2021 (7) TMI 544 - AAR - GST

Tax Ruling on Service Rates and Refunds: Key Takeaways for Businesses

In Re: M/s. VKL Builders India Private Limited

The Authority ruled that the rate of tax for services provided from 01.07.2017 to 31.03.2019 is 18% [9% - CGST + 9% - SGST]. The value of services from ... Determination of rate of tax - ongoing projects - services provided to the customers who are purchasers of the residential flats involved in the project-Santhi Homes, Pothencode - period 01.07.2017 to 31.03.2019 - N/N. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended - value of services, for services for the period 01.07.2017 onwards for which appropriation towards undivided share of land was already done in pre - GST period - applicable rate of tax for the period after 01.04.2019 where option was already exercised - relevant date for refund where cancellation of residential flats by any customer. HELD THAT:- The Commencement Certificate / Building Permit in respect of the project namely-Shanti Homes, Pothencode was issued before 31.03.2019; further the apartments being constructed under the project was partly booked before 31.03.2019 and the completion certificate has not been issued before 31.03.2019. Therefore, the project satisfies all the conditions of the definition of “ongoing project” in clause (xx) of Para 4 of the N/N. 11/2017-CT (Rate) dated 28.06.2017 as amended by N/N. 03/2019-CT (Rate) dated 29.03.2019 and accordingly the project qualifies to be eligible for exercise of option by the applicant to pay tax on the construction of the apartments in the project at the rates as specified for item (ie) or (if) of SI No. 3 of the said notification. Rate of tax on the services of construction of different types of residential apartments in the project-Shanti Homes, Pothencode rendered to their customers during the period from 01.07.2017 to 31.03.2019 - HELD THAT:- The project Santhi Homes does not fall under any of the schemes listed in sub-paras (a) to (h) of Para 6.6 above and hence the services of construction of residential apartments in the project rendered by the applicant do not qualify for the concessional rate of tax of 12% under any of the sub-items or items of SI No. 3 of the N/N. 11/2017-Central Tax (Rate) dated 28.06.2017. Therefore, the services of construction of all the 12 different types of residential apartments as mentioned in the question in the project-Santhi Homes is liable to GST at the rate of 18% as per Item (i) of SI No. 3 of N/N. 11/2017-Central Tax (Rate) dated 28.06.2017. Taxable value of services for the period 01.07.2017 onwards for which appropriation towards undivided share of land was already done in pre - GST period - whether the one-third deduction as provided for in Para 2 of Notification No. 11/2017 can again be taken where the value of undivided share already appropriated is lower than one-third of the total amount receivable for project including land value? - HELD THAT:- The value of land or undivided share of land is deemed to be one-third of the total amount charged for the supply irrespective of the actual value of land and accordingly the applicant is eligible to avail deduction of one-third of the total amount charged for the supply in arriving at the taxable value of the supply. Applicable rate of tax for the period after 01.04.2019 where option was already exercised in respect of the 12 different categories of apartments mentioned therein and eligibility for one-third deduction as per Para 2 to the extent consideration for undivided share of land is also included - HELD THAT:- The project-Shanti Homes does not come under any of the schemes specified in item (ie) of the said notification and accordingly the services of construction of the 12 categories of residential apartments in the project- Shanti Homes is liable to GST for the period from 01.04.2019 at the rate of 18% as per item (if) of SI No. 3 of N/N. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by N/N. 03/2019-Central Tax (Rate) dated 29.03.2019 in accordance with the option exercised by the applicant. The item (if) of SI No. 3 of the said notification provides that the provisions of paragraph 2 of the notification shall apply for valuation of the service. Therefore, the applicant is eligible for deduction of one-third of the total amount charged for the supply in determining the taxable value of such supply after 01.04.2019 also. Relevant date for application of refund of taxes already paid in the event of cancellation of residential flats by any customer - HELD THAT:- The provisions governing refund of GST paid on supply of goods and / or services are contained in Section 54 of the CGST Act. Sub-section (1) of Section 54 stipulates that any person claiming refund of any tax may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed. Explanation 2 to Section 54 prescribes the relevant date for making the application under different situations - In the instant case the relevant date is the date of payment of tax as prescribed in clause (h) of Explanation 2 of Section 54. Issues Involved:1. Rate of tax for services provided for the period 01.07.2017 to 31.03.2019.2. Value of services for the period 01.07.2017 onwards, considering appropriation towards undivided share of land done in the pre-GST period.3. Applicable rate of tax for the period after 01.04.2019 where option was already exercised.4. Relevant date for application of refund of taxes already paid in the event of cancellation of residential flats.Issue-wise Detailed Analysis:1. Rate of Tax for Services Provided for the Period 01.07.2017 to 31.03.2019:The applicant sought clarification on the rate of tax applicable to various types of residential apartments in their ongoing project from 01.07.2017 to 31.03.2019. The Authority determined that the project does not fall under any concessional schemes listed in sub-paras (a) to (h) of Para 6.6. Consequently, the services of construction of all 12 types of residential apartments are liable to GST at the rate of 18% [9% - CGST + 9% - SGST] as per Item (i) of SI No. 3 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.2. Value of Services for the Period 01.07.2017 Onwards:The applicant queried whether the one-third deduction for the value of the undivided share of land can be taken where the value already appropriated is lower than one-third of the total amount receivable. The Authority referenced Para 2 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, which states that the value of land or undivided share of land shall be deemed to be one-third of the total amount charged for the supply. This provision applies irrespective of the actual value of the land, allowing the applicant to avail a one-third deduction of the total amount charged for the supply.3. Applicable Rate of Tax for the Period After 01.04.2019:The applicant had exercised the option to continue paying tax at the old rates for their ongoing project. The Authority confirmed that the project does not fall under any specified schemes in item (ie) of the notification. Therefore, the services of construction of the 12 categories of residential apartments are liable to GST at the rate of 18% [9% - CGST + 9% - SGST] as per item (if) 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. The provisions of paragraph 2 of the notification apply for valuation of the service, allowing for a one-third deduction of the total amount charged for the supply.4. Relevant Date for Application of Refund of Taxes Already Paid in the Event of Cancellation of Residential Flats:The applicant sought clarification on the relevant date for applying for a refund of taxes already paid in the event of cancellation of residential flats. The Authority referred to Section 54 of the CGST Act, which governs the refund of GST paid on supply of goods and/or services. Sub-section (1) of Section 54 stipulates that the application must be made before the expiry of two years from the relevant date. In this context, the relevant date is the date of payment of tax as prescribed in clause (h) of Explanation 2 of Section 54.Ruling:a. The rate of tax for services provided to customers for the period 01.07.2017 to 31.03.2019 is 18% [9% - CGST + 9% - SGST].b. The value of services for the period 01.07.2017 onwards, where appropriation towards undivided share of land was done in the pre-GST period, should consider one-third of the total amount charged for the supply as the value of land.c. The applicable rate of tax for the period after 01.04.2019, where the option was exercised, is 18% [9% - CGST + 9% - SGST], with eligibility for one-third deduction as per Para 2.d. The relevant date for filing a refund application in the event of cancellation of residential flats is the date of payment of tax as per clause (h) of Explanation 2 of Section 54 of the CGST Act, 2017.