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2022 (10) TMI 773 - AAR - GSTRate of tax - taxable value - construction services of the apartments rendered by them from 01.07.2017 - amount for the undivided share of land and the amount for construction are fixed and separately available - appellant are not collecting and paying GST on the amount collected for the undivided share of land and they are collecting GST at the rate of 18% on the amount collected for the construction of the apartment. HELD THAT - The project of the applicant satisfies all the conditions of the definition of ongoing project in clause (xx) of Para 4 of the said notification and accordingly the applicant is eligible for filing option for continuing with the payment of tax at the old rates in respect of ongoing projects. It is also confirmed by the jurisdictional officer that the applicant has exercised the option to continue payment of tax at the old rate in respect of the project within the prescribed time and the manner prescribed in Item (ie) and (if) of Si No. 3 of the said notification. Given the above option exercised by the applicant, the services of construction of residential apartments rendered by the applicant are liable to GST at the rates prescribed under Item (ie) or (if) of Sl. No. 3 of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 03/2019 Central Tax (Rate) dated 29.03.2019 - the services of construction of apartments provided by the applicant squarely fall within the description of services specified in Item (if) of S1 No. 3 of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 03/2019 Central Tax (Rate) dated 29.03.2019 and accordingly the tax rates as prescribed in the said entry shall apply to the said services supplied by the applicant. Accordingly, the applicant is liable to pay GST at the rate of 18% in respect of the services of construction of residential apartments supplied by them. Taxable value of the services of construction of residential apartments rendered by them - HELD THAT - The taxable value in respect of the service specified at item (if) of Sl.No. 3 of the said notification is the total amount charged for the supply less the value of land or undivided share of land and the value of land or undivided share of land shall be deemed to be one-third of the total amount charged for the supply. As per the valuation mechanism prescribed in paragraph 2 of the said notification, the value of land or undivided share of land is deemed to be one-third of the total amount charged for the supply irrespective of the actual value of land and accordingly the applicant is eligible to avail deduction of one-third of the total amount charged for the supply in arriving at the taxable value of the supply. Time of supply of service - Value of supply - HELD THAT - The provisions of section 13 of the CGST Act, 2017 will apply to the determination of the time of supply. The provisions of Section 15 of the CGST Act, 2017 read with Para 2 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 will apply for determining the taxable value of the services supplied for the period from 01.07.2017 onwards and accordingly one-third of the total amount charged for the supply shall be deemed to be the value of land or undivided share of land involved in the supply.
Issues Involved:
1. Applicability of a notification issued under the provisions of the Act. 2. Determination of time and value of supply of goods or services or both. 3. Determination of the liability to pay tax on any goods or services or both. 4. Whether any particular thing done by the applicant with respect to any goods and/or services or both amounts to or results in a supply of goods and/or services or both, within the meaning of that term. Issue-wise Detailed Analysis: 1. Applicability of a notification issued under the provisions of the Act: The applicant, engaged in the construction of residential apartments, follows a practice of entering into two agreements with customers: one for the sale of an undivided share of land and another for the construction of the apartment. They have been collecting GST at 18% on the construction agreement amount. The applicant sought clarity on whether they should collect GST at 12%, as some customers contended, based on GST Notification 11/2017-Central Tax (Rate). The ruling confirmed that the applicant exercised the option to continue paying tax at the old rate of 18% as per Notification No. 03/2019-CT (Rate) for ongoing projects. Therefore, the applicant is liable to pay GST at the rate of 18% [9% CGST + 9% SGST] for the construction services of residential apartments supplied by them. 2. Determination of time and value of supply of goods or services or both: The value of the supply is governed by Section 15 of the CGST Act, which includes the transaction value, taxes, incidental expenses, and any other charges. The notification specifies that in the case of services involving the transfer of land, the value of such supply shall be the total amount charged less the value of the land, which is deemed to be one-third of the total amount charged. Therefore, the taxable value for the construction services provided by the applicant is the total amount charged for the supply minus one-third of that amount as the value of the land. The time of supply is determined by Section 13 of the CGST Act, which considers the earliest of the date of issue of the invoice, the date of provision of service, or the date of receipt of payment. 3. Determination of the liability to pay tax on any goods or services or both: Referring to the answers provided for the first and second issues, the applicant is liable to pay GST at the rate of 18% [9% CGST + 9% SGST] on the construction services supplied. The taxable value is determined as per Section 15 of the CGST Act, read with Para 2 of Notification No. 11/2017 Central Tax (Rate), which allows a deduction of one-third of the total amount charged for the supply as the value of the land. 4. Whether any particular thing done by the applicant with respect to any goods and/or services or both amounts to or results in a supply of goods and/or services or both, within the meaning of that term: As per Para 5(b) of Schedule II of the CGST Act, the construction of a complex, building, or civil structure intended for sale, except where the entire consideration is received after the issuance of the completion certificate or first occupation, is treated as a supply of service. Therefore, the activity of the applicant qualifies as a supply of service. RULING: 1. The applicant is liable to pay GST at the rate of 18% [9% CGST + 9% SGST] for the construction services provided. 2. The provisions of Section 13 of the CGST Act, 2017, apply to determine the time of supply, and Section 15 of the CGST Act, 2017, read with Para 2 of Notification No. 11/2017 Central Tax (Rate), applies for determining the taxable value, allowing a deduction of one-third of the total amount charged for the supply as the value of the land. 3. The liability to pay tax is as determined in issues (i) and (ii). 4. The applicant's activity qualifies as a supply of service under the CGST Act.
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