Construction services for affordable housing project qualify for lower GST rate per AAR ruling

The Authority for Advance Ruling (AAR) ruled in favor of the applicant, confirming that the construction services provided to a builder for an affordable housing project qualify for the lower GST rate of 12% as per the relevant notification. The ruling clarified that sub-contractors are also eligible for the concessional rate if the project meets the defined criteria.

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Issues Involved:

1. Eligibility for lower GST rate on construction services under Notification No. 01/2018-CT (Rate) dated 25-01-2018.
2. Definition and criteria of "Affordable Housing" under the relevant GST notification.
3. Applicability of concessional GST rates to sub-contractors.

Detailed Analysis:

1. Eligibility for Lower GST Rate:

The main issue is whether the construction services provided by M/s. Yash Nirman Engineers and Contractors (the applicant) to M/s. Lakhani Builders Pvt. Ltd. under the "La-Riveria" project qualify for the lower GST rate of 12% (6% CGST and 6% SGST) as specified in Notification No. 01/2018-CT (Rate) dated 25-01-2018. The applicant sought an advance ruling to confirm this eligibility.

2. Definition and Criteria of "Affordable Housing":

The project "La-Riveria" consists of 140 apartments, each with a carpet area of less than 60 sq. meters, which qualifies it as an affordable housing project. The notification defines affordable housing as a project using at least 50% of the Floor Area Ratio (FAR)/Floor Space Index (FSI) for dwelling units with a carpet area of not more than 60 square meters. The project has been given infrastructure status by the Government of India, which is a prerequisite for availing the concessional GST rate.

3. Applicability of Concessional GST Rates to Sub-Contractors:

The applicant argued that the concessional GST rate should apply to sub-contractors as well, as the notification does not restrict the benefit to developers only. The applicant's contract with M/s. Lakhani Builders Pvt. Ltd. was limited to specific construction activities like Excavation, RCC Work, Brick Work, Plaster Work, and Water Proofing Work. Despite the limited scope, the applicant contended that their services should still qualify for the lower GST rate as they pertain to an affordable housing project.

Observations and Judgment:

The Authority for Advance Ruling (AAR) examined the facts, documents, and submissions. They noted that the project "La-Riveria" qualifies as an affordable housing project, and the notification does not restrict the concessional rate to developers only. The AAR concluded that the benefit of the reduced GST rate of 12% (6% CGST and 6% SGST) is available to the applicant for their construction services related to the "La-Riveria" project. This benefit applies to supplies made after 25-01-2018, the date of the relevant notification, and only to flats with a carpet area of up to 60 sq. meters.

Order:

The AAR ruled in favor of the applicant, confirming that the construction services provided by M/s. Yash Nirman Engineers and Contractors to M/s. Lakhani Builders Pvt. Ltd. under the "La-Riveria" project qualify for the lower GST rate of 12% as provided in Notification No. 01/2018-CT (Rate) dated 25-01-2018.

Conclusion:

The judgment affirmed that the construction services related to affordable housing projects, even when provided by sub-contractors, are eligible for the concessional GST rate of 12%, provided the project meets the criteria defined in the relevant notification. This ruling provides clarity on the applicability of lower GST rates to various stakeholders involved in affordable housing projects.

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