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2018 (9) TMI 236 - AAR - GSTRate of GST - construction services - Affordable Housing Project - Whether the construction services provided under the project Prajapati Magnum qualifies for the reduced CGST Rate of 6% as provided in Sl. No 3 - item (v)- sub item (da) vide Notification 01/2018- CT (Rate) dated 25.01.2018? Held 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 25.01.2018 i.e. the date on which Notification 1/2018-CentraI 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 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. Ruling - The applicant s case is covered under the tax rate of 12%, under Heading 9954 (Construction Services) - 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.
Issues Involved:
1. Eligibility of reduced CGST rate for construction services under the project "Prajapati Magnum" as per Notification No. 01/2018-CT (Rate) dated 25.01.2018. Detailed Analysis: 1. Facts and Contentions by the Applicant: - Applicant's Background: M/s. Prajapati Developers, engaged in constructing residential and commercial complexes, is developing a project called "Prajapati Magnum" in Navi Mumbai. - Project Details: The project began in December 2013 and is expected to complete by December 2022, consisting of five wings with 19 floors each, totaling 352 flats. The flats range in cost from ?41,00,000 to ?87,00,000. - Tax Compliance: The applicant has been paying Service Tax and later GST at 12% after deducting one-third towards land value as per Notification No. 11/2017-Central Tax (Rate). - Architect's Certification: The project uses 73% of the total FSI for flats with carpet areas below 60 sq. meters, qualifying it as an affordable housing project as per the Government of India notification dated 30th March 2017. 2. Applicant’s Interpretation of Law: - Notification No. 11/2017-Central Tax (Rate): Initially provided an 18% GST rate on construction services, with a deduction for land value. - Amendments via Notification No. 01/2018-CT (Rate): Reduced the GST rate to 12% for specified construction services, including low-cost houses in affordable housing projects with infrastructure status. - Definition and Criteria: Affordable housing projects must use at least 50% of the FSI for units with carpet areas not exceeding 60 sq. meters. The applicant claims their project meets this criterion. 3. Contentions by the Concerned Officer: - Eligibility Concerns: The officer argues that the concessional rate applies only to low-cost houses and not to mixed projects. The project has been ongoing since 2013, and many units may have been sold to various buyers, not necessarily low-income groups. - Cost of Flats: The cost ranges from ?41 Lacs to ?87 Lacs, which raises questions about the project's eligibility as a low-cost housing project. - Potential Anti-Profiteering Issues: Concerns about flats being sold to promoters or investors and then resold without GST, leading to potential revenue loss and undermining social welfare objectives. 4. Hearing: - Preliminary Hearing: Held on 15.05.2018, where the applicant was requested to provide detailed information about all flats and buyers. - Final Hearing: Held on 26.06.2018, with references made to Circular No. 354 dated 07.05.2018. 5. Observations: - Key Issue: Whether the construction services under "Prajapati Magnum" qualify for the reduced CGST rate of 6% as per Notification No. 01/2018-CT (Rate). - Project Details and Compliance: The project uses 73% of the FSI for flats with carpet areas below 60 sq. meters, meeting the definition of affordable housing. - Relevant Notifications and Amendments: Notification No. 11/2017 and its amendments, including Notification No. 01/2018-CT (Rate), were analyzed to determine eligibility. - Government Clarifications: The Government clarified that low-cost houses in affordable housing projects with infrastructure status qualify for the reduced GST rate. 6. Conclusion: - Eligibility for Reduced Rate: The project "Prajapati Magnum" qualifies for the reduced CGST rate of 6% for flats with carpet areas up to 60 sq. meters, effective from 25.01.2018. The reduced rate applies only to these specific flats, while other flats will attract the normal GST rate. Order: - Question: Whether the construction services provided by the applicant under the project "Prajapati Magnum" qualify for the reduced CGST rate of 6% as per Notification No. 01/2018-CT (Rate) dated 25.01.2018? - Answer: Affirmative, as discussed above.
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