after deducting value of land) on works contract services provided for the construction of the units and common areas and amenities, which do qualify the criteria of low cost houses - since concessional rate would be available only for construction services pertaining to dwelling units less than 60 sq. mtrs including common areas and amenities on pro-rata basis, construction services including common areas and amenities on pro-rata basis, performed by the applicant in respect of dwelling units exceeding 60 sq.mtrs. would be liable to full rate of GST i.e. 18%.
Issues Involved:
1. Eligibility for concessional GST rate of 12% under Entry (v)(da) of Notification No. 11/2017-Central Tax (Rate) as amended. 2. Classification of building completion and finishing services as a separate service or as part of composite supply of works contract service. 3. Appropriate GST rate on works contract services for units and common areas that do not qualify as low-cost houses. Issue-Wise Detailed Analysis: 1. Eligibility for Concessional GST Rate of 12%: The applicant, Shapoorji Pallonji and Company Private Limited, sought clarification on whether they are eligible for a concessional GST rate of 12% under Entry (v)(da) of Notification No. 11/2017-Central Tax (Rate) as amended by Notification No. 01/2018-Central Tax (Rate). The applicant argued that their project qualifies as an "Affordable Housing Project" as defined by the Department of Economic Affairs notification dated 30.03.2017, which provides infrastructure status to such projects. The applicant contended that the benefit of reduced GST should apply to them as a contractor, similar to the developer, citing previous rulings in similar cases. The jurisdictional officer opposed this, stating that the contractor is not directly involved with the end-user customer and hence should not be eligible for the reduced rate. However, the Authority for Advance Ruling (AAR) observed that the notification does not restrict the benefit to developers only but applies to the nature of the service provided. Consequently, the AAR ruled that the applicant is eligible for the concessional rate of GST at 12% for the construction services provided under the affordable housing project, effective from 25.01.2018, but only for units with a carpet area of up to 60 sq. meters. 2. Classification of Building Completion and Finishing Services: The applicant queried whether building completion and finishing services should be treated as separate services or as part of a composite supply of works contract services. The applicant argued that these services are naturally bundled with the construction services and should be treated as part of the composite supply, which qualifies for the reduced GST rate. The AAR agreed with the applicant, noting that the contract's scope of work included civil and finishing works as part of the original construction. Therefore, building completion and finishing services are not separate services but part of the composite supply of works contract services. These services will be covered under Entry (v)(da) of Notification No. 11/2017 and will be eligible for the reduced GST rate of 12%, applicable only to dwelling units with a carpet area of less than 60 sq. meters. 3. Appropriate GST Rate for Units and Common Areas Not Qualifying as Low-Cost Houses: The applicant sought clarity on the GST rate applicable to units and common areas that do not meet the criteria of low-cost houses. The AAR observed that common amenities are naturally bundled with the construction services and form part of the overall construction service. Therefore, the rate applicable to the principal supply of construction services will also apply to common amenities. For units with a carpet area of up to 60 sq. meters, the GST rate will be 12%. For units with a carpet area exceeding 60 sq. meters and commercial units, the GST rate will be 18%. The AAR emphasized that the concessional rate of 12% applies only to affordable housing units and their associated common areas and amenities on a pro-rata basis. For other units, the standard GST rate of 18% will apply. Order: 1. The applicant is eligible for the concessional GST rate of 12% under Entry (v)(da) of Notification No. 11/2017-Central Tax (Rate) as amended, applicable to affordable housing units only. 2. Building completion and finishing services are part of the composite supply of works contract services and are eligible for the reduced GST rate of 12% for units with a carpet area of less than 60 sq. meters. 3. The appropriate GST rate for works contract services for units and common areas that do not qualify as low-cost houses is 18%.
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