2020 (9) TMI 1142 - AAR - GST

Concessional rate of GST - affordable housing project (AHP) - Works Contract - whether Entry No. 3(v)(da) of Notification 11/2017 Central Tax (Rate) dated 28/06/2017, as amended time to time, applies to the works contract service received from the contractors? - HELD THAT - Entry No. 3(v)(da) of the Rate Notification is related to the construction of low-cost apartments. Clause 4(xvi) of the Rate Notification defines an affordable residential apartment. It shall mean a residential apartment in a project which commences on or after 01/04/2019 or in an ongoing project in respect of which the promoter has not exercised the option to pay tax at the rate specified in (ie) or (if) of Entry No. 3, having carpet area not exceeding 60 sqm in metropolitan cities or 90 sqm in cities or towns other than metropolitan cities and for which the gross amount charged is not more than 45 lakh - It is ascertained from the WBHIRA website that the project is under construction and the flats offered on sale are partly booked. The flats having a carpet area of 60 sqm or less per unit in the RREP qualify as affordable residential apartments, provided the gross amount charged per unit does not exceed ₹ 45 lakh and the promoter has not exercised the option to pay tax at the rate specified in (ie) or (if) of Entry No. 3. It now needs to be ascertained whether the RREP is an affordable housing project, which enjoys infrastructure status vide the AHP Notification - The built-up area for the affordable residential apartments, as identified by the architect, under the RREP is 7885 sqm (the calculation sheet is attached). The relevant FAR, therefore, comes out to be 1.401, which is 50.96% of the FAR for the project. The RREP, therefore, is an affordable housing project in terms of the AHP Notification. Thus, the works contract service for the construction of those dwelling units in the RREP that are affordable residential apartments in terms of clause 4(xvi) of the Rate Notification are taxable under Entry No. 3(v)(da) of the said notification, provided the applicant does not opt for paying tax at the rate specified in (ie) or (if) of Entry No. 3.

Summary

Issues:
1. Admissibility of the application
2. Interpretation of Entry No. 3(v)(da) of Notification 11/2017 Central Tax (Rate)
3. Determination of affordable housing project status
4. Taxability of works contract service for construction

Admissibility of the application:
The applicant, a promoter of a residential real estate project, sought clarification on the applicability of Entry No. 3(v)(da) of the Rate Notification to works contract services received from contractors. The Authority found the question admissible under section 97(2)(b) of the GST Act, and the concerned revenue officer did not object to the application's admissibility, leading to its admission.

Interpretation of Entry No. 3(v)(da) of Notification 11/2017 Central Tax (Rate):
The applicant contended that their project qualified as an affordable housing project under the AHP Notification, making the works contract service taxable under Entry No. 3(v)(da) of the Rate Notification. The Authority examined definitions and criteria under the Rate Notification, emphasizing the importance of carpet area, completion certificates, and project booking status to determine tax applicability.

Determination of affordable housing project status:
Detailed observations were made regarding the project's registration, commencement, and completion certificates issued by competent authorities like WBHIRA and the local municipality. The Authority assessed the project's compliance with FAR/FSI requirements and the definition of affordable housing under the AHP Notification, concluding that the project qualified as an affordable housing project.

Taxability of works contract service for construction:
Based on the comprehensive analysis of the project's characteristics and compliance with relevant notifications, the Authority ruled that the works contract service for constructing dwelling units in the project classified as affordable residential apartments fell under Entry No. 3(v)(da) of the Rate Notification, subject to the applicant not opting for a different tax rate specified in the notification.

In conclusion, the ruling affirmed the taxability of works contract services for constructing affordable residential apartments in the project, subject to specific conditions and provisions under the GST Act.