2021 (8) TMI 1231 - AAR - GST

Classification of services - composite supply or not - services by way of construction of residential property is supplied along with the supply of 'other services' - Other Charges received by the company - to be treated as consideration for construction services of the Company - whether classified under HSN 9954 along with the main residential construction services of the Company or whether the same will be treated as consideration for independent service(s) of the respective head? - applicable effective rate of GST on services underlying the Other Charges. HELD THAT - There are more than two supplies which are independent supplies and so taxable separately, the supply of construction services of residential unit and the other supply of 'other services', viz. 'Electric meter installation and security deposit for the meter, Water connection charges and security deposit, municipal taxes, Advance maintenance, Clubhouse maintenance, Development charges, share money, entrance fee of organization, legal charges, legal fees, and, Infrastructure charges'. Services supplied in respect of the 'other charges' are different from the service of construction of residential flats. Therefore, it is observed that the 'other services' provided cannot be said to be naturally bundled and supplied in conjunction with each other in the ordinary course of business with main supply of residential flat in the subject case. Other Charges received will not be treated as consideration for construction services of the Company and is not classified under SAC 9954 along with the main residential construction services - The 'other charges' will be treated as consideration received against supply of independent service(s) of the respective heads. The amount or consideration is charged separately for different services. And even the stamp duty is also not paid on full amount collected from the customer along with the said other charges. Therefore, the other charges for the other services provided is not covered under the scope of 'Composite supply of services'. Therefore, the contention of the applicant is found not acceptable - the 'other charges' mentioned as above are held taxable as per their SAC under the GST Act, at 18% in terms of the respective and appropriate entries in Notification No.11/2017 CT (R) dated 28.6.2017 as they are covered under services, other than construction services.

Summary

Issues Involved:
1. Classification of "Other Charges" as consideration for construction services or independent services.
2. Applicable GST rate on services underlying the "Other Charges".

Detailed Analysis:

Issue 1: Classification of "Other Charges"

Applicant's Argument:
- The applicant, engaged in construction and sale of residential apartments, collects "Other Charges" such as electric meter installation, water connection charges, municipal taxes, advance maintenance, etc., from customers.
- These charges are argued to be naturally bundled with the main construction services, forming a composite supply under Section 2(30) of the CGST Act, with construction services as the principal supply.
- The applicant cites Section 8 of the CGST Act, arguing that the entire value of "Other Charges" should attract the same GST rate as the main construction services, with a 1/3rd deduction for land value as per Notification No. 11/2017.

Jurisdictional Officer's Argument:
- The officer contends that certain charges like electricity, water, and society formation are integral to the composite supply of works contract services, with construction as the principal supply.
- However, municipal taxes and advance maintenance are not related to the supply of apartments and should be taxed independently at 18%.

Authority's Observations:
- The agreement separates charges for construction and other services, implying independent supplies.
- The applicant's approach of treating these charges differently for stamp duty and GST purposes is inconsistent.
- The agreement explicitly states that customers have no claim on common areas and amenities until the property is transferred to the society, indicating separate supplies.

Conclusion:
- The "Other Charges" are not naturally bundled with the main construction services and do not form a composite supply.
- They are treated as independent supplies, each classified under respective SACs, and not under SAC 9954 for construction services.

Issue 2: Applicable GST Rate on "Other Charges"

Applicant's Argument:
- If not treated as composite supply, each service head under "Other Charges" should attract an 18% GST rate.

Authority's Observations:
- The "Other Charges" fall under different SAC codes, each attracting GST at 18%.
- The 1/3rd deduction for land value is not applicable to these charges as they are not part of the construction services.

Conclusion:
- The applicable GST rate on services underlying "Other Charges" is 18%, as per Notification No. 11/2017.
- The applicant must pay GST on the entire consideration received as 'other charges' without any abatement.

Order:
1. Classification: "Other Charges" are not treated as consideration for construction services under SAC 9954 but as independent services under respective heads.
2. GST Rate: The applicable GST rate on services underlying "Other Charges" is 18%, with no abatement allowed.

This comprehensive analysis ensures that the legal terminology and significant phrases from the original text are preserved, providing a thorough understanding of the judgment.