Sub-contractors in affordable housing projects under PMAY scheme denied concessional GST rate of 0.75% under Notification 03/2019

The AAR Karnataka ruled that sub-contractors working for builders/developers/contractors of affordable housing under PMAY scheme are not eligible for concessional GST rate of 0.75% under Notification No.03/2019-Central Tax (Rate). The concessional rate under Serial No.3(i) applies only to promoters constructing affordable residential apartments in RREP projects commencing after April 1, 2019. Since the applicant was a sub-contractor and not a promoter, the benefit was denied without examining other details.

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Issues Involved:
1. Applicability of Serial No.3(i) of Notification No.03/2019-Central Tax (Rate) dated 29th March 2019 to the applicant who is a sub-contractor.
2. Eligibility of concessional rate of CGST at 0.75% as per Notification No.03/2019-Central Tax (Rate) dated 29th March 2019.

Issue-wise Detailed Analysis:

1. Applicability of Serial No.3(i) of Notification No.03/2019-Central Tax (Rate) dated 29th March 2019 to the applicant who is a sub-contractor:

The applicant, a proprietorship concern engaged in civil construction of residential premises, sought an advance ruling on whether Serial No.3(i) of Notification No.03/2019-Central Tax (Rate) dated 29th March 2019, which amends Notification No.11/2017-Central Tax (Rate), applies to their services as a sub-contractor for affordable housing under the PMAY scheme. The applicant argued that their project qualifies as an Affordable Housing Project (AHP) and should thus benefit from the concessional rate of CGST at 0.75%.

Upon examination, it was noted that the applicant is a sub-contractor and not a promoter. The notification in question specifically applies to promoters involved in the construction of affordable residential apartments in a Residential Real Estate Project (RREP) commencing on or after 1st April 2019. The ruling clarified that the concessional rate is intended for promoters who have not opted for the higher tax rates specified for other items in the notification. Since the applicant is not a promoter, the benefit of the concessional rate of GST at 0.75% does not apply to them.

2. Eligibility of concessional rate of CGST at 0.75% as per Notification No.03/2019-Central Tax (Rate) dated 29th March 2019:

The applicant contended that they should be eligible for the concessional rate of CGST at 0.75% for their construction services related to affordable housing projects. They supported their claim by referencing various rulings and clarifications, including those from the Maharashtra AAR and CBEC, which suggested that the concessional rate could apply to sub-contractors in certain conditions.

However, the ruling emphasized that the concessional rate of 0.75% CGST is explicitly applicable to promoters as per the description in the notification. The notification's conditions and provisions are designed to apply to promoters who construct affordable residential apartments in RREPs. Since the applicant is a sub-contractor, they do not meet the criteria set forth in the notification. Therefore, the concessional rate of CGST at 0.75% is not applicable to the applicant.

Ruling:

1. Serial No.3(i) of Notification No.03/2019-Central Tax (Rate) dated 29th March 2019 is not applicable to the applicant who is a sub-contractor for affordable housing under the PMAY Scheme.

2. The concessional rate of CGST at 0.75% as per entry No.3(i) of Notification No.11/2017-Central Tax (Rate) dated 28th June 2017, amended by Notification No.03/2019-Central Tax (Rate) dated 29th March 2019, is not applicable to the applicant as this rate is intended only for promoters, not sub-contractors.

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