2023 (5) TMI 748 - AAAR - GST

Parking space charges are separate GST supply at 18%, not part of apartment construction services

The AAAR-WB ruled that charges for right to use car/two wheeler parking spaces constitute a separate supply under GST Act, taxable at 18%, distinct from ... Classification of supply - composite supply of construction of residential apartment services or the same is a distinct supply under section 7 of the CGST/WBGST Act, 2017? - bundled service or not - rate of tax - right to use of car/two wheeler vehicle parking space along with the sale of under constructed apartments - if apartments are sold after receipt of completion certificate from the competent authority, then whether the amounts collected for right to use of car parking space will also be treated as a non GST supply or not - Whether the taxability would change if such charges for right to use of car parking space is collected after the sale of the apartment has been done i.e. the customer had not opted for the car parking space at the time of purchase of the under constructed unit, but had sought for the same after the unit was handed over to the customer after receipt of the completion certificate? Whether parking space open or covered along with construction services of the apartment will be a bundled service as argued by the Appellant? - HELD THAT:- It transpires from plain reading of the above provisions of RERA that though a sanctioned plan requires inclusion of parking layout, an uncovered parking space such as open parking area is not included in the definition of “garage” but falls within the meaning of “common area”. Now the “common area” belongs to all apartment owners jointly or the owners’ association when formed and no portion can be sold/transferred/leased out to any person by the promoter - So in the instant case the sanctioned plan may have open parking spaces but the Appellant has no right to transfer ownership or lease out or allow right to use of the said spaces to allottees. The owners’ association on joint agreement of its members may lease out the open parking space on rent at a future date but that question is beyond the ambit of the current discussion. The amount charged by the appellant for right to use of car/two wheeler vehicle parking space, though not permissible as per RERA, constitutes a separate supply under the GST Act and the appellant is therefore liable to pay tax @ 18% on such supply. Further, the question of one-third abatement of valuation of land for open parking space is not maintainable as the “common area” which includes such open parking space is considered in the valuation of apartment and one-third abatement on supply of construction services is being availed before levy of tax under the GST Act. So, it is evident that sale/right to use car parking service and construction services are separate services which are not dependent on sale and purchase of each other. Therefore, sale/right to use car parking is not naturally bundled with construction services and hence, it can not be treated as composite supply of construction services. Appeal disposed off. Issues Involved:1. Whether the amounts charged for the right to use car/two-wheeler vehicle parking space along with the sale of under-construction apartments are to be treated as a composite supply or a distinct supply under section 7 of the CGST/WBGST Act, 2017.2. The rate of tax applicable on such charges if not treated as a composite supply.3. Tax treatment of amounts collected for the right to use car parking space post-receipt of the completion certificate.4. Taxability of charges for the right to use car parking space if collected after the sale of the apartment.Summary:Issue 1: Composite Supply vs. Distinct SupplyThe Appellant argued that the right to use car parking space is an ancillary supply to the principal supply of residential apartment construction services, thus constituting a composite supply. However, the WBAAR observed that since the parking facility is optional and not naturally bundled with the construction services, it should be treated as a distinct supply. Consequently, the right to use parking space is not a composite supply under section 7 of the CGST/WBGST Act, 2017.Issue 2: Applicable Tax RateThe WBAAR ruled that the GST rate applicable for the supply of services for the right to use open parking space is 18% (CGST 9% + WBGST 9%) without any abatement on the value of land. The Appellant's argument for a lower tax rate due to composite supply was rejected.Issue 3: Post-Completion Certificate SalesFor apartments sold after receiving the completion certificate, the WBAAR ruled that the consideration for the right to use parking space is a separate service and not bundled with the apartment sale. Therefore, the consideration for the apartment is treated as non-GST, while the parking space service is taxable.Issue 4: Charges Collected After SaleThe WBAAR confirmed that if charges for the right to use parking space are collected after the sale of the apartment, they remain a separate service and are not naturally bundled with the construction services. Thus, they do not qualify as a composite supply and are subject to the standard GST rate.Final Ruling:The Appellate Authority upheld the WBAAR's decision, confirming that the right to use car parking space constitutes a separate supply under the GST Act and is taxable at 18%. The appeal was dismissed, and the WBAAR's ruling was affirmed.