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TMI Blog2021 (7) TMI 542X X X X Extracts X X X X X X X X Extracts X X X X ..... of the term apartment ; residential apartment real estate project and promoter as above 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 including the redevelopment projects fall within the definition of real estate project and the applicant fall within the definition of promoter . Further, on a conjoint reading of the above provisions of law, the facts as stated in the application and the terms and conditions in the agreements produced as Annexure A and C 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notifications issued there under. 3. Brief facts of the case: 3.1. The applicant started the activities in April 2019. They first identify locations suitable for the gated community villa projects and will buy the land in their own name and take layout approval in their name and promote the villas to various villa buyers. In another situation they identify locations suitable for the gated community villa projects and enter into agreement with the landlords for the purchase of the entire land area required for the project. The total area of land is divided into various plots and the layout approval is taken in the name of landlord and the villa approval is taken either in the name of landlord or in the name of villa buyers from concerned local authorities at their expense. After the approval from local authorities, they provide amenities like road, arch, compound wall, rain water harvest, health club etc required for the gated communities. They do marketing activities such as digital, paper ads, media advertisement etc and identify the suitable villa buyers for the projects. 3.2. The exact areas of plots as per the layout approval for each of the villa are sold to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction activities. There is only the development of plots and sale of such developed plots. In such cases no advances are received from customers for undertaking the plot development and the plot is sold for a consideration to various buyers after the development work is over. There is no development work undertaken by them for and on behalf of buyers. 4. Accordingly, they requested advance ruling on the following; 1. Whether the rate of GST applicable with effect from 01.04.2019 on DLPL on promotion of villa projects for the villa buyers is 1.5% / 7.5% (effective tax rate 1%/5%) without benefit of Input Tax Credit? 2. Whether the GST tax rate of 1.5% / 7.5% is applicable on DLPL in their redeveloped projects undertaken after 01.04.2019 which were uncompleted and already started by developers before 31.03.2019? 3. How the taxable value of construction of villa is to be calculated by DLPL on the projects developed and promoted by DLPL on the arrangement of agreement with landlord, landlord selling the plots directly to various villa buyers identified by DLPL. Whether out of the total value of the villa including land value, 2/3rd of the total value shall be taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST in their hands at the rate of 1.5% for affordable villas and 7.5% for villas other than affordable villas. The effective rate of GST after excluding 1/3rd of total consideration towards land portion as per Para 2 of the said notification shall be 1% for affordable villas and 5% for villas other than affordable villas subject to fulfilment of other conditions in the notification. 5.4. As per Para 2 of the Notification No. 11/2017 CT (Rate) dated 28.06.2017 the value of construction services provided by the promoter to the buyers of villas shall be the total amount charged for such supply less the value of such transfer of land or undivided share of land in such supply and the value of land or undivided share of land shall be deemed to be one third of the total amount charged for such supply. Therefore, the taxable value shall be 2/3rd of the total value of villa including the value of land. The CBIC in Q.No. 36 of the FAQ on Real Estate Sector issued under F.No.354/32/2019 - TRU dated 07.05.2019 clarified that the developer cannot take deduction of actual value of land, as the valuation mechanism prescribed in Para 2 of the said notification clearly prescribes one-third abate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the provisions of Paragraph 2 of the said notification apply for valuation of the service and accordingly one-third of the total amount charged for the supply is eligible as deduction as the value of transfer of land or undivided share of land involved in the supply in determining the taxable value irrespective of the actual value of land or undivided share of land. 8.2. A new tax structure for real estate sector was introduced with effect from 01.04.2019 onwards by amendment of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 by Notification No. 03/2019 - Central Tax (Rate) dated 29.03.2019. Admittedly, the services of construction of villas are being rendered by the applicant after 01.04.2019 and hence the rate as notified under the new tax structure is applicable in respect of the construction services rendered by the applicant. 8.3. The entries at Items (i) and (ia) of SI No. 3 of 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 reads as follows; Heading 9954 - Construction services - (i) Construction of affordable residential apartments by a promoter in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April, 2019, which shall be calculated in the manner as prescribed in the Annexure I in the case of REP other than RREP and in Annexure II in the case of RREP; Provided also that where a registered person (landowner- promoter) who transfers development right or FSI (including additional FSI) to a promoter (developer- promoter) against consideration, wholly or partly, in the form of construction of apartments, - (i) the developer-promoter shall pay tax on supply of construction of apartments to the landowner- promoter, and (ii) such landowner - promoter shall be eligible for credit of taxes charged from him by the developer-promoter towards the supply of construction of apartments by developer-promoter to him, provided the landowner-promoter further supplies such apartments to his buyers before issuance of completion certificate or first occupation, whichever is earlier, and pays tax on the same which is not less than the amount of tax charged from him on construction of such apartments by the developer- promoter. Explanation . - (i) - developer- promoter is a promoter who constructs or converts a building into apartments or develops a plot for sale, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability in the month not later than the month of June following the end of the financial year. 2. Notwithstanding anything contained in Explanation 1 above, tax on cement received from unregistered person shall be paid in the month in which cement is received. 3. Input Tax Credit not availed shall be reported every month by reporting the same as ineligible credit in GSTR-3B [Row No. 4 (D)(2)]. 8.5. Para 4 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 provides the definition of the different terms used in the above entries. The relevant definitions are reproduced below; (xiv) the term - apartment shall have the same meaning as assigned to it in clause (e) of section 2 of the Real Estate (Regulation and Development) Act, 2016; (xv) the term - project shall mean a Real Estate Project or a Residential Real Estate Project; (xvi) the term - affordable residential apartment shall mean, - (a) a residential apartment in a project which commences on or after 1st April, 2019, or in an ongoing project in respect of which the promoter has not exercised option in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of selling to other persons all or some of the plots in the said project, whether with or without structures thereon; or (iii) any development authority or any other public body in respect of allottees of- (a) buildings or apartments, as the case may be, constructed by such authority or body on lands owned by them or placed at their disposal by the Government; or (b) plots owned by such authority or body or placed at their disposal by the Government, for the purpose of selling all or some of the apartments or plots; or (iv) an apex State level co-operative housing finance society and a primary co-operative housing society which constructs apartments or buildings for its members or in respect of the allottees of such apartments or buildings; or (v) any other person who acts himself as a builder, coloniser, contractor, developer, estate developer or by any other name or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale; or (vi) such other person who constructs any building or apartment for sale to the general public. (zn) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - CGST + 3.75% - SGST] 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. 11. The next question raised by the applicant is regarding the taxable value of the services of construction of residential villas rendered by them. Both the entries at Item (i) and (ia) of SI No. 3 of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 specify that the provisions of Paragraph 2 of the said notification shall apply for valuation of the service. The provisions of Para 2 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 is extracted below; 2. In case of supply of service specified in column (3), in item (i), (ia), (ib), (ic), (id), (ie) and (if) against serial number 3 of the Table above, involving transfer of land or undivided share of land, as the case may be, the value of such supply shall be equivalent to the total amount charged for such supply less the value of transfer of land or undivided share of land, as the case may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration 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 a supply of services. In the instant case it is stated by the applicant that they are not receiving any advance from their customers for undertaking development activities in the plot and the plot is sold after development. Hence the transaction is in respect of sale of developed plots / land and is covered by Paragraph 5 of Schedule III of the CGST Act which stipulates that sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building shall be treated neither as a supply of goods nor a supply of service. Therefore, the transaction is not liable to GST. In view of the observations stated above, the following rulings are issued; RULING 1. Whether the rate of GST applicable with effect from 01.04.2019 on DLPL on promotion of villa projects for the villa buyers is 1.5% / 7.5% (effective tax rate l%/5%) without benefit of Input Tax Credit? The applicant is liable to pay GST at the rate of 1.5% [0.75% - CGST + 0.75% - SGST] in respect of the services of construc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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