Developer liable for GST on landowner share under new scheme, daily wage employees not taxable

The AAR Telangana ruled that the applicant's project falls under the new GST scheme as they did not opt for the old scheme by the deadline. The developer must pay CGST/SGST at 0.5% each for affordable residential apartments (carpet area less than 60 sq. mts) and 2.5% each for other residential apartments without ITC. Tax on the landowner's share must be paid by the applicant as developer-promoter liability, not under RCM. Daily wage labor engaged as employees is not taxable, but manpower supply services attract 18% GST payable by the supply agency.

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Issues:
1. Interpretation of notification 4/2019 for GST payment on RCM basis for new projects.
2. Applicability of RCM to daily wages, labor charges, and contract labor.
3. Limit on the percentage of material used in the project.
4. Tax liability on salaries, incentives, brokerage, remuneration, and interest on working capital.
5. Different tax rates for affordable and non-affordable flats based on carpet area.
6. Tax rates for sale agreement and work order in the case of semi-finished residential flats.

Analysis:
1. The applicant sought clarification on whether notification 4/2019 applies for GST payment on RCM basis for new projects. The ruling clarified that the project commenced before 01.04.2019 and did not fall under the definition of "other than ongoing projects," as per Notification No. 03/2019. Thus, the project did not qualify for RCM under the said notification.

2. The ruling stated that RCM does not apply to daily wages, labor charges, or contract labor, as per Schedule III to the CGST Act, 2017, which exempts services by employees to employers from tax if rendered in the course of employment. However, manpower supply services are taxable at 18%.

3. There is no specified limit on the percentage of material to be used in the project, such as cement or sand, as per the ruling.

4. Salaries, incentives, brokerage, remuneration, and interest on working capital were deemed not liable for RCM, as per the ruling.

5. The ruling confirmed that different tax rates based on carpet area can be adopted for affordable and non-affordable flats in a project, allowing for GST rates of 1% and 5% respectively.

6. In the case of entering into two types of agreements for selling semi-finished residential flats, the ruling clarified that if the initial contract for land and building constitutes a single contract, it attracts tax rates of 0.5% for affordable housing and 2.5% for other housing under CGST & SGST without ITC. However, any additional agreement beyond the initial contract would attract a 9% tax rate under CGST & SGST each with ITC.

This detailed analysis of the judgment provides a comprehensive understanding of the issues addressed and the rulings provided by the Authority for Advance Ruling, Telangana.

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