2023 (1) TMI 87 - AAR - GST

AAR Gujarat refuses GST rate ruling for real estate project lacking proper documentation despite RREP qualification

In Re: M/s. Shivam Developers,

The AAR Gujarat declined to rule on GST rates for a real estate project due to insufficient documentation. While the project qualified as a Residential ... Construction services or not - whether the project which is currently under construction by the applicant shall be regarded as a Residential Real Estate Project (RREP) or Real Estate Project (REP)? - Whether the project consisting residential Apartment eligible for GST Rate 1% being an affordable residential apartment without ITC, 5% without ITC for other than residential affordable apartment and 5% without ITC for commercial shops? - HELD THAT:- The applicant is developing buildings consisting of apartments and commercial shops for the purpose of selling. The instant project, shall be treated as RREP if the carpet area of the commercial apartments is not more than 15 per cent. of the total carpet area of all the apartments in the REP. Here, we find that instant project having commercial shop carpet area less than 15% of total carpet area considering the submission of the applicant. As a result, the instant project falls under the category of Residential Real Estate Project (RREP). Applicable GST rate on affordable residential apartment, other residential apartment and commercial shop - HELD THAT:- The consideration of Rs. 45 Lacs as mentioned in the Notification in case of Affordable Residential Apartment is the gross amount which includes all types of charges collected from the potential buyer except Stamp Duty payable. We find that the applicant have not submitted any legal documents to ascertain that the which types of charges makes exact gross amount of the affordable residential flat which are collected from the customer. The applicant has not submitted the types of heads under which consideration have been received and make Gross Amount of the affordable Residential Flat less than 45 lacs - Similarly, the applicant have not submitted any legal documents in support of exact carpet area and consideration recovered from the customer in respect of other than affordable residential flat and commercial shops. The applicant have not submitted sufficient documents to decide the Ruling on the question sought for, therefore we are not inclined to pronounce the Ruling in absence of proper documents. The ruling can be pronounced on the basis of proper documents in support of the questions and not on simple facts and assumptions. Issues Involved:1. Classification of the project as a Residential Real Estate Project (RREP) or Real Estate Project (REP).2. Applicability of GST rates on different types of apartments and commercial units within the project.Issue-wise Detailed Analysis:1. Classification of the Project as RREP or REP:The applicant, engaged in the construction and development of a real estate project named 'Shivvay Landmark,' sought to determine whether their project qualifies as a Residential Real Estate Project (RREP) or a Real Estate Project (REP). According to Notification No. 3/2019-CT (Rate), a project can be classified as an RREP if the carpet area of commercial apartments is not more than 15% of the total carpet area. The applicant submitted that the total carpet area of the project is 7406.99 square meters, with commercial shops occupying 776.59 square meters, which is 10.49% of the total carpet area. Consequently, the project qualifies as an RREP since the commercial area is less than 15% of the total carpet area.2. Applicability of GST Rates:The applicant sought clarification on the applicable GST rates for different types of units within the project, specifically affordable residential apartments, non-affordable residential apartments, and commercial shops.Affordable Residential Apartments:The applicant argued that affordable residential apartments, defined as having a carpet area below 90 square meters and a cost below Rs. 45 lakh, should attract a GST rate of 1% without Input Tax Credit (ITC). The conditions for this classification include:- Construction in a non-metropolitan area.- Carpet area below 90 square meters.- Commercial area not exceeding 15% of the total carpet area.- Consideration charged below Rs. 45 lakh.Non-affordable Residential Apartments and Commercial Shops:For non-affordable residential apartments and commercial shops, the applicant contended that the applicable GST rate should be 5% without ITC. The conditions for this classification include:- No ITC on goods and services used in supplying the service.- Payment of an amount equivalent to the ITC attributable to construction in a project after 1st April 2019.- At least 80% of input and input services should be received from registered suppliers.- Tax on shortfall of input and input services from unregistered suppliers should be paid at 18% on a reverse charge basis.- Tax on cement received from unregistered suppliers should be paid on a reverse charge basis.- Maintenance of project-wise accounts of inward supplies and submission of tax liability on shortfall.Findings:The authority examined the submissions and found that the applicant did not provide sufficient legal documents to establish the exact carpet area and consideration charged for affordable residential apartments, non-affordable residential apartments, and commercial shops. The applicant also did not demonstrate compliance with the conditions mentioned in Notification No. 11/2017-CT (Rate) as amended by Notification No. 3/2019-CT (Rate).Ruling:Due to the lack of proper documentation and evidence, the authority could not pronounce a ruling on the questions sought by the applicant. The application was deemed not maintainable in the absence of sufficient documents to support the claims.