GST on construction of parking plaza services

[Ashish Diwedi]

Dear Sir,

We are in the business of construction of Resi Apartments. We have bought a plot from M/s Lotus International and started construction of residential project. For additional FSI we have entered into agreement with Municipal Authorities ( hereinafter called as TMC) to construct parking lot for general public (hereinafter called as Amenity Plot) . The series of events are detailed herein below: -

01.10.2001 - The area of the Amenity Plot admeasuring 4,302 m2 have been handed over to the TMC and possession receipt issued.

26.07.2004 – Declaration (Conveyance) executed for transfer of the Amenity Plot in favour of TMC. The same was registered on the same day with the Sub Registrar of Assurances.

21.04.2005 – Property Card area of the Amenity Plot admeasuring 4,316 m2 issued in the name of TMC and in lieu of which the TMC has granted us the Development Rights by way of approval of plans on 29/03/2006 which have been utilised on a portion of the plot.

27.11.2008 - We, as the erstwhile owners of this plot, applied to the TMC to construct Parking lot on the surrendered plot at our cost, by consuming 2 FSI of the plot, in exchange for equivalent TDR.

04.05.2009 – TMC accepted our proposal for construction of the Parking Lot approving area admeasuring 1 FSI as of now and the agreement contained clause that the FSI 2 will be subsequently sanctioned on the same terms and conditions.

06.07.2009 - Sanction and commencement certificate was issued for the amenity building for an area admeasuring 1 FSI with a condition that the Agreement will be executed and registered before work is started.

24.12.2009 – 15.01.2010 - The Amenity Space Agreement was executed and registered with the Sub Registrar Of Assurances clearly stating that the Corporation has agreed to grant the additional development rights in the form of FSI of 2 i.e. 6,389.80 m² on the said area. The Corporation has initially sanctioned the TDR in the form of FSI of 1 i.e. 3,194.90 m² and the plan so submitted are being processed by the Corporation the sanction of which shall be along with the commencement certificate. The Corporation shall subsequently sanction the balance development rights in the form of FSI of 2 i.e. 6,389.80 m² on the said area is sanctioned by the Corporation a separate agreement shall be entered into by the parties for the development rights in the form of FSI of 2 i.e. 6,389.80 m² on the same terms and conditions.

16.01.2010 - We informed the TMC that work has commenced on the site.

03.05.2010 – Plinth completion certificate issued.

20.07.2010 – Building construction progressed and TMC instructed us to stop work of the building and submit plans for a Parking lot along with the amenity building.

29.07.2010 – Plans submitted by us with parking plaza.

06.03.2013 - TMC informed us that the plans for the Parking Lot have been approved.

07.03.2014 - The plans were approved with the parking lot admeasuring 6,421.40 m² under podium and ramp.

24.01.2017 – Development Right Certificate (DRC) No.23 released for 2831.50 m2

03.05.2018 - DRC No.31 released for 2069.58 m2

06.06.2018 - Application made for Occupation Certificate of part area of 9523.33 m2 out of the total area of 13,414 m2. The same is awaited.

24.01.2019 - DRC No.23 released for 5675.59 m2

Synopsis of the approvals, amount spent and DRC release

Date	Area Approved – m2	Amount Spent - ₹ Crs	DRC Release - m2
06-07-2009	3,194.90
07-03-2014	6,421.20
27-10-2016	2,901.00
24-01-2017			2,831.50
30-06-2017		8.98
20-01-2018	897.42
03-05-2018			2,069.58
24-01-2019			5,675.59
31-03-2019		8.30
Total	13,414.52	17.28	10576.67
07-05-2019	Balance to be spent	1.00

Questions arising from the above: -

What shall be the nature of the service of construction of Parking Lot be considered – Construction service or Works’ contract service?

What shall be rate of GST on the construction of above Parking Lot?

What shall be the value on which GST shall be charged?

At what point of time GST shall be paid?

Will there be any taxability for the FSI received from TMC Authority under RCM?

Is Receipt of TDR liable to GST under RCM?

We have taken ITC for goods & services used in construction of the parking lot from 1st July 2017. Can we say that we shall pay GST only on construction service undertaken after 1st July 2017 on the cost of construction services? We have completion certificate from Chartered engineer stating work completed till 30th June 2017 is 49%. Can we pay GST only on balance 51% or do we have to pay GST on the entire 100%?

AI Summary

Construction Firm Seeks Clarity on GST Rates, Valuation, and Timing for Parking Lot Project; TDR and RCM Implications Explored A construction company involved in building residential apartments has entered into an agreement with municipal authorities to construct a public parking lot in exchange for additional Floor Space Index (FSI) rights. The company seeks clarity on the nature of services provided, applicable GST rates, valuation, and timing of GST payments for the parking lot construction. Additionally, they inquire about the tax implications of receiving Transferable Development Rights (TDR) and the applicability of GST under the Reverse Charge Mechanism (RCM). They also question whether GST should be paid on the entire construction cost or only on the portion completed after July 1, 2017.