TaxTMI 
TaxTMI 
2021 (7) TMI 542
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....identify locations suitable for the gated community villa projects and will buy the land in their own name and take layout approval in their name and promote the villas to various villa buyers. In another situation they identify locations suitable for the gated community villa projects and enter into agreement with the landlords for the purchase of the entire land area required for the project. The total area of land is divided into various plots and the layout approval is taken in the name of landlord and the villa approval is taken either in the name of landlord or in the name of villa buyers from concerned local authorities at their expense. After the approval from local authorities, they provide amenities like road, arch, compound wall, rain water harvest, health club etc required for the gated communities. They do marketing activities such as digital, paper ads, media advertisement etc and identify the suitable villa buyers for the projects. 3.2. The exact areas of plots as per the layout approval for each of the villa are sold to the villa buyers by the landlord and there is no undivided share of land involved in these cases. They enter into agreement with landlords to purch....
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....for undertaking the plot development and the plot is sold for a consideration to various buyers after the development work is over. There is no development work undertaken by them for and on behalf of buyers. 4. Accordingly, they requested advance ruling on the following; 1. Whether the rate of GST applicable with effect from 01.04.2019 on DLPL on promotion of villa projects for the villa buyers is 1.5% / 7.5% (effective tax rate 1%/5%) without benefit of Input Tax Credit? 2. Whether the GST tax rate of 1.5% / 7.5% is applicable on DLPL in their redeveloped projects undertaken after 01.04.2019 which were uncompleted and already started by developers before 31.03.2019? 3. How the taxable value of construction of villa is to be calculated by DLPL on the projects developed and promoted by DLPL on the arrangement of agreement with landlord, landlord selling the plots directly to various villa buyers identified by DLPL. Whether out of the total value of the villa including land value, 2/3rd of the total value shall be taken for payment of GST at the rate of 1.5% / 7.5% (effective rate of 1% / 5% on the total value of villa) 4. We believe that GST will not be applicable when DLPL....
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....ditions in the notification. 5.4. As per Para 2 of the Notification No. 11/2017 CT (Rate) dated 28.06.2017 the value of construction services provided by the promoter to the buyers of villas shall be the total amount charged for such supply less the value of such transfer of land or undivided share of land in such supply and the value of land or undivided share of land shall be deemed to be one third of the total amount charged for such supply. Therefore, the taxable value shall be 2/3rd of the total value of villa including the value of land. The CBIC in Q.No. 36 of the FAQ on Real Estate Sector issued under F.No.354/32/2019 - TRU dated 07.05.2019 clarified that the developer cannot take deduction of actual value of land, as the valuation mechanism prescribed in Para 2 of the said notification clearly prescribes one-third abatement towards value of land. Therefore, in all cases the value of land included in the value of villa shall be deemed as l/3rd of the total value of villa including the value of land. The actual value of land even if mentioned in any of the agreement is of no relevance to calculate the GST payable on the construction services of villa. Accordingly, they are ....
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..... A new tax structure for real estate sector was introduced with effect from 01.04.2019 onwards by amendment of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 by Notification No. 03/2019 - Central Tax (Rate) dated 29.03.2019. Admittedly, the services of construction of villas are being rendered by the applicant after 01.04.2019 and hence the rate as notified under the new tax structure is applicable in respect of the construction services rendered by the applicant. 8.3. The entries at Items (i) and (ia) of SI No. 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 03/2019 Central Tax (Rate) dated 29.03.2019 reads as follows; "Heading 9954 - Construction services - (i) Construction of affordable residential apartments by a promoter in a Residential Real Estate Project (herein after referred to as RREP) which commences on or after 1st April, 2019 or in an ongoing RREP in respect of which the promoter has not exercised option to pay central tax on construction of apartments at the rates as specified for item (ie) or (if) below, as the case may be, in the manner prescribed therein, intended for sale to a buyer, wholly or p....
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....ents, - (i) the developer-promoter shall pay tax on supply of construction of apartments to the landowner- promoter, and (ii) such landowner - promoter shall be eligible for credit of taxes charged from him by the developer-promoter towards the supply of construction of apartments by developer-promoter to him, provided the landowner-promoter further supplies such apartments to his buyers before issuance of completion certificate or first occupation, whichever is earlier, and pays tax on the same which is not less than the amount of tax charged from him on construction of such apartments by the developer- promoter. Explanation. - (i) - developer- promoter is a promoter who constructs or converts a building into apartments or develops a plot for sale, (ii) landowner-promoter is a promoter who transfers the land or development rights or FSI to a developer- promoter for construction of apartments and receives constructed apartments against such transferred rights and sells such apartments to his buyers independently. Provided also that eighty percent of value of input and input services, [other than services by way of grant of development rights, long term lease of land (a....
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....-Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 03/2019-Central Tax (Rate) dated 29.03.2019 provides the definition of the different terms used in the above entries. The relevant definitions are reproduced below; (xiv) the term - apartment shall have the same meaning as assigned to it in clause (e) of section 2 of the Real Estate (Regulation and Development) Act, 2016; (xv) the term - project shall mean a Real Estate Project or a Residential Real Estate Project; (xvi) the term - affordable residential apartment shall mean, - (a) a residential apartment in a project which commences on or after 1st April, 2019, or in an ongoing project in respect of which the promoter has not exercised option in the prescribed form to pay central tax on construction of apartments at the rates as specified for item (ie) or (if) against serial number 3, as the case may be, having carpet area not exceeding 60 square meter in metropolitan cities or 90 square meter in cities or towns other than metropolitan cities and for which the gross amount charged is not more than forty five lakhs rupees. (xvii) the term - promoter shall have the same meaning as assigned to it in clause (z....
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....f selling all or some of the apartments or plots; or (iv) an apex State level co-operative housing finance society and a primary co-operative housing society which constructs apartments or buildings for its members or in respect of the allottees of such apartments or buildings; or (v) any other person who acts himself as a builder, coloniser, contractor, developer, estate developer or by any other name or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale; or (vi) such other person who constructs any building or apartment for sale to the general public. (zn) "real estate project" means the development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of land into plots or apartment, as the case may be, for the purpose of selling all or some of the said apartments or plots or building, as the case may be, and includes the common areas, the development works, all improvements and structures thereon, and all easement, rights and appurtenances belonging thereto. 9. On a p....
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....Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 specify that the provisions of Paragraph 2 of the said notification shall apply for valuation of the service. The provisions of Para 2 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 is extracted below; "2. In case of supply of service specified in column (3), in item (i), (ia), (ib), (ic), (id), (ie) and (if) against serial number 3 of the Table above, involving transfer of land or undivided share of land, as the case may be, the value of such supply shall be equivalent to the total amount charged for such supply less the value of transfer of land or undivided share of land, as the case may be, and the value of such transfer of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply. Explanation. -For the purposes of this paragraph- ''total amount" means the sum total of,- (a) consideration charged for aforesaid service; and (b) amount charged for transfer of land or undivided share of land, as the case may be including by way of lease or sub-lease." In terms of the above Para 2 of the said notificatio....
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....ulates that sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building shall be treated neither as a supply of goods nor a supply of service. Therefore, the transaction is not liable to GST. In view of the observations stated above, the following rulings are issued; RULING 1. Whether the rate of GST applicable with effect from 01.04.2019 on DLPL on promotion of villa projects for the villa buyers is 1.5% / 7.5% (effective tax rate l%/5%) without benefit of Input Tax Credit? The applicant is liable to pay GST at the rate of 1.5% [0.75% - CGST + 0.75% - SGST] in respect of the services of construction of affordable residential apartments as per entry at Item (i) and at the rate of 7.5% [3.75% - CGST + 3.75% - SGST] in respect of the services of construction of residential apartments other than affordable residential apartments as per entry at Item No. (ia) of SI No. 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 subject to the conditions prescribed under the respective entries in the villa projects. 2. Whether the GST tax rate of 1.5% / 7.5% is applicable on DLPL in their redeveloped projects undertaken after 01.04.2019 which were ....