TaxTMI 
TaxTMI 
2019 (7) TMI 39
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....s. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". 02 FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus STATEMENT OF FACTS 1.0 M/s Nagpur Integrated Township Private Limited (hereinafter referred to as NITPL), (hereinafter referred to as the "Applicant") registered under GST at Nagpur with Registration number 27AAFCN5825Q1ZS. It is into development of land and construction of flats to be given out on lease as per the Agreement of Lease entered by them with the customers which is enclosed to this application. 2.0 Maharashtra Airport Development Company Ltd.(hereinafter referred to as "MADC"), a Company registered under the Companies Act, 1956 & having its registered office at World Trade Centre, 8^th floor, Cuffe Parade, Mumbai-400005, is a special planning authority under the Maharashtra Regiona....
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....anges to the plan as approved. The prospective buyer would make an advance payment followed by instalments as prescribed. The buyer is liable to pay all applicable taxes including GST on the lease Consideration as applicable. The buyer is also liable to pay stamp duty and registration charges as applicable. The lease of property shall be registered in the name of buyer on payment of consideration as scheduled. The deed is registered with right of inheritance of lease for the remaining period of lease as is dependent on the situation. The agreement also contains conditions as the property should be maintained in good condition, should not be used for storing hazardous substances, pay maintenance as prescribed etc. The payments from the buyers are described as lease Consideration. Authenticated copies of certificates showing nature of title of MADC and Developer is made available to the prospective buyer. Copy of sanctioned plan on basis of which construction is undertaken is also made available to the buyer. 7.0 Whether the transaction is outside the purview of GST as a transaction in immovable property? If not, what is the appropriate classification and rate of GST? are the i....
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.... (b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier. SCHEDULE III [Section 7] ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES . . . 5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. TRANSFER OF PROPERTY ACT Section 54 in The Transfer of Property Act, 1882 54. "Sale" defined .-"Sale" is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. Sale how made.-Such transfer, in the case of tangible immoveable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument. In the case of tangible immoveable property of a value less than one hundred rupees, such transfer may be made either by....
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.... common parlance meaning of "ownership". "Ownership" denotes relation between a person and an object forming the subject matter of his ownership. It consist in a complex of rights, all of which are rights in rem, being good against all the world and not against specific persons (Salmond on Jurisprudence 12th edition, Chapter 8). 9.3 The ownership therefore grants rights in the subject matter to the exclusion of the whole world. The nature of transaction as is evident from the agreement does not involve transfer of ownership and hence there is no sale of land as contemplated with in meaning of either Transfer of Property Act or GST is happening in the present case. 9.4 Clause (b) [Paragraph 5 of Schedule Il provides that construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier shall be treated as service. It is therefore important that the building should be intended for sale to buyer. In the p....
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.... or denomination, to another form, currency or denomination for which a separate consideration is charged. Therefore anything other than goods is service. Therefore the transaction of leasing is a 'service'. A doubt will arise whether such services in relation to immovable property is treated as 'service'. To clarify this, specific provisions has been made in Schedule II to GST Act. Sch. II classifies transactions as either supply of goods or supply of services. SI.No. 2 and 5 of Sch. provides that: "2. Land and Building (q) any lease, tenancy, easement, licence to occupy land is a supply of services; (b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services." "5. Supply of services The following shall be treated as supply of service, namely:- (a) renting of immovable property;.. ." 10.2 Clause (a) of SI. No. 2 treats lease, tenancy or easement or license to occupy land as provision of service. The transaction between Applicant and MADC falls under this clause. But the same is not applicable to transac....
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....plication filed by the applicant was held on 6" March, 2019, wherein the applicant has made his submission which has been taken on record. 2.0 During the course of personal hearing, Hon'ble Member AUTHORITY FOR ADVANCE RULINGS (GST) had requested the applicant to provide the details of lease amount charged to the customers towards the leasing of residential apartment/flats in the proposed project covered in the application filed by the applicant before the Hon'ble Authority for Advance Ruling and also some other residential projects in the vicinity of the project of the applicant where flats are available for sale. 3.0 Accordingly, the applicant is herewith submitting the details of the lease amount proposed to be charged/recovered from the customers. Also, the sale price per sq. feet of some other residential projects in the vicinity of the project of the applicant is also being submitted for ready reference. TABLE SHOWING LEASE AMOUNT IN THE PROPOSED PROJECT OF RESIDENTIAL APARTMENT FOR LEASE OF THE APPLICANT S.No. Unit No. Type Area in Sq.Ft. Lease value of unit Lease price Rs./sq.Ft. (booking price) 1. Symphony 1C0301 1BHK 970 25,22,000....
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....sion & District Nagpur, Sub Division & Taluka Nagpur (Rural) Revenue Village Khapri (Rly) M/s. Chourangi Builders and Developers Pvt. Ltd., (formerly known as M/S. Reatox Builders & Developers Pvt. Ltd., hereinafter referred to as "Chourangi"), having its registered office at 3/341, 1A, Rajiv CHSL, Madhusudan Kaleikar Marg, Next to FDA, Bandra Kurla Complex, Bandra (E), Mumbai 400051 formed a Special Purpose Vehicle (SPV), under the name and style of 'M/s. Nagpur Integrated Township Ltd.' (NITPL), with IJM Realty (Mauritius) Ltd., a company incorporated under the laws of Mauritius. IJM, on behalf of NITPL has deposited through MADC and Chourangi a Onetime Settlement (OTS) amount to M/s. Vijaya Bank towards the Settlement of loan amount, availed by Chourangi in respect of the development of the said Land. In consideration of NITPL paying the OTS amount and agreed dues in respect of the development of the said Land, MADC had entered in to Development Agreement (DA) with NITPL on 08th December 2017 along with a Power of Attorney (POA) dated 08th December 2017 and thereby entrusted to NITPL the rights to design, finance and develop a township project, on the said Land comprisi....
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.... by the Prospective Lessee. The Developer has also granted inspection of all relevant building plans, including that of common areas as defined in section 2 (n) of the Real Estate (Regulation and Development) Act 2016. The Prospective Lessee, by agreeing to the terms and conditions as set out in the application for booking/allotment, has applied to the Developer for the allotment of the said Property. The developed units will be transferred to prospective customers through an agreement wherein the allotment is given to customer referred to as lessee. The lessee agrees to take on lease from Development (Applicant) and Applicant agree to lease out to respective buyer the respective flat as mentioned specifically in the agreement. The lessee is not having any option to suggest any changes to the plan as approved. The prospective buyer would make an advance payment followed by instalments as presented. The buyer is liable to pay all applicable taxes including GST on the lease Consideration as applicable. The buyer is also liable to pay stamp duty and registration charges as applicable. The lease of property shall be registered in the name of buyer on full payment of consideration....
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....hout consideration is not a supply, barring few exceptions, in which a transaction is deemed to be a supply even without consideration. Further import of services for a consideration, whether or not in the course or furtherance of business is treated as supply. From the facts of the case & paras of proposed lease agreement, transaction between developer and prospective lessee covers the concept 'supply' as it is for supply of construction services for a consideration. Basically it is a works contract service and As per judgment of Hon'ble Apex Court in case of Larsen & Toubro Vs. State of Karnataka (2014) 1 SCC 708 =2013 (9) TMI 853 - SUPREME COURT. The term works contract is broad and includes all obligations and all types of contract. Works contract is a contract for undertaking or bringing into existence some works. Hence, lease agreement between applicants and prospective lessee is for works contract service. A perusal of the above authorities leads us to the conclusion that "Works" means the carrying out of construction activities involving labour along with the supply of materials. Further, there appears to be a close nexus between "works contract" and construction a....
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....s defined in clause (119) of section 2 Under GST, the whole works contract is treated as a composite supply of Services and leviable to GST as Supply of Services. As per entire consideration will be paid by the prospective lessee before issuance of completion certificate or prior to occupation GST will be applicable. From the facts of the case entire construction service is provided to prospective lease in compliance of agreement lease hence it is squarely covers in the ambit of GST Law. 04. HEARING Preliminary Hearing in the matter was held on 07.02.2019. Sh. Natrajan Ganesh, Advocate, appeared and requested for admission of application as per contentions made in their application. Jurisdictional Officer Sh. Rahul Ganveer, State Tax Officer ((NAG-BST-C-001) Nagpur appeared and made written submissions. The application was admitted and called for final hearing on 06.03.2019. Sh. Natrajan Ganesh, Advocate, appeared made oral & written submissions. During final hearing Sh Natrajan Ganesh was asked to submit details such as area of a unit that is to be leased the amount of lease received phase wise and sale price of similar unit as per ready reckoner or as the case may be ....
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....y will be constructing both, residential and commercial units, the query raised by them is only in respect of "transaction in immovable property". In normal circumstances flats are generally taken on lease only when the lessee intends to stay therein. The lease rent/amount is paid monthly by the lessee with an advance amount paid as deposit which is generally refundable. Thus flats given on lease would mean completed construction of units with OC. It may be possible in some cases that flats may also be occupied without OC but that would not be a matter of concern to this authority. Thus we have no hesitation in stating that lessee customers who take flats on lease would generally prefer to use the same. We may also mention here that generally the rent/lease amount, as is prevalent on the Mumbai market, would be around 2% to 3% of the property value, per month. The situation in the subject case is very much different. First of all the applicant says that they are receiving the lease amounts from their customers during the construction process. The applicant keeps paying instalments on completion of slabs and this type of payment is only made when a person has entered into an agre....
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.... and therefore we conclude that the said transaction is only being given a colour of a lease transaction. Further, we find that the customers of the applicants also have to pay maintenance charges. In normal case in the State of Maharashtra in all the lease transactions of residential flats it is the flat owners who pay maintenance charges and not the lessee. We understand that there is no law to state that the maintenance should not be paid by the lessee but the general nature of such transactions where the flat owner pays the maintenance cannot be ignored. The applicant has submitted that the subject transactions being undertaken by them, being in the nature of long term lease of residential apartment to individual customers, will construe a supply of service but such supply is exempted from payment of GST, vide S.No. 12 of Notification No. 12/2017. The Government, has granted exemption to certain services vide Notification No. 12/2017-Central Tax (Rate)dated 28.06.2017. As per Sl. No. 12 of said notification, GST on following service is NIL: Sr.No. 12 : Heading 9963 or Heading 9972 : Services by way of renting of residential dwelling for use as residence. We find tha....