Flat purchaser cannot seek advance ruling on construction services as recipient not supplier under Section 95

The AAR Tamil Nadu rejected an advance ruling application filed by a flat purchaser seeking determination of taxable value and time of supply for construction services. The authority held that Section 95 of CGST Act 2017 permits advance rulings only for supplies undertaken or proposed to be undertaken by the applicant. Since the applicant was a recipient of construction services from the developer rather than a supplier, the application was inadmissible. The AAR emphasized that allowing recipients to obtain rulings on inward supplies would be ineffective as suppliers remain free to assess supplies according to their own determination, rendering such rulings irrelevant.

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Issues Involved:
1. Determination of taxable value for the supply of construction services.
2. Eligibility of the applicant to seek an advance ruling as a recipient of services.

Issue-wise Detailed Analysis:

1. Determination of Taxable Value for the Supply of Construction Services:

The applicant, an unregistered dealer under the GST Act and a service recipient of construction services, sought an advance ruling on the taxable value in respect of the supply of construction services provided by the developer as per Clause (b) of Notification No. 4/2018. The applicant had entered into a Joint Development Agreement (JDA) with the developer, M/s Nu Tech Associates, for the development of 6 flats, with the applicant entitled to 2510 sq.ft. of super built-up area.

The applicant argued that the value of supply should be based on the consideration in the form of transfer of development rights of 1146.66 sq.ft. of undivided interest in the land. The time of supply was when the developer transferred possession or the right in the constructed area, which had not yet occurred. The developer, being a registered person under GST, was liable to pay GST on the construction services provided.

The applicant contended that the value of construction services should not be based on the open market value unilaterally decided by the developer at Rs. 7,240.70 per sq.ft., which was deemed illogical and inflated. Instead, the value should be determined under Section 15 of the GST Act, read with Rules 27 to 35 of the CGST Rules, 2017, considering the actual cost of construction agreed in the JDA at Rs. 2,000 per sq.ft.

The applicant proposed that if the open market value was not available, the value should be the sum total of consideration in money and any such further amount equivalent to the consideration not in money. They suggested that the value of supply of service could be based on the undivided share of land relinquished by the landowner, which was Rs. 57,33,300 for 1146.66 sq.ft., resulting in a GST liability of Rs. 2,86,665 for 4 flats.

Alternatively, the applicant suggested obtaining a valuation report from an approved panel valuer if the value was not determinable under the previous clauses.

2. Eligibility of the Applicant to Seek an Advance Ruling as a Recipient of Services:

The applicant argued that they were eligible to seek an advance ruling as a recipient of construction services, having paid the prescribed fees and obtained a temporary registration with GSTIN/User ID. They referred to FAQs on the GST portal, which stated that both registered and unregistered persons could apply for an advance ruling on matters prescribed under the GST Act.

However, the authority examined the admissibility of the application under Section 95 of the CGST Act, which defines "advance ruling" as a decision provided to an applicant in relation to the supply of goods or services undertaken or proposed to be undertaken by the applicant. Since the applicant was a recipient of services and not the supplier, the authority concluded that the application was not admissible.

Ruling:

The application was rejected as not admitted under Section 98(2) read with Sections 95(a) and 103(1) of the CGST/TNGST Act, 2017. The authority determined that only a supplier, not a recipient, is eligible to seek an advance ruling.

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