2022 (10) TMI 302 - AAR - GST

Housing units in Chennai Metropolitan Area cannot claim concessional GST rate despite being outside city limits

In Re: M/s. VGK Property Developers Private Limited.

The AAR Tamil Nadu ruled that housing units in a project located in Kanchipuram revenue district, despite being outside Chennai city limits, fall within ... Scope of jurisdiction of the revenue district of Chennai - units in the Impugned Project with carpet area not exceeding 90 square meters and value not exceeding Rs. 45 Lakhs - location within the revenue district of Kanchipuram - Non-Metropolitan Cities or not - applicability of N/N. 11.2017 - Central Tax (Rate), dated 28.06.2017 r/w Notification 3/2019 CT(Rate) - HELD THAT:- Housing units, up to 90 sq. meters of carpet area and within the value limit of Rs. 45 Lakhs, in cities or towns other than metropolitan cities can be classified as affordable residential apartment, as defined in Notification 11/2017 - Central Tax (Rate), as amended by Notification No. 03/2019 - Central Tax (Rate). Such units are liable to GST Rate of 1.5% on the Value of Supply (and effective rate of 1% of the Total amount Charged). The Census Commission of India defines Metropolitan cities as those Indian cities having a population of more than 4 million. The 74th Amendment to the Indian Constitution defines a metropolitan area as An area having a population of 10 Lakh or 1 Million or more, comprised in one or more districts and consisting of two or more Municipalities or Panchayats or other contiguous areas, specified by the Governor by public notification to be a Metropolitan area. The Metropolitan city is, therefore by inference, defined by the metropolitan area, and whose land use and development etc., are regulated by the Metropolitan Development Authority. It is evident for any development of any land or building, the planning authority shall levy charges (called the development charges) as per the rates prescribed in the Act. The Chennai Metropolitan Development Authority (CMDA) is authorised to regulate real estate development within the Chennai Metropolitan Area (CMA) via the issue of Planning Permissions (PP) issued under Section 49 of the 1971 Tamil Nadu Town and Country Planning Act - Also, from the documents submitted by the applicant, it is inferred that though the Sembakkam Municipality is the 'appropriate local body' for issuing approval order for the building plan, necessary fees towards 'development charges' were collected by the Chennai Metropolitan Development Authority (CMDA). Therefore, the planning authority for the impugned project is CMDA and by extension, the impugned project falls within the ambit of Metropolitan City of Chennai. Thus, the units in the impugned Project is NOT considered as located in city or town 'other than Metropolitan Cities' in terms of Notification No. 11/2017 -Central Tax (Rate), dated 28.06.2017 r/w Notification 3/2019 CT(Rate). Issues Involved:1. Classification of the project location as a 'Non-Metropolitan City' under GST notifications.2. Determination of GST rate applicable to the project.Detailed Analysis:Issue 1: Classification of the Project Location as a 'Non-Metropolitan City'The applicant, VGK Property Developers Private Limited, sought an advance ruling on whether their project located in Rajakilpakkam, Kanchipuram, could be classified as an 'Affordable Residential Apartment' in a 'Non-Metropolitan City' under Notification No. 11/2017 - Central Tax (Rate) as amended by Notification 3/2019 CT (Rate). The applicant argued that various authorities consider the area differently for different purposes and that the Sembakkam Municipality, which collects property tax for the project, should be the determining authority.The statutory provisions were examined, including SL No. 3, item (i) of Notification No. 11/2017 - Central Tax (Rate) and Para 4(xvi) of the same notification, which define 'Affordable Residential Apartment' and specify the criteria for classification based on carpet area and value limits. The applicant's project was claimed to fall outside the jurisdiction of Chennai, thus qualifying as a 'Non-Metropolitan City.'Issue 2: Determination of GST Rate Applicable to the ProjectThe applicant contended that if the project is classified as being in a 'Non-Metropolitan City,' the applicable GST rate would be 1.5% on the value of supply (effective rate of 1% on the total amount charged).Judgment Analysis:1. Examination of Documents:- Various documents submitted by the applicant, including planning permits, building plan approvals, and property tax demand notices issued by the Sembakkam Municipality, were scrutinized.- The Chennai Metropolitan Development Authority (CMDA) was found to be involved in the approval and collection of development charges, indicating that the project falls under the Chennai Metropolitan Area.2. Definition of Metropolitan Cities:- The Census Commission of India and the 74th Amendment to the Indian Constitution define metropolitan areas based on population and administrative boundaries.- The Chennai Metropolitan Development Authority (CMDA) administers the Chennai Metropolitan Region, which includes Kanchipuram.3. Statutory Provisions:- Under the Tamil Nadu Town and Country Planning Act, 1971, the CMDA is authorized to regulate real estate development within the Chennai Metropolitan Area.- The documents indicated that the Sembakkam Municipality, while the local body for issuing approvals, collected development charges on behalf of the CMDA, reinforcing the project's classification within the Chennai Metropolitan Area.4. Conclusion:- The project was determined to be within the Chennai Metropolitan Area.- Consequently, the project does not qualify as being in a 'Non-Metropolitan City' under Notification No. 11/2017 - Central Tax (Rate) as amended by Notification 3/2019 CT (Rate).Ruling:The units in the impugned project are within the Chennai Metropolitan area and hence cannot be considered as located in a city or town 'other than Metropolitan Cities' in terms of the relevant GST notifications. The ruling confirms that the project does not qualify for the lower GST rate applicable to 'Non-Metropolitan Cities.'This comprehensive analysis ensures that all relevant issues, legal terminology, and significant phrases from the original judgment are preserved, providing a thorough understanding of the judgment.