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2022 (10) TMI 863 - AAR - GSTRate of GST - Affordable Residential Apartment in a Residential Real Estate Project - whether the rate of 0.75% under Item No. (i) of Entry No. 3 of Notification No. 03/2019 Central Tax (Rate) can be availed when the project consists of both Affordable Residential Apartments as well as apartments other than Affordable Residential Apartments? HELD THAT - A new tax structure for the real estate sector was introduced with effect from 01.04.2019 onwards by amendment of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 by Notification No. 03/2019 - Central Tax (Rate) dated 29.03.2019. Admittedly, the services of construction of apartments are being rendered by the applicant after 01.04.2019 and hence the rate as notified under the new tax structure is applicable in respect of the construction services rendered by the applicant. The project to be undertaken by the applicant falls within the definition of a real estate project and the applicant falls within the definition of promoter . Further, on a conjoint reading of the provisions of law, the facts as stated in the application and the terms and conditions in the draft agreement produced as Annexure 1 it is seen that the services of construction of apartments provided by the applicant in the residential real estate project squarely fall within the description of services specified in Item (i) and (ia) of SI. No. 3 of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 03/2019 Central Tax (Rate) dated 29.03.2019 and accordingly the tax rates as prescribed in the said entries shall apply to the said services supplied by the applicant. Accordingly, the applicant is liable to pay GST at the rate of 1.5% in respect of the services of construction of affordable residential apartments as per entry at Item (i) and the rate of 7.5% in respect of the services of construction of residential apartments other than affordable residential apartments in the project as per entry at Item No. (ia) of SI No. 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 subject to the conditions prescribed under the respective entries.
Issues Involved:
1. Applicability of GST rate of 0.75% under Item No. (i) of Entry No. 3 of Notification No. 03/2019 Central Tax (Rate) for "Affordable Residential Apartments" in a Residential Real Estate Project (RREP) containing both affordable and non-affordable residential apartments. Issue-Wise Detailed Analysis: 1. Applicability of GST Rate for Affordable Residential Apartments in a Mixed Residential Real Estate Project: Applicant's Contentions: - The applicant, a partnership firm engaged in developing residential apartments, plans to execute a Joint Development Agreement (JDA) for a residential project comprising 50 units, out of which 20 units qualify as "Affordable Residential Apartments" under Notification No. 11/2017 as amended by Notification No. 03/2019. - The applicant submits that the concessional GST rate of 0.75% for affordable residential apartments should apply even if the project includes non-affordable residential apartments. The applicant argues that the notification focuses on individual residential units rather than the entire project. Jurisdictional Officer's Comments: - No comments were offered by the jurisdictional officer, implying no specific objections or pending proceedings against the applicant. Discussion and Findings: - The primary question is the applicable GST rate for the construction of "Affordable Residential Apartments" in a mixed RREP. - Notification No. 11/2017 Central Tax (Rate), as amended by Notification No. 03/2019, introduced a new tax structure effective from 01.04.2019, prescribing different GST rates for affordable and non-affordable residential apartments. - The relevant entries in the notification specify: - Item (i): Construction of affordable residential apartments at 1.5% GST (0.75% CGST + 0.75% SGST). - Item (ia): Construction of residential apartments other than affordable residential apartments at 7.5% GST (3.75% CGST + 3.75% SGST). - The definitions from the Real Estate (Regulation and Development) Act, 2016, clarify terms like "apartment," "promoter," "real estate project," and "affordable residential apartment." - The ruling emphasizes that the tax rates apply to individual apartments based on their classification (affordable or non-affordable) rather than the entire project. Ruling: - The applicant must pay GST at: - 1.5% (0.75% CGST + 0.75% SGST) for the construction of affordable residential apartments. - 7.5% (3.75% CGST + 3.75% SGST) for the construction of residential apartments other than affordable residential apartments. - These rates apply to the respective categories of apartments in the Residential Real Estate Project, subject to the conditions prescribed under the respective entries. Conclusion: The judgment clarifies that the concessional GST rate of 0.75% for affordable residential apartments is applicable even in a mixed residential real estate project containing both affordable and non-affordable units. The tax rates are determined based on the classification of individual apartments rather than the entire project.
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