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TMI Blog2018 (10) TMI 1140X X X X Extracts X X X X X X X X Extracts X X X X ..... tute a supply under the Central Goods and Services TaxAct, 2017 and Telangana Goods and Services Tax Act, 2017 (herein after referred to as Central and State GST Act)? 2. Whether in the facts and circumstances construction activity undertaken by the Company, with respect to the share belonging to the Partners (as described in the "Statement of relevant facts") would be treated a Supply of Service under the Central and State GST Act? 3. Whether in the facts and circumstances, the recovery of construction cost by the Company from the "Partners" would be the transaction value for purpose of Section 15 of the Central and State GST Act to be valued in accordance with Sec 15 read with Rule 30 of the Central Goods and Services Tax Rules 2017 and Telangana Goods and Services Tax Rules 2017 (Central and State GST Rules)? 4. Whether in the facts and circumstances the vesting of the constructed portion upon the "Partners", would independently constitute a supply besides the supply on account of recovery of construction cost as aforesaid by the Company? Statement of relevant facts having a bearing on the question(s) raised: Gowra Ventures ("GV" / the "Company"), is a private limited compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he legal owners of their respective constructed portions. The necessary documents or agreements as required under the relevant laws will be entered into by the Partners to give effect to the above arrangement. Statement containing the applicant's interpretation of law based on the facts, in respect of the aforesaid questions: Whether the activity of pooling (amalgamation) of individual parcels of land is a supply? There is no disposal by any of the modes described in terms of Sec 7 of the Central and State GST Act for consideration in this case where the respective land parcels (land 1 and land 2) are amalgamated for purpose of constructing a multi-storied building after obtaining necessary approval from the competent authority under the Building Laws. This is because the parties to the amalgamation retain their respective shares in the combined parcel of land. Whether the construction activity undertaken by the Company is a supply? The construction activity undertaken by the Company falls within the definition of the business as it includes any adventure, whether or not for a pecuniary benefit Sec 2 (17) the Central and State GST Act. The reimbursement of construction cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; As per Section 2 (17) of the Central and State GST Act "business" includes- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrols or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other; (vi) both of them are directly or indirectly controlled by a third person; (vii) together they directly or indirectly control a third person; or (viii) they are members of the same family; As per Rule 28 of the Central Goods and Services Tax (CGST) Rules, 2017 and Telangana Goods and Services Tax (CGST) Rules, 2017 The value of the supply of goods or services or both between distinct persons as specified in sub-section (4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is made through an agent, shall- (a) be the open market value of such supply; (b) if the open market value is not available, be the value of supply of goods or services of like kind and quality; (c) if the value is not determinable under clause (a) or (b), be the value as determined by the application of rule 30 or rule 31, in that order: Provided that where the goods are intended for further supply as such by the recipient, the value shall, at the option of the supplier, be an amount equival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) For the purposes of this Act, the expression "supply" includes-- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. (2) Notwithstanding anything contained in sub-section (1),-- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction cost by the Company from the "partners" would be the transaction value for purpose of Section 15 of the Central and state GST Act to be valued in accordance with Sec 15 read with Rule 30 of the Central Goods and Services Tax Rules, 2017 and Telangana Goods an Service Tax Rules, 2017(Central & State GST Rules)? * M/s Gowra Ventures Pvt Ltd(owner 1) is providing the construction service to the Owners 2 to 8 on the amalgamated land belonging to the owner1 and owners 2 to 8 and it is also seen from the subject Application and the said MOU that the Owners 2 to 8 are also Directors of M/s Gowra Ventures Pvt Ltd. Further Section 15 of CGST Act,2017 which stipulates the issue of valuation is extracted hereunder: "15. (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (2) The value of supply shall include--- (a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other; (vi) both of them are directly or indirectly controlled by a third person; (vii) together they directly or indirectly control a third person; or (viii) they are members of the same family; (b) the term "person" also includes legal persons; (c) persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related." On going through the MOU, the nature of service provided by the assessee and in the light of the provisions of the Section 15 of CGST Act,2017 recourse needs to be made to the provisions of Rule 28 and Rule 30 of the CGST Rules, 2017. Rule 28 and Rule 30 of the CGST Rules, 2017 are extracted hereunder: "28. Value of supply of goods or services or both between distinct or related persons, other than through an agent.-The value of the supply of goods or services or both between distinct persons as specified in sub-section (4) and (5) of section 25 or w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he title of the property of the parcels of land remained with the respective owners at any point of time. Further M/s Gowra Ventures Pvt Ltd have provided construction service on the amalgamated land for a consideration to the Owners 2 to 8. Neither any service nor any consideration has been received by owner1 for vesting of constructed portion to the partners (owners 2 to 8) and hence the same cannot be treated as an independent supply. In view of the foregoing discussion, the following ruling is passed. Advance Ruling 1. The pooling of land by way of amalgamation of the separate parcels viz Land 1 and Land 2 as described in the "Statement of relevant facts" would not constitute a supply under the CGST/TGST Act, 2017. 2. The activity undertaken by M/s Gowra Venture Pvt. Ltd., with respect to the share belonging to the partners (as described in the "Statement of relevant facts" of the subject Application) is a supply of service under the CGST/TGST Act, 2017. 3. The applicant is providing service to owners 2 to 8 who are related persons and therefore the value of the construction service supplied by M/s Gowra Ventures Pvt. Ltd shall be 110% of the cost of provision of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X
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