Construction on leased land remains taxable under GST; apartment-sale concessional rate and accommodation exemption do not apply.

Construction of units on leased land for prospective clients is taxable as a construction service, and the manner of payment, whether lump sum or periodic, does not change GST liability. The lower-rate apartment-for-sale entry is inapplicable where the units are intended for sub-lease, sub-let or assignment rather than sale, so the residuary construction-service rate applies; however, one-third deduction towards land remains available for valuation where the transaction involves transfer of land or undivided share by lease or sublease. The activity is not an accommodation service eligible for exemption. Monthly or annual maintenance charges are separately taxable at 18%.

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Issues: (i) Whether GST is payable on the applicant's construction work for prospective clients, whether consideration is received as a lump sum or as periodic payments; (ii) whether the supply is eligible for the lower rate applicable to construction of apartments intended for sale and whether deduction of one-third of the value towards land is available; (iii) whether the activity can be treated as accommodation service so as to claim exemption under the exemption notification; (iv) whether GST is payable on monthly or annual maintenance charges and, if so, at what rate.

Issue (i): Whether GST is payable on the applicant's construction work for prospective clients, whether consideration is received as a lump sum or as periodic payments.

Analysis: The applicant's proposed arrangement concerned construction and subsequent assignment or letting of the constructed area on leased land. The Authority found that the supply was construction service and that the form of payment, whether upfront or periodic, did not alter taxability. The transaction was not treated as a mere lease of immovable property so as to escape GST on the construction component.

Conclusion: GST is payable on the construction work for prospective clients in both payment models.

Issue (ii): Whether the supply is eligible for the lower rate applicable to construction of apartments intended for sale and whether deduction of one-third of the value towards land is available.

Analysis: The lower-rate entries under Notification No. 11/2017-Central Tax (Rate) applied only where the construction was intended for sale to a buyer. On the facts, the constructed units were to be sub-leased, sub-let, or assigned and not transferred by way of sale of title or ownership. The Authority therefore held that the lower-rate entries did not apply and the supply fell under the residuary construction-service entry. At the same time, for valuation, the notification's land-valuation mechanism applied where the supply involved transfer of land or undivided share of land, including by way of lease or sublease, so the land deduction was available.

Conclusion: The applicable SAC is 9954 and the applicable GST rate is 18%, with deduction of one-third of the total consideration towards land available for valuation.

Issue (iii): Whether the activity can be treated as accommodation service so as to claim exemption under the exemption notification.

Analysis: The Authority held that leasing out constructed property on leased land did not fall within accommodation service under the exemption framework. Since the activity was not an accommodation service of the kind covered by the relevant exemption entry, the exemption could not be claimed.

Conclusion: The activity does not fall under accommodation service and no exemption under the relevant entry is available.

Issue (iv): Whether GST is payable on monthly or annual maintenance charges and, if so, at what rate.

Analysis: The Authority treated maintenance charges as a taxable supply under the service entry for services of membership organisations and similar services. The charge was found taxable independently of the construction/lease arrangement.

Conclusion: GST is payable on monthly or annual maintenance charges at 18% under SAC 9995.

Final Conclusion: The ruling holds the proposed construction and related maintenance supplies to be taxable under GST, denies the claimed accommodation-service exemption, and permits land-value deduction in computing the taxable value of the construction supply.

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