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2023 (9) TMI 127 - AAR - GSTScope of supply - Applicant being land owner not executing construction work - liability to pay tax in respect of agreements to be entered with customers for sale of apartments (other than affordable) belonging to the Applicant's share before issuance of Completion Certificate in a project under JDA, area sharing model, where construction work is executed by developer and the developer - rate of tax on sale of apartments before issuance of completion certificate - input tax credit. Whether Applicant being land owner not executing construction work, is liable to pay tax in respect of agreements to be entered with customers for sale of apartments (other than affordable) belonging to the Applicant's share before issuance of Completion Certificate in a project under JDA, area sharing model, where construction work is executed by developer developer is liable to pay tax on the portion of apartments to be handed over to the Applicant on or before issuance of Completion Certificate? HELD THAT - The developer is providing construction services to the applicant and the applicant is providing again the construction services to the prospective customers - It is also pertinent to note that the agreements for supply of constructed apartments with the prospective purchasers are entered by the applicant which is a supply of service as per section 7 of the CGST Act and there is no direct supply of construction services to the prospective purchasers by the developer. The developer is only providing services to the applicant and not to the prospective purchasers - The applicant is acting as a supplier of works contract service to the prospective purchasers of apartments and hence he is a supplier under Section 7(1) of the CGST Act, 2017 liable to pay tax under Section 9(1) of the CGST Act, 2017. Whether the applicant, if liable for tax, what is the applicable rate of tax on sale of apartments before issuance of completion certificate? - HELD THAT - The question of the applicant to opt for the taxation as an ongoing project in Annexure IV of the Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 3/2019- Central Tax (Rate) dated 29.03.2019 does not arise as he was not registered at the time allowed for filing of such option and the option is only for the registered person. The claim that the developer has opted for such a scheme does not entitle the applicant for that scheme, as the developer is a different person from the applicant - Hence the applicant is liable to pay tax as per entries 3(i) to 3(id) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 3/2019- Central Tax (Rate) dated 29.03.2019 depending on the nature of the apartment, whether it is a residential or commercial apartment; if the apartment is a residential apartment, whether it is affordable category or not and whether the project is a residential real estate project or a real estate project other than residential real estate project. If the applicant is liable to pay tax, whether applicant can claim credit of tax charged by the developer on the portion of apartments belonging to the applicant where developer has opted for payment of tax under old scheme i.e. 18%? - HELD THAT - From the details provided by the applicant that he shall be further supplying the apartments to his buyers before the issuance of completion certificate or first occupation, whichever is earlier and developer promoter is charging the tax towards the supply of construction of apartments by the developer-promoter to him, the applicant is eligible to claim the input tax credit provided that the applicant pays tax on the supply of apartments which is not less than the amount of tax charged from him on construction of such apartments by the developer-promoter - Since the applicant is liable to tax at an amount which is lower than the amount of tax charged by the developer promoter, the applicant is not eligible to claim the input tax credit on the amount of tax charged by the developer to the applicant. The applicant is eligible to claim input tax credit on the tax charged by the developer for supply of construction services subject to the two conditions (a) he is a registered dealer on the date the time of supply of construction services falls (b) the amount of tax payable by the applicant for his supply of apartments is more than the amount of tax charged by the developer from the applicant for the supply of construction services. If the applicant is liable for tax, whether the applicant can claim input tax credit on other expenses, other than tax charged by developer for supply of apartments? - HELD THAT - The input tax credit is not eligible to be claimed on any of the expenses other than the tax charged by the developer for the construction services subject to its eligibility if all other conditions are satisfied.
Issues Involved:
1. Tax liability of the Applicant on sale of apartments before issuance of Completion Certificate. 2. Applicable rate of tax on sale of apartments before issuance of Completion Certificate. 3. Eligibility of the Applicant to claim credit of tax charged by the developer. 4. Eligibility of the Applicant to claim input tax credit on other expenses. Summary: Issue 1: Tax Liability of the Applicant The applicant, being a landowner, entered into a Joint Development Agreement (JDA) with a developer for constructing residential apartments. The applicant sought clarity on whether they are liable to pay GST on the sale of apartments before the issuance of a Completion Certificate. The ruling clarified that the applicant is considered a supplier of works contract service to the prospective purchasers of apartments. Hence, the applicant is liable to pay tax under Section 9(1) of the CGST Act, 2017, as the sale of apartments before the issuance of Completion Certificate constitutes a supply of services under Section 7(1) and is classified as a works contract. Issue 2: Applicable Rate of Tax The applicable rate of tax on the sale of apartments before the issuance of the Completion Certificate depends on the nature of the apartment and the project type. The ruling referred to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 3/2019-Central Tax (Rate) dated 29.03.2019. The tax rate varies based on whether the apartment is residential or commercial, affordable or not, and whether the project is a Residential Real Estate Project (RREP) or a Real Estate Project (REP) other than RREP. Issue 3: Eligibility to Claim Credit of Tax Charged by Developer The applicant is eligible to claim input tax credit on the tax charged by the developer for the supply of construction services, provided two conditions are met: (a) the applicant is a registered dealer on the date the time of supply of construction services falls, and (b) the amount of tax payable by the applicant for the supply of apartments is more than the amount of tax charged by the developer from the applicant. The ruling emphasized that the applicant cannot claim input tax credit if the tax payable by the applicant is less than the tax charged by the developer. Issue 4: Eligibility to Claim Input Tax Credit on Other Expenses The ruling stated that input tax credit on other expenses, apart from the tax charged by the developer for the supply of apartments, is not eligible to be claimed. The provisions of the relevant notifications and the CGST Act specify that the central tax shall be paid in cash, and input tax credit is restricted to the tax charged by the developer for construction services, subject to the conditions mentioned. Ruling: 1. The applicant is liable to pay tax as a supplier of works contract service under Section 9(1) of the CGST Act, 2017. 2. The applicable tax rate depends on the nature of the apartment and the project type as per the relevant notifications. 3. The applicant can claim input tax credit on the tax charged by the developer, subject to specific conditions. 4. Input tax credit on other expenses is not eligible to be claimed.
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