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TMI Blog2021 (8) TMI 1231X X X X Extracts X X X X X X X X Extracts X X X X ..... outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions made by the applicant are as under:- 2.1 M/s Puranik Builders Pvt. Ltd., the applicant, holding GSTIN 27AABCP0109R179, is engaged in the business of construction and sale of residential apartments and discharge Goods and Services Tax (GST) in respect of supply of construction services in respect of residential units for which consideration is received before receipt of Occupancy / completion Certificate. 2.2 The terms of under construction sale of residential apartments by the Applicant are governed by an 'Agreement for Sale' made and entered between the Applicant and their customers, which upon completion of construction is supplemented by a sale deed. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for future society of residents, etc. 8 formation and registration Formation and registration of the organization and legal charges in connection therewith Charges in respect of formation of future society of residents and associated legal cost. 9 Infrastructure charges Additional charges for development of common area infrastructure. 10 Legal fees Charges for legal cost of the transaction of sale of residential apartments, 2.5 Presently, the Applicant has been collecting and discharging GST at the rate of 18% on the Other Charges collected from their customers in respect of sale of residential apartments. B. Statement containing the Applicant's interpretation of law and/or facts: POSITION OF LAW 2.6.1. As per Section 2 of the CGST Act, "Composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply: Illustration: Where goods are packed and transported with insurance, the supply of goods, packing materials, transp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Applicant on residential complex services was denied on Preference Location Charges, External Development Charges, Internal Development Charges, Electric sub-station charges, club membership charges, lawn charges, etc. collected from clients. The Applicant challenged such vivisection of services into individual components. The CESTAT held that the components such as preferred location charges, external development charges, etc. were part and parcel and for various elements of main service and thus entire consideration received was eligible for abatement. 2.6.8 Alternatively, in case such supplies are not treated as Composite supply, the same should be treated as supply of independent services of each head / description by the Applicant, taxability of which may be determined as per the nature of individual service head / description. 2.6.9 If the supplies pursuant to the Other Charges and the main construction services of the Company are treated as Composite supplies, as per Section 8 of the CGST Act, in such a situation, the entire value of the Other Charges should attract the effective rate of GST as applicable on the main construction services of the Company supplied un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply or supply common amenities if the tax bill comes in the name of the flat owner then it's a service provided but if it comes in the name of the builder and will be taxed @18%. Same in case of Advance Maintenance Charges are charges collected in advance from the purchasers of flats and are used for maintenance of flats during the transition period when possession is given to the buyers and before the society is formed. Both above are not related to the supply of apartments. Hence, these charges cannot be considered as a part of composite supply where the principal supply is construction. Hence GST @ 18% will be charged on such amounts POSITION OF LAW 3.5 COMPOSITE Supply [Section 2(30)]: Composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply,' 3.5.1 Principal Supply [Section 2(90)] : "Principal supply/" means the supply of goods or services which constitute the predominant element of a composite supply and to whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us other charges from their customers at the time of entering into the Agreement and/or before giving possession of residential apartments. Such charges are collected under the Agreement itself with their respective amounts separately mentioned in the Agreement. A list of such charges recovered are provided in the application, which includes. Electric meter installation and security deposit for meter, Water connection charges, municipal taxes, Advance maintenance, Club-house maintenance, Development charges, share money, entrance fee of organization, legal charges, legal fees, and Infrastructure charges on which, applicant is presently discharging GST at the rate of 18%. 5.4 Applicant feels that the 'Other Charges' mentioned in the Agreement are primarily for supply of construction services since they are received only from the customers to whom construction services are supplied and therefore the services underlying the 'Other Charges' may be treated as naturally bundled with supply of main construction services which are supplied in conjunction with each other, in the ordinary course of business. Hence, in case these services are treated as 'Composite supply& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ordinary course of business, one of which is a principal supply: Illustration: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply." Principal Supply Section 2(90):- "Principal supply" means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary". 5.7.1 Section 8 of the CGST Act which provides the manner of determining tax liability on a composite supply or a mixed supply, is reproduced as under: "8. The tax liability on a composite or a mixed supply shall be determined in the following Manner, namely:- (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply: and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax." 5.7.2 In order to be held as 'Composite supply' as per Section 2 (30) of the CGST Act, 2017, there must be two or mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (xi) Rs. 1.00,372/- towards Services Tax, presently @ 15% as per Finance Act, 2016. 5.7.4 As per the provisions of the Bombay Stamp Act 1958, stamp duty is payable on sale of immovable property. From the receipt of the stamp duty paid by the applicant, it is seen that the applicant has paid stamp duty on the value of sale of flat having an amount of Rs. 86, 58,000/-only. The Applicant has not considered the value of other services supplied as above (i.e. other charges collected for which present ARA has been filed) for the payment of stamp duty to the government implying that, when the question of payment of stamp duty arises, the applicant treats these Other charges not as a part of supply of main construction service, but when question of payment of GST arises, the applicant tries to contend that the value of other charges collected is part and parcel of value of that main construction service. It is a legal principle that a party cannot be permitted to approbate and reprobate on the same facts and take inconsistent shifting stands. 5.7.5 Further, para no. 15 (c) of Page No. 50 of the impugned agreement is as under:-. Para (15) The Purchaser hereto specifically declares an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said complex being completed all respects as-envisaged herein by the Developer by utilizing full development potential of the said Larger property as per the Development Regulation by use of FSI or TDR or any additional FSI by payment of premium or in any other manner and upon the Developer selling /transferring/allotting all the Flats constructed in the said complex, and upon the Developer receiving the entire payment (towards the consideration, deposits, outgoings or otherwise) due and payable to it under all Agreements for Sales executed with all Purchaser of the Flat, in the said Complex. If only Organization is formed of the said Complex, then said property will be transferred by Conveyance or Lease to the said Organization. In case of more than one Organization is formed. Developer will convey the super structure of respective building and grant perpetual lease of the plinth area of respect building to the respective Organization and all other residual area i.e. area covered by all infrastructure viz. road, electric substation, STP etc. and amenities viz. playground, garden, club house (if any) to the Apex Body Such Deed of Conveyance/ Lease shall be in accordance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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. (Provisions of paragraph 2 of this notification shall apply for valuation of this service). 5.8.2 The above entry is specifically related to 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. 5.9.1 Further, as per the explanatory note published by the Government, for the purposes of the CGST Act, 2017, the 'other services' provided by the applicant can be said to be classified under different SAC as under:- Sr.No. Description of charges Brief explanation Group of SAC SAC 1. (a) Electric meter State installation and (b) security deposit for meter Paid by the Applicant to Maharashtra Electricity Board (MSEB) for each unit at construction stage and later, a reimbursement is claimed from the customer. (a) Installatio n services (b) Other Misc. services (a) 99546 1 (b) 99979 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent services. And even the stamp duty is also not paid on full amount collected from the customer along with the said other charges. Therefore, the other charges for the other services provided is not covered under the scope of 'Composite supply of services'. Therefore, the contention of the applicant is found not acceptable. 5.9.3 In view of above, the 'other charges' mentioned as above are held taxable as per their SAC under the GST Act, at 18% in terms of the respective and appropriate entries (against the SAC mentioned in the Table at para 5.9.1 above) in Notification No.11/2017 CT (R) dated 28.6.2017 as they are covered under services, other than construction services. 5.10 The jurisdictional officer has not properly appreciated the terms of agreement, particularly the clauses cited supra. It is mentioned in the said agreement that customers have no right to claim any title, interest or any ownership in respect of facilities getting created in the project. We further find from the aforesaid terms of sale agreement that, so far as the facilities getting created are concerned, the applicant has reserved the entire rights of the same with itself and the applican ..... X X X X Extracts X X X X X X X X Extracts X X X X
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