Preferential location charges form part of composite construction supply and cannot be taxed separately under GST.

Preferential location charges collected with consideration for construction services were treated as part of the composite supply of construction service, not as a separate taxable levy. A later GST Council recommendation and the Government's clarification under Section 168(1) stated that such charges form part of the consideration for construction services where construction is the principal supply. That clarification was held to reflect and confirm the legal position, bind departmental authorities, and operate retrospectively. On that basis, the contrary advance ruling and appellate order were quashed.

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Issues: Whether preferential location charges collected along with consideration for construction services are to be taxed separately or as part of the composite supply of construction services, and whether the contrary advance ruling and appellate order were liable to be quashed in view of the later GST Council recommendation and circular.

Analysis: The dispute turned on whether preferential location charges formed an integral part of the supply of construction services. The GST Council later recommended that such charges should not be taxed separately, but should be treated as part of the supply of construction service. The Government accepted that recommendation and issued a clarification under Section 168(1) of the Central Goods and Services Tax Act, 2017, stating that location charges are part of the consideration for construction services and form part of a composite supply where construction service is the principal supply. The clarification was held to bind the departmental authorities and to operate retrospectively as a clarification of the legal position.

Conclusion: Preferential location charges are not to be taxed separately and must be treated as part of the construction service. The advance ruling and the appellate order were quashed.

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