2022 (10) TMI 856 - AAR - GST

Scope of Advance Ruling application - Application for AR filed by the association on behalf of its members - Supply or not - portion of apartments constructed by Developers and allotted to the Land Owners as part of a joint development arrangement between the Developers and the Land Owners - allotment of apartments of Land Owners by the Developers as part of a joint development arrangement - value to be adopted for the purpose of computing GST liability - time of supply - rate of GST - HELD THAT - In the instant case the questions raised by the applicant pertains to the GST liability of the activity undertaken by the developers; who are the members of the applicant; i.e., the applicability of GST on the supplies made by third persons and not in respect of any supply undertaken or proposed to be undertaken by the applicant - the provisions of the CGST Act governing advance ruling does not provide for an applicant to seek a ruling regarding the applicability of the provisions of the Act or the notification issued there under to a third person other than the applicant. Admittedly, the applicant has preferred this application on behalf of the members of the applicant and hence the application is not in respect of any matter specified in Section 97 (2) of the CGST Act in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. Hence this authority has no jurisdiction to issue ruling on the above question.

Issues Involved:
1. Whether the portion of apartments constructed by Developers and allotted to the Land Owners as part of a joint development arrangement would be treated as supply liable to GST?
2. If treated as supply and liable to GST, what is the value to be adopted for computing GST liability?
3. If treated as supply and liable to GST, what is the time of supply and when does the GST liability arise?
4. If treated as supply and liable to GST, what is the rate of GST applicable?

Detailed Analysis:

1. Treatment of Allotted Apartments as Supply Liable to GST:
The applicant, representing real estate developers, questioned whether the portion of apartments constructed by developers and allotted to landowners under a joint development arrangement is considered a supply liable to GST. The applicant argued that since no consideration flows from the landowners to the developers, it should not be considered a supply under the CGST/SGST Act. The ruling authority examined the provisions of the CGST Act and noted that the application pertains to the activities of the applicant's members, not the applicant itself. As per Section 95(a) of the CGST Act, advance ruling can only be sought for supplies undertaken or proposed by the applicant. Therefore, the authority concluded it had no jurisdiction to issue a ruling on this matter.

2. Value for Computing GST Liability:
The applicant contended that if the allotment of apartments to landowners is treated as a supply, the value should be determined according to Section 15(1) of the CGST/SGST Act, which states that the value of supply shall be the transaction value where the supplier and recipient are unrelated, and the price is the sole consideration. Since no consideration flows from landowners to developers, the value of the supply would be zero. The applicant also discussed the application of Rule 27 of the CGST/SGST Rules, which deals with the valuation of supply where consideration is not wholly in money. They argued that sub-rules (a) to (c) of Rule 27 would fail in this scenario, and reliance should be placed on sub-rule (d), which refers to Rule 30 or Rule 31 for valuation. According to Rule 30, the value should be 110% of the cost of construction.

3. Time of Supply and GST Liability:
The applicant argued that the time of supply should be determined under Section 13(2) of the CGST/SGST Act. Since there is no invoice or payment, Section 13(2)(a) and (b) would not apply. Consequently, Section 13(2)(c) would apply, stating the time of supply is the date on which the recipient records the receipt of services in their books. The applicant suggested that the landowner would record the receipt of apartments only upon completion, making the time of supply the completion date, at which point the GST liability would arise.

4. Rate of GST Applicable:
The applicant referred to Notification No. 11/2017-Central Tax (Rate) dated 28-06-2017, which classifies construction services under GST. They noted that the effective GST rate for affordable residential apartments is 1.5%, and for other residential apartments, it is 7.5%, subject to conditions specified in the notification.

Jurisdictional Issue:
The ruling authority emphasized that the application was made on behalf of the applicant's members and not for any supply undertaken or proposed by the applicant itself. As per Sections 95(a) and 97(2) of the CGST Act, advance ruling can only be sought for supplies by the applicant. Therefore, the authority concluded it had no jurisdiction to answer the questions raised by the applicant.

Ruling:
The authority ruled that it has no jurisdiction to answer the questions raised by the applicant, as they do not pertain to any matter specified under Section 97(2) of the CGST Act in relation to the supply of goods or services undertaken or proposed to be undertaken by the applicant.

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