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2023 (7) TMI 518 - AAR - GSTRate of GST - construction and sale of villas is 1.5% / 7.5% (effective tax rate 1%/5%) without benefit of Input Tax Credit - Whether out of the total value of the villa including land value, 2/3rd of the total value shall be taken for payment of GST at the rate of 1.5% / 7.5% (effective rate of 1% /5% on the total value of villa)? - amount charged by the applicant from villa buyers for some structural changes, to add some additional area or undertake interior works etc carried out before the completion of the construction is also part of gross amount charged for construction and sale of villa - applicability of N/N. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by N/N. 03/2019 Central Tax (Rate) dated 29.03.2019. HELD THAT - On a plain reading of the entries at Item (i) and (ia) of SI. No. 3 of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017, it is evident that the rate of GST prescribed under the entry at Item (i) applies to construction of affordable residential apartments and under the entry at Item (ia) applies to construction of residential apartments other than affordable residential apartments by a promoter in a residential real estate project intended for sale to a buyer except where the entire consideration is received after issuance of completion certificate. From the definition of the term apartment ; residential apartment real estate project and promoter , it is clear that the residential villas being constructed by the applicant fall within the definition of residential apartment and the projects undertaken by the applicant fall within the definition of real estate project and the applicant fall within the definition of promoter . Further, on a conjoint reading of the provisions of law, the facts as stated in the application; the terms and conditions in the agreements and the documents produced it is seen that the services of construction of villas provided by the applicant squarely fall within the description of services specified in Item (i) and (ia) of SI. 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 entries shall be applicable to the said services supplied by the applicant - the applicant is liable to pay GST at the rate of 1.5% in respect of the services of construction of affordable residential apartments as per entry at Item (i) and at the rate of 7.5% in respect of the services of construction of residential apartments other than affordable residential apartments as per entry at Item No. (ia) of SI. No. 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 subject to the conditions prescribed under the respective entries. Taxable value of the services of construction of residential villas rendered - HELD THAT - The amount charged by them from the villa buyers for some structural changes, to add some additional area or undertake interior works etc. carried out before completion of the construction being part of overall construction services and naturally bundled when supplied to the villa buyers should be included in the consideration charged for the construction service and shall form part of the total amount charged for the supply as defined in explanation to Para 2 of the said notification - As 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 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.
Issues Involved:
1. Applicable GST rate on construction and sale of villas. 2. Calculation of taxable value for construction of villas. 3. GST applicability on additional charges for structural changes, additional area, or interior works before completion of construction. Detailed Analysis: Issue 1: Applicable GST Rate on Construction and Sale of Villas The applicant sought clarification on the GST rate applicable to the construction and sale of villas. The ruling confirmed that the GST rate is 1.5% for affordable residential apartments and 7.5% for other residential apartments, as per Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017, amended by Notification No. 03/2019 Central Tax (Rate) dated 29.03.2019. The effective tax rates, after excluding one-third of the total consideration towards land value, are 1% for affordable villas and 5% for other villas, subject to the conditions specified in the notification. Issue 2: Calculation of Taxable Value for Construction of Villas The applicant queried how to calculate the taxable value for construction services when the land is sold directly by the landlord to villa buyers identified by the applicant. The ruling stated that the taxable value should be determined as per Paragraph 2 of Notification No. 11/2017 Central Tax (Rate). This provision allows for the deduction of one-third of the total amount charged for the supply as the value of land or undivided share of land. Therefore, the taxable value is two-thirds of the total value of the villa, including land value. Issue 3: GST Applicability on Additional Charges for Structural Changes, Additional Area, or Interior Works The applicant also sought clarity on whether additional charges for structural changes, additional area, or interior works undertaken before the completion of construction should be included in the gross amount charged for construction and sale of the villa. The ruling confirmed that these additional charges form part of the total amount charged for the supply. Consequently, they are subject to GST at the same rate as the construction service, i.e., 1% for affordable villas and 5% for other villas, without input tax credit, as per the conditions in the notification. Conclusion: The ruling provided clear answers to the applicant's queries: 1. The applicable GST rate for construction and sale of villas is 1.5% for affordable residential apartments and 7.5% for other residential apartments, translating to effective rates of 1% and 5% respectively after excluding one-third value towards land. 2. The taxable value of construction services is calculated by deducting one-third of the total amount charged for the supply as the value of land, thus considering two-thirds of the total value of the villa for GST purposes. 3. Additional charges for structural changes, additional area, or interior works before completion of construction are included in the gross amount charged for construction and are subject to GST at the same rates as the principal construction service. These rulings ensure that the applicant adheres to the specified GST rates and valuation methods, maintaining compliance with the relevant GST notifications and provisions.
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