9911796707
TMI Blog2020 (9) TMI 1249X X X X Extracts X X X X X X X X Extracts X X X X ..... e 5% GST Rate, viz. two-third of (3.75+3.75), claimed by the Appellant pertains to the other than Affordable Residential Projects to commence w.e.f. 1.04.2019 - Similarly 12% GST Rate, viz. two-third of (9+9) claimed by the Appellant pertains to other projects including commercial projects - Similarly 12% GST Rate, viz. two-third of (9+9) claimed by the Appellant pertains to other projects including commercial projects. Preferential Location service - Whether Preferential Location Service (PLS), is Construction Service? - HELD THAT:- It is clear from the Appellant s pleas that they are claiming the rates of 5% or 12% for Preferential Location service and simultaneously claiming these services as Construction Service/ a component of Construction Service. It is also clear that the claim includes entitlement to abatement of one-third from the value/ consideration of landed/ immovable property - As admittedly stated by the Appellant, the different rates of the houses can be on account of different locations. Thus premiumness of a location attracts a commensurate consideration which the buyer pays for an identified advantage, viz. view/ direction/ sunlight/ airiness/ vicinity/ serenity/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e SAC 997222 or 997223. Classification of service - HELD THAT:- The most appropriate entry wherein the instant Service, viz. to be provided by M/s. DLF Ltd., is classifiable is Heading 9972, Group 99722 and Service Accounting Code (SAC) 997222 viz. Building sales on a fee or commission basis or on contract basis . Where the sale of a piece of land is being made as a stock in trade the preferential location service shall classify under SAC 997223 viz., Land sales on a fee or commission basis or on contract basis . Rate of GST - HELD THAT:- PLS classifies under SAC 997222 and attracts the rate of 18% (9% under CGST Act vide Entry (iii) under Column (3) against the Serial Number 16 of the Notification 1 1/2017-CT(R) dated 28.06.2017 as amended. X X X X Extracts X X X X X X X X Extracts X X X X ..... ST at 18% on the sale of properties in the GST law. The GST law is in infancy and concepts there under like the concepts of 'composite supply' are in a nascent stage, there is a certain ambiguity about the taxability of PLS collected by the Applicant. Therefore the applicant has filed this advance ruling for obtaining clarity on the same. ii) In case of sale/transfer of constructed property before the issuance of CC/OC, the applicant is paying GST @18% on PLS since inception of the GST Law. As per applicant opinion that such charges should qualify as composite supply and should be taxable @12% or 5% or NIL as applicable. Therefore, applicant should be allowed/refund of the excess GST paid on PLS so that the benefit can be provided to the customers. iii) In some cases, applicant recovers lump sum price for sale/transfer of properties/units. Such lump sum price can be different for various properties/units on account of various commercial factors such as location of the property/unit. In such cases, applicant opinion that GST should be applicable at a single rate on lump sum prices charged even if differential prices are charged for different property/ unit @ 12% or 5% or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Suresh Kumar Bansal vs. Union Of India (June 2016) has been relied upon by the Appellant. In this case the petitioners had entered into agreements with the Builder for buying flats. They contested that agreements with builder being for purchase of immovable property, and also there being no machinery for computation of value of services if any involved in construction of a complex, there's no legislative competence to levy service tax on such a transaction. Hon'ble High Court further found/ held:- "39. In the present case, we find that there is no machinery provision for ascertaining the service element involved in the composite contract. In order to sustain the levy of service tax on services, it is essential that the machinery provisions provide for a mechanism for ascertaining the measure. 45. Whilst Rule 2A of the Rules provides for mechanism to ascertain the value of services in a composite works contract involving services and goods, the said Rule does not cater to determination of value of services in case of a composite contract which also involves sale of land. 53. ... neither the Act nor the Rules framed therein provide for a machinery provision for exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t goes hand in hand with the Construction Service and follows as a consequence of supply of construction service. g. Without there being a sale of the property there can be no question of recovery of PLS; there can be no standalone existence of PLS without construction activity. 13. That, according to them (Appellant) the taxability of PLS shall be as under: - a. Preferential Location Charges (PLS) are liable to be included in the Construction Service charges and are subsumed within this single supply and would be chargeable at effective GST rate of 12%/ 5% and not at the residuary rate of 18%. b. Without prejudice to the above, the supply of the said 2 services is a composite supply of service. c. That, where buyer enters into agreement before issue of OC/CC (Occupation Certificate/ Completion Certificate) the PLS shall be chargeable to tax at the abated rate of 12%/ 5% in terms of Notification 11/2017-CT(R) dated 28.06.2017, viz. the rate applicable to Construction Service. d. That, where buyer enters into agreement after issue of OC/CC (Occupation Certificate/ Completion Certificate) the PLS shall be outside the scope of a Supply. e. That due to GST law being in in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in spite of the fact no reasonable opportunity of being heard was afforded to the Appellant. Considering the same, on this ground alone, the impugned AAR Order is liable to be set aside." ORDER of AAR The Advance Ruling Authority (AAR) has rejected the Application for Advance Ruling holding that since it is bound to pronounce the Ruling within 90 days in terms of Section 98(6) and the Appellant is requesting for Hearing beyond that limit which cannot be granted, the Application is rejected under Section 98(2) of the CGST Act 2017. Relevant provisions are reproduced below: - "98. Procedure on receipt of application.- .... (2) The Authority may, after examining the application and the records called for and after hearing the applicant or his authorised representative and the concerned officer or his authorised representative, by order, either admit or reject the application: Provided that the Authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of this Act: Provided further that no application shall be rejected under this sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t rejecting of the application for Advance Ruling by the State Authority for Advance Ruling, is incorrect in law and needs to be set aside. In the Appeal, the applicant has submitted the following also while requesting for the Rulings:- i) The applicant has paid GST at 18% on the sale of properties in the GST law. The GST law is in infancy and concepts there under like the concepts of 'composite supply' are in a nascent stage, there is a certain ambiguity about the taxability of PLS collected by the Applicant. Therefore the applicant has filed this advance ruling for obtaining clarity on the same. ii) In case of sale/transfer of constructed property before the issuance of CC/OC, the applicant is paying GST @18% on PLS since inception of the GST Law. As per applicant opinion that such charges should qualify as composite supply and should be taxable @12% or 5% or NIL as applicable. Therefore, applicant should be allowed/refund of the excess GST paid on PLS so that the benefit can be provided to the customers. iii) In some cases, applicant recovers lump sum price for sale/transfer of properties/units. Such lump sum price can be different for various properties/units on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, involving transfer of property in land or undivided share of land, as the case may be, the value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, as the case may be, and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply. Explanation For the purposes of paragraph 2, "total amount" means the sum total of,- (a) consideration charged for aforesaid service; and (b) amount charged for transfer of land or undivided share of land, as the case may be." Thus the Value of the Land/ Undivided portion of the Land was deemed to be the one-third of the 'Total Amount" of the property. The consideration for the Construction Service, which included the value of the Goods involved, was thus deemed to be the two-third of the total amount charged for the immovable property. However, the Paragraph 2 was amended w.e.f. 25.01.2018 vide Notification 1/2018 (dated 25.01.2018) as under:- "(ii) for paragraph 2, the following shall be substituted, namely: - 2. In case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Project (REP) other than a Residential Real Estate Project (RREP)" ; "Construction of other than Affordable Residential Apartments by a Promoter in a Real Estate Project (REP) other than a Residential Real Estate Project (RREP)" and "Construction of Commercial Apartments viz. Shops/ Offices" etc. etc. Presently, these entries attract CGST Rates varying from 0.75% (for Affordable Residential Apartments) to 3.75% (for other than Affordable Residential Apartments) where such project commenced on or after 1.04.2019 and 6% for on-going projects on the date of Notification viz. 29.03.2019. Commercial Construction continued attracting 9% CGST (18% IGST). With one-third of the total transacted value of an immovable property being attributable to the Land/ share of Land in view of the 'Paragraph 2' ibid, the 5% GST Rate, viz. two-third of (3.75+3.75), claimed (supra) by the Appellant pertains to the other than Affordable Residential Projects to commence w.e.f. 1.04.2019. Similarly 12% GST Rate, viz. two-third of (9+9) claimed by the Appellant pertains to other projects including commercial projects. PREFERENTIAL LOCATION SERVICE It is clear from the Appellant's pleas that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion against the Entry 997213 reads, "Trade services of buildings." The Explanatory Notes on the SAC reads as under:- "997213 Trade services of buildings This service code includes: - sales on own account of buildings and associated land in cases where the sales are treated as sales of trading stock, by the seller, but not sales of property where the sales are disposals of the fixed assets of the selling unit - sales of houses with associated land, multiple-dwelling buildings with associated land and individual dwelling units within such buildings, such as individual apartments or condominiums Note: Such property can either be leasehold or freehold This service code does not include: - sales of vacant land, cf.997215" The above makes it clear that when a building is being sold as a 'Stock in Trade', the same would qualify as a Supply under GST as any other trading service. Accordingly, the related services, including PLS, would also be taxable supplies. From the Explanatory note above also it is clear that the sales of 'Buildings and Associated Lands' as sales of trading stock is a service. The consideration charged for providing a preferential locat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... park facing, corner flat; Floor - first floor, top floor, Vastu - having the bed room in a particular direction; Number - lucky numbers, there is no transfer of material from the service provider to the service recipient. Abatement is applicable where there is any transfer of materials. Thus Service Tax in respect of the PLS is applicable at full rates. "Construction of Complexes/ Buildings' and "Preferential Location' are separate and different activities. Usually, all the houses/floors in a complex/building may not have preferential location. Therefore, a builder may not charge the PLC (preferential location charges) in respect of all the houses/floors. Thus, Construction of a Complex, Building etc. is an independent activity/ service in itself, even without Preferential Location, and vice-versa. CLASSIFICATION of PLS The Scheme of Classification of Services (classification scheme) notified vide Notification 11/2017-CT(R) dated 28.06.2017, wherein above mentioned Services of Construction, Accommodation and Warehousing are also comprised, doesn't exclusively mention/ classify the Preferential Location Service. However for the sake of providing a frame of reference, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, transoceanic and inland waterways) 149 Group 99676 Supporting services for air or space transport 159 Heading 9968 Postal and courier services 160 Group 99681 Postal and courier services 165 Heading 9969 Electricity, gas, water and other distribution services 166 Group 99691 Electricity and gas distribution services 170 Group 99692 Water distribution and other services 174 Section 7 Financial and related services; real estate services; and rental and leasing services 175 Heading 9971 Financial and related services 176 Group 99711 Financial services (except investment banking, insurance services and pension services) 182 Group 99712 Investment banking services 184 Group 99713 Insurance and pension services (excluding reinsurance services) 193 Group 99714 Reinsurance services 201 Group 99715 Services auxiliary' to financial services (other than to insurance and pensions) 211 Group 99716 Services auxiliary to insurance and pensions 217 Group 99717 Services of holding financial assets 220 Heading 9972 Real estate services 221 Group 99721 Real estate services involving owned or leased property 227 Group 99722 Real estate servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and security services 420 Group 99853 Cleaning services 430 Group 99854 Packaging services 435 Group 99855 Travel arrangement, tour operator and related services 444 Group 99859 Other support services 454 Heading 9986 Support services to agriculture, hunting, forestry, fishing, mining and utilities 455 Group 99861 Support services to agriculture, hunting, forestry and fishing 462 Group 99862 Support services to mining 465 Group 99863 Support services to electricity, gas and water distribution 470 Heading 9987 Maintenance, repair and installation (except construction) services 471 Group 99871 Maintenance and repair services of fabricated metal products, machinery and equipment 481 Group 99872 Repair services of other goods 490 Group 99873 Installation services (other than construction) 498 Heading 9988 Manufacturing services on physical inputs (goods) owned by others 499 Group 99881 Food, beverage and tobacco manufacturing services 509 Group 99882 Textile, wearing apparel and leather manufacturing services 513 Group 99883 Wood and paper manufacturing services 516 Group 99884 Petroleum, chemical and pharmaceutical product manufacturi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sanitation and similar services 650 Group 99949 Others 652 Heading 9995 Services of membership organisations 653 Group 99951 Services furnished by business, employers and professional organisations Services 656 Group 99952 Services furnished by trade unions 658 Group 99959 Services furnished by other membership organisations 668 Heading 9996 Recreational, cultural and sporting services 669 Group 99961 Audio visual and related services 675 Group 99962 Performing arts and other live entertainment event presentation and promotion services 680 Group 99963 Services of performing and other artists 684 Group 99964 Museum and preservation services 687 Group 99965 Sports and recreational sports services 691 Group 99966 Services of athletes and related support services 694 Group 99969 Other amusement and recreational services 700 Heading 9997 Other services 701 Group 99971 Washing, cleaning and dyeing services 708 Group 99972 Beauty and physical well-being services 713 Group 99973 Funeral, cremation and undertaking services 716 Group 99979 Other miscellaneous services 723 Heading 9998 Domestic services 724 Group 99980 Domestic serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices 58 995474 Floor and wall tiling services 59 995475 Other floor laying, wall covering and wall papering services 60 995476 Joinery and carpentry services 61 995477 Fencing and railing services 62 995478 Other building completion and finishing services nowhere else classified 63 995479 Services involving repair, alterations, additions, replacements, maintenance of the completion/finishing works covered above From the descriptions it is clear that the Preferential Location Service cannot be classified under the above Group/ any of the above Accounting Codes. Real Estate Services (Heading 9972): 220 Heading 9972 Real estate services 221 Group 99721 Real estate services involving owned or leased property 222 997211 Rental or leasing services involving own or leased residential property' 223 997212 Rental or leasing services involving own or leased non-residential property 224 997213 Trade services of buildings 225 997214 Trade services of time-share properties 226 997215 Trade services of vacant and subdivided land 227 Group 99722 Real estate services on a fee or commission basis or on contract basis 228 997221 Property management ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, Union territory or local authority to governmental authority or government entity, by way of lease of land. Nil - (ii) Supply of land or undivided share of land byway of lease or sub lease where such supply is a part of composite supply of construction of flats, etc. specified in the entry in column (3), against serial number 3, at item (i); sub-item (b), sub-item (c), sub-item (d), sub-item (da) and sub-item (db) of item (iv); sub-item (b), sub-item (c). sub-item (d) and sub-item (da) of item (v); and sub-item (c) of item (vi). Provided that nothing contained in this entry shall apply to an amount charged for such lease and sub-lease in excess of one third of the total amount charged for the said composite supply. Total amount shall have the same meaning for the purpose of this proviso as given in paragraph 2 of this notification. Nil - (iii) Real estate services other than (i) and (ii) above. 9 - Further, the Hon'ble AAAR, West Bengal [in Appeal Case No. 09/WBAAAR/APPEAL/ 2019 - Bengal Peerless Housing Development Company. In re (2019) 110 taxmann.com - 34/76 GST 701 (AAAR-West Bengal)] decided on September 25, 2019, has held as under:- "Preferential Location ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on certificate (CC/OC). QUESTION-2 "Whether PLS collected along with consideration for sale of properties attracts GST rate of 5% or 18% where sale/transfer of constructed property has taken place before issuance of CC/OC under new projects which commence on or after 01.04.2019?" RULING: PLS collected along with consideration for sale of properties attracts GST rate of 18% where sale/transfer of constructed property has taken place before issuance of completion/Occupation certificate (CC/OC) under new projects which commence on or after 01.04.2019. QUESTION-3 "Whether PLS collected along with consideration for sale of properties is outside the scope of supply where sale/transfer of constructed property is entered into by the Applicant after issuance CC/OC?" RULING: No. The PLS collected along with consideration for sale of properties where sale/transfer of constructed property is entered into by the Applicant after issuance CC/OC, is not outside the scope of supply. QUESTION-4 "If as per above question, PLS attracts concessional rate of tax/exemption (whether 12% or 5% or nil as the case may be), whether, in facts and circumstances of the case, Applicant/or cust ..... X X X X Extracts X X X X X X X X Extracts X X X X
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