2021 (1) TMI 370 - AAR - GST

Benefit of reduced rate of GST - Sr. No. 3 item (v) sub-item (da) of Notification No. 01/2018-CT (Rate) Dated 25.01.2018 - construction services provided by the applicant under the project SAMANVAY RESIDENCY - HELD THAT - It is found that Ahmedabad Urban Development Authority has approved Samnvay Residency under the Affordable Housing Project and Architect has given certificate that land area of the said scheme is 3465 Sq. Mtrs. This scheme is having total 5 blocks namely A to E. The total FSI of the scheme is 9342.61 Sq. Mtrs. and out of which 9084.81 Sq. Mtr. of FSI consumed in the flats having carpet area below 60 Sq. Mtrs. On perusal of clarification, notification and the clause (da) of item (v) of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 and facts on record, we find 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 - The benefit of reduced rate would be available to them only in the cases of supply effected after 25-1-2018 i.e. the date on which Notification 1/2018-Central Tax (Rate) dated 25-01-2018 was issued and the benefit of this reduced rate would be applicable in case of only those flats which are having carpet area upto 60 sq mtrs. in this scheme which is covered in the category of affordable housing. In case of other flats which have carpet area more than 60 Sq. Mtrs. the applicant would be required to pay GST at normal applicable rate. The construction services provided by the applicant under the project SAMANVAY RESIDENCY qualifies for the reduced CGST rate of 6% as provided in Sr. No. 3 item (v) sub-item (da) of Notification No. 01/2018-CT (Rate) Dated 25.01.2018.

Summary

Issues Involved:
1. Whether the construction services provided by the applicant under the project "SAMANVAY RESIDENCY" qualify for the reduced CGST rate of 6% as provided in Sr. No. 3 item (v) sub-item (da) of Notification No. 01/2018-CT (Rate) dated 25.01.2018.

Issue-wise Detailed Analysis:

1. Qualification for Reduced CGST Rate:
The applicant, engaged in the construction of residential and commercial complexes, sought an advance ruling to determine if their project "SAMANVAY RESIDENCY" qualifies for a reduced CGST rate of 6% under Notification No. 01/2018-CT (Rate) dated 25.01.2018. The project involves constructing 154 flats and 10 shops over 3465 sq.mtrs of land with a total FSI of 9342.61 sq.mtrs, of which 9084.81 sq.mtrs are used for flats with a carpet area below 60 sq.mtrs.

Applicant’s Interpretation:
The applicant argued that their construction activity falls under Sr. No. 5 (b) of Schedule II of the CGST Act, which classifies it as a supply of services. They referenced Notification No. 11/2017-CT (Rate) and its amendments, which reduced the GST rate on specified construction services from 18% to 12%, and further to 8% after accounting for the value of the land. They contended that their project qualifies as an affordable housing project as it uses 97% of the total Floor Area Ratio (FAR) for dwelling units with a carpet area of not more than 60 sq.mtrs, thus meeting the criteria for the reduced rate.

Findings and Discussion:
The authority examined the applicant's submissions, including the project's approval by the Ahmedabad Urban Development Authority (AUDA) under the "Residential Affordable Housing Scheme" and the Architect’s Certificate confirming the usage of FSI. They referenced Notification No. 11/2017-Central Tax (Rate) and its amendments, which specify a 12% tax rate for low-cost houses in affordable housing projects given infrastructure status by the Government of India.

Notification and Clarifications:
The relevant notification from the Department of Economic Affairs defines "Affordable Housing" as a project using at least 50% of the FAR for units with a carpet area not exceeding 60 sq.mtrs. The GST Council's recommendation and subsequent government clarification confirmed that such projects attract a concessional GST rate of 8% (after deducting the value of the land).

Conclusion:
The authority concluded that the applicant's project qualifies for the reduced CGST rate of 6% under the specified notification, applicable only to flats with a carpet area up to 60 sq.mtrs. The benefit of the reduced rate applies to supplies made after 25-01-2018, the date of the relevant notification.

Ruling:
The construction services provided by the applicant under the project "SAMANVAY RESIDENCY" qualify for the reduced CGST rate of 6% as per Sr. No. 3 item (v) sub-item (da) of Notification No. 01/2018-CT (Rate) dated 25.01.2018.