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TMI Blog2019 (7) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... shown as a lease transaction and not, sale. The entire consideration will be received by the applicant before issuance of completion certificate by a competent authority which does not generally happen in a lease transaction - there is not a very large difference between the lease price and the ready reckoner rates of the properties in that area (as submitted by the applicant). We find that the transaction of sale of flats in a building under construction is being projected as a lease transaction of residential units by the applicant. There is a taxable supply in the subject case, which is a supply of services in the form of construction of a complex, building, civil structure or a part thereof, including a complex or building to their prospective lesses, a part of which i.e. flats are intended to be handed over to the buyer, for which consideration is received by the applicant in installments, on completion of work, slab wise viz. the developed units will be transferred to prospective customers through an agreement wherein the allotment is given to their customers. In the form of construction service, a composite supply of works contract as defined in clause 119 of Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinafter referred to as MADC ), a Company registered under the Companies Act, 1956 having its registered office at World Trade Centre, 8 th floor, Cuffe Parade, Mumbai-400005, is a special planning authority under the Maharashtra Regional Town Planning Act, 1966, for the Multi Modal International Hub Airport, Nagpur Project(MIHAN) which includes development of Nagpur Airport as an international Hub, development of a Special Economic Zone, other facilities around the Nagpur Airport. 3.0 MADC is the owner of land situated at MIHAN ad-measuring 31 acres. M/s. Chourangi Builders and Developers Pvt. Ltd. (formerly known as M/s. Reatox Builders Developers Pvt. Ltd., hereinafter referred to as Chourangi ) is having its registered office at 3/341, 1A, Rajiv CHSL, Madhusudan Kaleikar Marg, next to FDA, Bandra Kurla Complex, Bandra(E), Mumbai-5005. Chourangi constituted a Special Purpose Vehicle(hereinafter referred to as SPV ) with IJM Realty Mauritius a company incorporated under the laws of Mauritius and an affiliate of IJM Group of companies(hereinafter referred to as IJM ). The SPV is referred as Integrated Nagpur Township Private Limited (Applicant). NITPL is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anctioned plan on basis of which construction is undertaken is also made available to the buyer. 7.0 Whether the transaction is outside the purview of GST as a transaction in immovable property? If not, what is the appropriate classification and rate of GST? are the issues on which advance ruling is sought by the applicant. 8.0 Since provisions of CGST and SGST are identical mostly, any reference to provisions shall be taken as applicable to both CGST and SGST Acts. The relevant provisions of CGST Act are being reproduced below for ready reference and sake of clarity- Section 7 of the CGST Act, 2017 states 7. (1) 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; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined .- Sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. Sale how made.-Such transfer, in the case of tangible immoveable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument. In the case of tangible immoveable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property. Delivery of tangible immoveable property takes place when the seller places the buyer, or such person as he directs, in possession of the property. Contract for sale.- A contract for the sale of immoveable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in or charge on such property. Section 105 of The Transfer of Property Act, 1882 105. Lease defined.- A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case. 9.4 Clause (b) [Paragraph 5 of Schedule Il provides that construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer , wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier shall be treated as service. It is therefore important that the building should be intended for sale to buyer. In the present case, since the terms of agreement is affirming the relationship as builder and lessee, the construction is not intended for sale to buyer and hence transaction will not fall under clause (b). As the transaction is not falling under clause (b), all the related concessions/abatements available in respect of such transaction also is not applicable. 9.5 The transaction also will not constitute sale of building since the conditions as stipulated for sale is not satisfied in the present case. Therefore the transaction as undertaken is not falling outside the purview of GST as per Schedule III. 9.6 Section 105 of Transfer of Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a supply of services; (b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services. 5. Supply of services The following shall be treated as supply of service, namely:- (a) renting of immovable property;.. . 10.2 Clause (a) of SI. No. 2 treats lease, tenancy or easement or license to occupy land as provision of service. The transaction between Applicant and MADC falls under this clause. But the same is not applicable to transaction between Applicant and buyer since the premium collected is not just for lease of land but for land with constructed unit. Clause (b) deals with lease or letting out of building for business or commerce. The list of buildings mentioned includes commercial, industrial or residential complex. The residential complex in present case is not let out or leased for business or commerce since the buyer is not occupying it for the purpose of business or commerce. Therefore the transaction is not falling under SI.No. 2. 10.3 Clause (a) of Sl. No .5 of Schedule treats renting of immo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord. 2.0 During the course of personal hearing, Hon ble Member AUTHORITY FOR ADVANCE RULINGS (GST) had requested the applicant to provide the details of lease amount charged to the customers towards the leasing of residential apartment/flats in the proposed project covered in the application filed by the applicant before the Hon ble Authority for Advance Ruling and also some other residential projects in the vicinity of the project of the applicant where flats are available for sale. 3.0 Accordingly, the applicant is herewith submitting the details of the lease amount proposed to be charged/recovered from the customers. Also, the sale price per sq. feet of some other residential projects in the vicinity of the project of the applicant is also being submitted for ready reference. TABLE SHOWING LEASE AMOUNT IN THE PROPOSED PROJECT OF RESIDENTIAL APARTMENT FOR LEASE OF THE APPLICANT S.No. Unit No. Type Area in Sq.Ft. Lease value of unit Lease price Rs./sq.Ft. (booking price) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority for Advance Ruling, Maharashtra may kindly issue a ruling to the above effect and thus render justice. 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- Maharashtra Airport Development Company Ltd (MADC) is a special planning authority under the Maharashtra Regional and Town Planning Act 1966, for the Multi Modal International Hub Airport, Nagpur Project (MIHAN) which includes development of Nagpur Airport as an international Hub, development of a Special Economic Zone, and other facilities around the Nagpur Airport. MADC is the rightful owner of the land situated at MIHAN, ad-measuring about 31 acres situated within the Registration Division District Nagpur, Sub Division Taluka Nagpur (Rural) Revenue Village Khapri (Rly) M/s. Chourangi Builders and Developers Pvt. Ltd., (formerly known as M/S. Reatox Builders Developers Pvt. Ltd., hereinafter referred to as Chourangi ), having its registered office at 3/341, 1A, Rajiv CHSL, Madhusudan Kaleikar Marg, Next to FDA, Bandra Kurla Complex, Bandra (E), Mumbai 400051 formed a Special Purpose Vehicle (SPV), under the name a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Prospective Lessee is interested to take the said Property in the said FCP Phase-IA with the knowledge that the said Property is a Leasehold Property and not a Freehold Property, and pursuance of the same the Prospective Lessee has thoroughly inspected/verified all the documents of title relating to the said FCP-Phase-1A and the Township Project under the existing law applicable to the said FCP-Phase-1A and Township Project, including the relevant orders, and the approval of plans, designs and specifications prepared by the Developer s Architects and all other documents to his/her own satisfaction, for which the Developer had extended all possible co operation to verify the rights of the Parties as well as the title of the said Property agreed to be taken on lease by the Prospective Lessee. The Developer has also granted inspection of all relevant building plans, including that of common areas as defined in section 2 (n) of the Real Estate (Regulation and Development) Act 2016. The Prospective Lessee, by agreeing to the terms and conditions as set out in the application for booking/allotment, has applied to the Developer for the allotment of the said Property. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the competent authority or after its first occupation, whichever is earlier. From the above facts it is clear that it is a composite supply i.e. works contract as per Section 2(119) of GST Act-2017. The meaning and scope of supply under GST can be understood in terms of following six parameters, which can be adopted to characterize a transaction as supply: 1. Supply of goods or services. Supply of anything other than goods or services does not attract GST. 2. Supply should be made for a consideration 3. Supply should be made in the course of furtherance of business 4. Supply should be made by a taxable person 5. Supply should be a taxable supply While these five parameters describe the concept of supply. Any transaction involving supply of goods or services without consideration is not a supply, barring few exceptions, in which a transaction is deemed to be a supply even without consideration. Further import of services for a consideration, whether or not in the course or furtherance of business is treated as supply. From the facts of the case paras of proposed lease agreement, transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of this clause - (1) the expression competent authority means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely: (I) an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or (II) a chartered engineer registered with the institution of Engineers (India); or (III) a licensed surveyor of the respective local body of the city or town or village or development or planning authority; (2) the expression construction includes additions, alterations, replacement or remodeling of any existing civil Structure. I. Entry 6 Composite supply The following composite supplies shall be treated as a supply of services, namely: (a) Works contract as defined in clause (119) of section 2 Under GST, the whole works contract is treated as a composite supply of Services and leviable to GST as Supply of Services. As per entire consideration will be paid by the prospective lessee before issuance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the flats would be transferred to their customers by way of an agreement wherein the allotment is given to their customer as a lessee . The buyer is liable to pay all applicable taxes including GST, stamp duty and registration charges as applicable, on the lease Consideration and also maintenance charges. From the submissions made by the applicants we find as under: i. The applicant having developmental rights on the property also has rights to lease out the flats/commercial units to their customers. ii. The customers will be paying them an advance amount of 10% of the cost of the so called lease amount and the balance will be paid in instalments slab-wise as the construction progresses. The final 5 % will be paid on possession. The Payment Schedule finds mention in Schedule D of the Draft Agreement of Lease submitted by them. iii. The maintenance of the said flats will also be borne by the customers (lessees). While the applicant has mentioned that they will be constructing both, residential and commercial units, the query raised by them is only in respect of transaction in immovable property . In normal circumstances flats ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1BHK 970 25,22,000 2,600 4208 2 Symphony 1A0302 2BHK 1,332 28,30,500 2,125 4208 3 Symphony 1C0101 2.5BHK 1,684 35,36,400 2,100 4208 4 Symphony 1A1001 3BHK 1,760 45,76,000 2,600 4208 5 Symphony 101202 3BHK 2,371 47,21,937 1,992 4208 It may not be proper to compare the price of under construction flats with prices of flats ready to be sold and occupied but we would just like to study the comparison in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th commercial and residential units. However, it appears that their query is only limited to residential units. It also appears from the submissions made by the applicant that they are is going to construct the said property for their prospective lessees. We have no doubt whatsoever that in the subject case there is a supply as defined under Section 7 of the CGST Act, 2017. As per Schedule II (2), in respect of Land and Building : (a) any lease, tenancy, easement, licence to occupy land is a supply of services; (b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services. As per Schedule II (5)(a), renting of immovable property shall be treated as a supply of services and as per Schedule II (5)(b), construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whicheve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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