2019 (9) TMI 878 - AAR - GST

Rate of tax - Low cost houses up to a carpet area of 60 Square meters per house in an affordable housing project - Benefit of reduced rate of GST is available to sub-contractors or not - construction service provided by M/s. Yash Nirman Engineers and Contractors to M/s. Lakhani Builders Pvt. Ltd under the project La-Riveria - taxable at lower rate of CGST@ 6% and SGST @ 6% as provided in SI. No 3- Item (V) - sub item(da) vide notification no 01/2018-CT (Rate) dated 25-01-2018? HELD THAT - The applicant has not been given the entire contract for construction of complete houses. Probably the carpentry work like making of doors, etc, electrical work, etc does not seem to have been given to them. However, the job allotted to them are pertaining to affordable housing since the each and every one of the apartments are less than 60 sq. mtrs. The entry (v) (da) of Notification 01/2018, mentioned above, no-where restricts the benefit to a Developer only. The Notification entry is qua the supply of service and not qua the person and therefore once a project qualifies as an AHP, the benefit of concessional rate of tax would be available in respect of works contract services pertaining to Low Cost Houses, irrespective of it being supplied by the Developer or the Contractor. 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 also claimed by them in their 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-Central 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. Answered in the affirmative.

Summary

Issues Involved:

1. Eligibility for lower GST rate on construction services under Notification No. 01/2018-CT (Rate) dated 25-01-2018.
2. Definition and criteria of "Affordable Housing" under the relevant GST notification.
3. Applicability of concessional GST rates to sub-contractors.

Detailed Analysis:

1. Eligibility for Lower GST Rate:

The main issue is whether the construction services provided by M/s. Yash Nirman Engineers and Contractors (the applicant) to M/s. Lakhani Builders Pvt. Ltd. under the "La-Riveria" project qualify for the lower GST rate of 12% (6% CGST and 6% SGST) as specified in Notification No. 01/2018-CT (Rate) dated 25-01-2018. The applicant sought an advance ruling to confirm this eligibility.

2. Definition and Criteria of "Affordable Housing":

The project "La-Riveria" consists of 140 apartments, each with a carpet area of less than 60 sq. meters, which qualifies it as an affordable housing project. The notification defines affordable housing as a project using at least 50% of the Floor Area Ratio (FAR)/Floor Space Index (FSI) for dwelling units with a carpet area of not more than 60 square meters. The project has been given infrastructure status by the Government of India, which is a prerequisite for availing the concessional GST rate.

3. Applicability of Concessional GST Rates to Sub-Contractors:

The applicant argued that the concessional GST rate should apply to sub-contractors as well, as the notification does not restrict the benefit to developers only. The applicant's contract with M/s. Lakhani Builders Pvt. Ltd. was limited to specific construction activities like Excavation, RCC Work, Brick Work, Plaster Work, and Water Proofing Work. Despite the limited scope, the applicant contended that their services should still qualify for the lower GST rate as they pertain to an affordable housing project.

Observations and Judgment:

The Authority for Advance Ruling (AAR) examined the facts, documents, and submissions. They noted that the project "La-Riveria" qualifies as an affordable housing project, and the notification does not restrict the concessional rate to developers only. The AAR concluded that the benefit of the reduced GST rate of 12% (6% CGST and 6% SGST) is available to the applicant for their construction services related to the "La-Riveria" project. This benefit applies to supplies made after 25-01-2018, the date of the relevant notification, and only to flats with a carpet area of up to 60 sq. meters.

Order:

The AAR ruled in favor of the applicant, confirming that the construction services provided by M/s. Yash Nirman Engineers and Contractors to M/s. Lakhani Builders Pvt. Ltd. under the "La-Riveria" project qualify for the lower GST rate of 12% as provided in Notification No. 01/2018-CT (Rate) dated 25-01-2018.

Conclusion:

The judgment affirmed that the construction services related to affordable housing projects, even when provided by sub-contractors, are eligible for the concessional GST rate of 12%, provided the project meets the criteria defined in the relevant notification. This ruling provides clarity on the applicability of lower GST rates to various stakeholders involved in affordable housing projects.