Association cannot seek advance ruling on members' GST liability for joint development arrangements under Section 97(2)

The AAR Kerala dismissed an advance ruling application filed by an association seeking clarification on GST liability for joint development arrangements between developers and land owners. The authority held it lacked jurisdiction as the application concerned GST liability of third parties (association members) rather than supplies by the applicant itself. The AAR ruled that advance ruling provisions under Section 97(2) of CGST Act do not permit applications regarding tax applicability to persons other than the applicant, making the application outside statutory scope.

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Issues Involved:
1. Whether the portion of apartments constructed by Developers and allotted to the Land Owners as part of a joint development arrangement would be treated as supply liable to GSTRs.
2. If treated as supply and liable to GST, what is the value to be adopted for computing GST liabilityRs.
3. If treated as supply and liable to GST, what is the time of supply and when does the GST liability ariseRs.
4. If treated as supply and liable to GST, what is the rate of GST applicableRs.

Detailed Analysis:

1. Treatment of Allotted Apartments as Supply Liable to GST:
The applicant, representing real estate developers, questioned whether the portion of apartments constructed by developers and allotted to landowners under a joint development arrangement is considered a supply liable to GST. The applicant argued that since no consideration flows from the landowners to the developers, it should not be considered a supply under the CGST/SGST Act. The ruling authority examined the provisions of the CGST Act and noted that the application pertains to the activities of the applicant's members, not the applicant itself. As per Section 95(a) of the CGST Act, advance ruling can only be sought for supplies undertaken or proposed by the applicant. Therefore, the authority concluded it had no jurisdiction to issue a ruling on this matter.

2. Value for Computing GST Liability:
The applicant contended that if the allotment of apartments to landowners is treated as a supply, the value should be determined according to Section 15(1) of the CGST/SGST Act, which states that the value of supply shall be the transaction value where the supplier and recipient are unrelated, and the price is the sole consideration. Since no consideration flows from landowners to developers, the value of the supply would be zero. The applicant also discussed the application of Rule 27 of the CGST/SGST Rules, which deals with the valuation of supply where consideration is not wholly in money. They argued that sub-rules (a) to (c) of Rule 27 would fail in this scenario, and reliance should be placed on sub-rule (d), which refers to Rule 30 or Rule 31 for valuation. According to Rule 30, the value should be 110% of the cost of construction.

3. Time of Supply and GST Liability:
The applicant argued that the time of supply should be determined under Section 13(2) of the CGST/SGST Act. Since there is no invoice or payment, Section 13(2)(a) and (b) would not apply. Consequently, Section 13(2)(c) would apply, stating the time of supply is the date on which the recipient records the receipt of services in their books. The applicant suggested that the landowner would record the receipt of apartments only upon completion, making the time of supply the completion date, at which point the GST liability would arise.

4. Rate of GST Applicable:
The applicant referred to Notification No. 11/2017-Central Tax (Rate) dated 28-06-2017, which classifies construction services under GST. They noted that the effective GST rate for affordable residential apartments is 1.5%, and for other residential apartments, it is 7.5%, subject to conditions specified in the notification.

Jurisdictional Issue:
The ruling authority emphasized that the application was made on behalf of the applicant's members and not for any supply undertaken or proposed by the applicant itself. As per Sections 95(a) and 97(2) of the CGST Act, advance ruling can only be sought for supplies by the applicant. Therefore, the authority concluded it had no jurisdiction to answer the questions raised by the applicant.

Ruling:
The authority ruled that it has no jurisdiction to answer the questions raised by the applicant, as they do not pertain to any matter specified under Section 97(2) of the CGST Act in relation to the supply of goods or services undertaken or proposed to be undertaken by the applicant.

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