Residential apartment construction under GST: ongoing projects outside the concessional scheme attract 18%, with land deemed one-third for valuation.

Ongoing residential apartment projects not covered by the specified concessional scheme fall under the general rate entry in Notification No. 11/2017-Central Tax (Rate) as amended, so the construction services are taxable at 18%. For valuation where the supply involves transfer of land or an undivided share of land, the notification prescribes a deemed land value of one-third of the total amount charged, which is deducted from the consideration to compute taxable value. Construction of apartments intended for sale is treated as a supply of service under Schedule II, except where full consideration is received after completion certificate or first occupation.

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Issues: (i) Whether the construction services rendered in the project were taxable at 18% under Item (if) of Sl. No. 3 of Notification No. 11/2017-Central Tax (Rate) as amended, or at the concessional rate under Item (ie); (ii) whether, for valuation, the value of land or undivided share of land was to be taken as one-third of the total amount charged; (iii) whether the applicant's activity of constructing residential apartments amounted to a supply of service.

Issue (i): Whether the construction services rendered in the project were taxable at 18% under Item (if) of Sl. No. 3 of Notification No. 11/2017-Central Tax (Rate) as amended, or at the concessional rate under Item (ie).

Analysis: The applicable rate structure under Notification No. 11/2017-Central Tax (Rate), as amended by Notification No. 03/2019-Central Tax (Rate), distinguishes between the concessional rate for specifically enumerated schemes under Item (ie) and the general rate for ongoing residential projects under Item (if). The project was found to be an ongoing project, and the applicant had exercised the option to continue under the old regime. However, the project did not fall within any of the schemes listed under Item (ie). The construction activity therefore answered the description in Item (if).

Conclusion: The services are taxable at 18% and not at the concessional 12% rate.

Issue (ii): Whether, for valuation, the value of land or undivided share of land was to be taken as one-third of the total amount charged.

Analysis: Section 15 of the Central Goods and Services Tax Act, 2017 governs value of supply, while Paragraph 2 of Notification No. 11/2017-Central Tax (Rate) specifically prescribes the valuation mechanism for construction services involving transfer of land or undivided share of land. That paragraph deems the value of land or undivided share of land to be one-third of the total amount charged, and the taxable value is computed by deducting that deemed land value from the total consideration.

Conclusion: The applicant is entitled to deduct one-third of the total amount charged as the deemed value of land or undivided share of land.

Issue (iii): Whether the applicant's activity of constructing residential apartments amounted to a supply of service.

Analysis: Construction of a building or complex intended for sale, other than where the entire consideration is received after completion certificate or first occupation, is treated as a supply of service under Schedule II. The applicant's construction of apartments for customers falls within that statutory description.

Conclusion: The applicant's activity qualifies as a supply of service.

Final Conclusion: The ruling fixes the applicable tax rate for the project at 18%, applies the statutory valuation rule deeming land at one-third of the consideration, and characterises the construction activity as a taxable supply of service.

Ratio Decidendi: For ongoing apartment projects not covered by the specified concessional schemes, the applicable notification entry governs the rate, and where the supply involves transfer of land or undivided share of land, the notification's deeming provision controls valuation by treating land as one-third of the total consideration.

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