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TMI Blog2020 (9) TMI 1145X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to as "the Appellant") against the Advance Ruling No. GST-ARA-40/2019-201B-06, dated 15.01.2020 = 2020 (2) TMI 554 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA, passed by the Maharashtra Authority for Advance Ruling (MAAR). BRIEF FACTS OF THE CASE 3.1 The Appellant, M/s. Vilas Chandanmal Gandhi, holding GST Registration No. 27AAVPG7805Q1ZS, is an owner of the land situated within the limits of Pune Municipal Corporation (PMC). 3.2 The Appellant, with an objective to develop the land, owned by him, entered into an agreement with a developer, namely, M/s. Amar Builders and Developers, a Partnership Firm, to develop the said land jointly and share the profits through distribution of sale proceeds after development of the land by way of construction of residential/ commercial project. The terms of the above said agreement are mentioned as under: * The Appellant agreed to assign/ transfer the development rights in land to the M/s. Amar Builders and Developers (Developer); * The said assignment/ transfer of rights in land was for the purpose of construction of residential/ commercial project on the land; * The Developer agreed to pay consideration in the form of 45% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 97 of the CGST Act,2017 (herein after referred to as "the application") before the Maharashtra Authority for Advance Ruling (herein after referred to as "the Ruling Authority or MAAR"). The Appellant applied for advance ruling on the following questions: "a) Whether GST is leviable on sale of Transferable Development Rights ('TDR')/ Floor Space Index ('FSI') received as consideration for surrendering the joint rights in land in terms of Development Control Regulations and granted in light of the article of agreement dated 18th December 2017 entered between the Appellant and Pune Municipal Corporation ('PMC') read with Development Control Regulations. b) If yes, what will be the classification under GST and what will be the applicable rate of GST?" 3.10 The Applicant/Appellant had submitted before the Advance Ruling Authority as under: (a) That sale of TDR/Additional FSI does not amount to taxable supply under GST, being in the nature of transaction of sale of land/immovable property, and accordingly, the same is covered under clause 5 of Schedule III to the CGST Act, 2017; (b) The Applicant had referred to various other legislations such as Section 3(4) of the Bomba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 15.01.2020 = 2020 (2) TMI 554 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA, held that GST is leviable on the sale of TDR/ FSI. They, further, held that the said transaction would fall under the Heading 9972, i.e. at SI. No.16, entry (iii) of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017, attracting GST at the rate of 18 % (9% CGST + 9%SGST). The Advance Ruling Authority has based its ruling on the basis of FAQs on real estate, issued by the Ministry of Finance, vide F. No. 354/32/2019-T.R.U. dated 14.05.2019, and the provisions laid under the Notification No. 4/2018-C.T. (Rate) dated 25.01.2018 read with the Notification No. 13/2017-C.T. (Rate) dated 28.06.2017 as amended by the Notification No. 05/2019-C.T. (Rate) dated 29.03.2019. 3.12 Being aggrieved by the aforesaid Advance Ruling Order, the Appellant have filed the present appeal. GROUNDS OF APPEAL 4. The Appellant, in their Appeal memorandum, has, inter alia, mentioned the following grounds of appeal: 4.1 That the sale of TDR/FSI cannot be taxed under the GST law, as the same is in the nature of transaction of sale of land/immovable property, which is covered under Schedule III to the CGST Act, 2017 (Activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant and the facts of the case, in this Appeal, it is seen that, the Appellant has transferred the land to Pune Municipal Corporation (PMC) and in consideration of the same, the PMC awarded TDR's/ FSI, as consideration instead of consideration in cash. After, receiving the TDR/FSI the Appellant decided to sell/supply the said TDR/FSI in the open Real Estate market. Accordingly, the Appellant has sold said TDR/FSI to M/s. Vamona Developers Pvt. Ltd. (M/s. VDPL). Therefore, the Appellant have entered into two different agreements regarding TDR/FSI, as follows: - A) Agreement with PMC: - The Appellant has transferred his land to the PMC vide Possession Receipt dated 29.11.2017 and by way of an Agreement dated 18.12.2017 which is registered at the office of Sub Registrar Haveli No. 11, at Serial No. 12939/2017. In consideration of the same, the PMC awarded TDR's/ FSI as consideration instead of consideration in cash. B) Agreement with M/s. Vamona Developers Pvt. Ltd. (VDPL): - The Appellant later on decided to sell/supply the TDRs/ FSI to M/s. VDPL. Consequently, the Appellant have entered into agreement/ deed of assignment with M/s. VDPL. Initially, the Appellant have not charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising from the land is immovable property. FSI/TDR, being a benefit arising from the land, consequently must be held to be immovable property....." 5.6 It is to mention here that, the Appellant has transferred the land to PMC. And, in consideration of the same, the PMC awarded TDR's/ FSI as consideration instead of consideration in cash. After, receiving the TDR/FSI the Appellant decided to sell/supply the said TDR/FSI in the open market of Real Estate with a motive of profit. Accordingly, the Appellant has found a buyer (M/s. Vamona Developers Pvt. Ltd. (VDPL)) for the said TDR/FSI and sold TDR/FSI to M/s. Vamona Developers Pvt. Ltd. (VDPL). 5.7 The transaction of TDR/FSI received to the Appellant from PMC against transferred of his land, was not for consideration for taxation (i.e. whether on this transaction GST leviable or not) before the Advance Ruling Authority. But the subsequent transaction with M/s. Vamona Developers Pvt. Ltd. (VDPL) for consideration for taxation before the Advance Ruling Authority. Accordingly, the Advance Ruling authority held that, the subsequent separate transaction with M/s. Vamona Developers Pvt. Ltd. (VDPL) is a taxable transaction. 5.8 In the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the scope of the term "anything" in the definition of service needs to be understood in the context of the GST scheme and cannot cover all transactions; (b) that the TDR will be considered as immovable property; (c) that TDR is akin to money, and thereby not leviable to GST; (d) that the activity of transfer of Development Rights is not taxable under SI. No. 16(iii) of the Notification No. 11/2017-C.T. (Rate), dated 28.06.2017, as the activity of sale of TDR are not in the nature of Real Estate Services, which is evident from the explanatory notes to the aforesaid notification, which covers various services under the Heading "Real Estate Services". (e) that reliance on Notification No. 4/2018-C.T. (Rate), dated 25.01.2018 & Notification No. 13/2017-C.T. (Rate) as amended by the Notification No.05/2019-C.T. (Rate), dated 29.03.2019 is misplaced as leviability of tax cannot be determined on the basis of merely entries appeared on any Rate/Exemption Notification or any other notification. (f) that the Appellant case was not maintainable in the Advance Ruling as the subject transaction related to the sale of TDR was completed before the filing of the Advance Ruling ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness to raise the question in the first place) and then reject it. The Appellant has himself approached the authority for Advance Ruling, willingly participated in the proceedings and now has at the appellate stage raised the issue of maintainability of an issue which was itself raised by them. Therefore, against the peculiar background of the case we do not find it at all necessary to deal with the argument of the Appellant. 9. The main issue raised by the Appellant is that the Sale of TDR/ Additional FSI does not amount to taxable supply under GST being in nature of transaction of sale of land/ immovable property and covered under Clause 5 of Schedule III of CGST Act. To substantiate his claim, Appellant has taken support of the definition of the term "goods" as defined in the CGST Act, 2017 and has submitted that the said definition includes the word 'moveable property' which has not been defined in the CGST Act. The Appellant has referred to the other statutes for the definition of the term "land" as the term "land" has not been defined under the GST Act. One such reference was made to Bombay Land Revenue Code, 1879 for the definition of the "Land", wherein the term "Land" has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing"? This issue has been decided by Hon'ble ITAT in case of Income-tax Officer v. Shri Prem Rattan Gupta, ITA No.5803/Mum/2009 = 2012 (3) TMI 474 - ITAT MUMBAI, in relation to Section 50 C of the Income Tax Act, 1961. Transfers of immovable property are required to take place at a fair valuation as per Income tax laws. The Mumbai Bench of the Income Tax Appellate Tribunal ('ITAT') ruled, that the Transfer of Development Rights ('TDR') and Floor Space Index ('FSI') cannot be subject of consideration under the fair valuation provisions of Section 50 C of the Income Tax Act, 1961 ('Act'). The ruling was based on the rationale that section 50C refers to 'land and building' and TDR being immoveable property is a much bigger concept than the term 'land and building'. The issue was that, one, Shri. Prem Rattan Gupta, was the joint owner of property and development agreement was entered into by him with the Public Works Department and the Thane Municipal Corporation ('Acquiring Authorities'), as per which the entire plot was agreed to be sold for development. The assessing officer was of the view that the property should be valued for more since it had development rights attached to it. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant has referred to various definitions of the term land' occurring under other legislations where the term land has been defined to include 'benefits arising out of land' and as TDR is a benefit arising out of land it will also come under Clause 5 of schedule III to the CGST Act, 2017. We do not agree with the argument of the Appellant as the Clause 5 speaks only of land' and 'building'. Neither the GST Act nor the schedules define land' or choose to do that. In that case there is no need to qualify the term land by ascribing any meaning to it or defining it by borrowing definitions from other laws. The CGST law does not make a reference to any other law while mentioning land' in Schedule III. Also, if it had wanted to widen the scope of 'land' to include 'benefits arising out of land' it could have very well done so. Schedule III to the CGST Act, 2017 is so to speak an exemption notification and exemption notifications have to be strictly interpreted. The Supreme Court in the case of "Dilip Kumar and Company (App 3327 of 2007 dated 30.7.2018)" = 2018 (7) TMI 1826 - SUPREME COURT, have clearly laid down the law that the exemption notification should be interpreted strictly; the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice is very wide and it covers anything other than goods under its ambit. Hence as per the definition of supply under Section 7 of the CGST Act, 2017, the transfer of TDR made for consideration in the course or furtherance of business is supply of service and taxable as per the provisions of CGST Act, 2017. It is again made clear that levy of a tax is not on land but levy of tax is on the benefits arising out of the land, which are in the nature of service. 15. The Appellant has stated that popular and common parlance meaning needs to be given to the term 'services' and it cannot include transaction of sale of immoveable property. The Appellant has further given the definitions of service under various other laws to drive home the point that TDR is not a service. We can only say that the definition of 'service 'under the CGST law is wide and broad and defining TDR as a service does not lead to any absurdity. The definition of service is broadened so as to cover all commercial transactions within its ambit and sale of TDR is a commercial transaction. There is no section under the Act which explicitly prohibits the taxation of TDR. The Schedule Ill to the CGST Act, 2017 only mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not taxable under the earlier law, we can only say that the law has to be interpreted as per the provisions incorporated in it and not as per the Statement of Objects and Reasons (SOR). Looking up the SOR as a tool for interpretation is only permissible when the law itself is ambiguous and cannot be interpreted by the plain meaning of the words without arriving at an absurd result. The law of Interpretation of Statutes looks upon the SOR as an external aid of interpretation to be put to use only when only when the wordings of the provisions/statutes are ambiguous. In the instant case, we have on the interpretation of the statute arrived at the conclusion that TDR is a service and find no ambiguity whatsoever in the wordings of the statute and therefore do not find the need to go back to the SOR as an aid to interpretation. 18. We also do not agree with the submission of the Appellant that TDR is money. It is given in lieu of money and just because it is given in lieu of money it does not get the status of money. Money is already defined under the CGST Act, 2017 and it does not include TDR. Under the GST Act, "Money" means Indian legal tender or any foreign currency, cheque, pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention that the sale of TDR/FSI would not get covered under entry (iii) of the Heading 9972 of the Notification No. 11/2017-C.T. (Rate), dated 28.06.2017 bearing the description "Real Estate Services" as the same is not appearing under the explanatory notes to the Heading 9972 of the above said notification, it is stated that the explanatory notes indicate the scope and coverage of the heading, group and service codes of the scheme of classification of services, and is merely a guiding tool for the assessee and tax administration for classification of services. Thus, the explanatory notes of the notification would not prevail over the notification itself. i.e. if a service is falling under any head of the notification by virtue of its nature and description, then merely non-appearance of the same in the explanatory notes to that notification would not mean that the services are not covered under that heading. 22. We would like to advert to the Notification No. 4/2019-C.T. (Rate), dated 29.03.2019, which seeks to amend the Notification No. 12/2017-C.T. (Rate), dated 28.06.2017 by inserting entries at Si. No. 41A in the aforesaid exemption notification, which stipulates that "servi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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