2024 (7) TMI 354 - AAR - GST

Levy and discharge of output tax on services provided - construction services - effective rate 8% (12% less 1/3rd value deducted on account of land) under entry number 3 (ie) of Notification no. 11/2017-Central Tax (rate) dated 28.06.2017 as amended by Notification 03/2019-central tax (rate) dated 29.03.2019 - HELD THAT - In the instant case the applicant has stated that all the units are below 60 square metres and has submitted the project plans and Unit configuration of 'Block 7' in support of the same. It is also found that the applicant has stated that the area of Commercial unit is less than 15% of the total area of the project. From a reading of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended, the clarification issued by Government of India Ministry of Finance Department of Revenue (TRU), the submissions of the taxpayer and the facts on record it is found that the item i.e. of SL no 3 of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended, is applicable to the applicant as the applicant's case falls under the scheme specified at sub-item (da) of item (v) in case of construction of residential units of less than 60sq mts and not for commercial units. The sub item 'da' of item V mentioned in item 'ie' of SL No 3 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended is applicable to the applicant and the rates as mentioned against the said item 'ie' which is 12% shall be applicable to the applicant. Further in case of supply of services involving transfer of land or undivided share of land the value of supply shall be reduced by one third making the effective rate 8%.

Issues Involved:
1. Applicability of GST rate on construction services provided by the applicant.
2. Determination of whether the project qualifies as an "ongoing project."
3. Compliance with the conditions specified in the relevant GST notifications.
4. Calculation of effective GST rate considering the value of land.

Detailed Analysis:

1. Applicability of GST Rate on Construction Services:
The applicant, a partnership firm engaged in construction services, converted into a Private Limited Company, sought an advance ruling on whether they can levy and discharge output tax at the effective rate of 8% (12% less 1/3rd value deducted on account of land) under entry number 3 (ie) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification 03/2019-Central Tax (Rate) dated 29.03.2019. The applicant opted to continue with the old rate of paying output tax with the claim of input tax credit.

2. Determination of Whether the Project Qualifies as an "Ongoing Project":
The project in question, Tower 'Block A7', commenced in February 2019 and included residential units measuring approximately 42 Sq. meters per unit, with commercial units constituting less than 15% of the total area, qualifying it as an RREP Project. The applicant provided evidence of the commencement certificate issued before 31st March 2019 and a Chartered Engineer's certificate dated 15.04.2019, confirming the project's initiation before the specified date. Additionally, the applicant submitted that the completion certificate had not been issued, and first occupation had not taken place before 31st March 2019, fulfilling the conditions of an ongoing project.

3. Compliance with Conditions Specified in Relevant GST Notifications:
The applicant exercised the option to pay tax at the specified rate by submitting Form Annexure IV on 09.05.2019, meeting the condition stipulated in the notification. The project also met the criteria of "Affordable Housing" as defined by the Ministry of Finance, with all units below 60 square meters and the area of commercial units less than 15% of the total area.

4. Calculation of Effective GST Rate Considering the Value of Land:
The notification specified that in the case of supply of services involving the transfer of land, the value of supply shall be reduced by one-third. Therefore, the effective rate applicable to the applicant's project was determined to be 8% (CGST 4% and SGST 4%).

Ruling:
The sub-item "da" of item "v" mentioned in item "ie" of SL No. 3 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended is applicable to the applicant. The rates mentioned against the said item "ie," which is 12% (CGST 6% + SGST 6%), shall be applicable to the applicant for the supply of construction services of residential flats qualifying under the scheme mentioned in sub-item "da" of item "v." Further, in the case of supply of services involving the transfer of land or undivided share of land, the value of supply shall be reduced by one-third, making the effective rate 8% (CGST 4% + SGST 4%).

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