TaxTMI 
TaxTMI 
2021 (9) TMI 320
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....') is registered under the GST Vide GSTIN 33AAHFT892OF1Z6. They have sought Advance Ruling on the following questions: 1. Whether paragraph 2A of Notification No. 03/2019-Central Tax (Rate) dated 29th March, 2019, is applicable to those agreements entered on or before 29th September 2019 with unregistered persons? 2. If the answer to question (1) is affirmative, whether Notification no 03/2019-Central Tax (Rate) dated 29th March, 2019 is applicable, when the actual cost of construction of services are known? 3. If the answer to the question (1) or (2) is negative, which valuation rule is applicable for identifying the value of supply for construction services rendered? 4. What will be the value of supply, in case, Applicant adopts Rule 30 of CGST Rule, 2017? 5. What will be the value of supply, in case, Applicant adopts Rule 31, instead of Rule 30 of CGST Rule, 2017 in terms of proviso to Rule 31 of CGST Rules? 6. Whether paragraph 2A of Notification no 03/2019-Central Tax (Rate) dated 29th March, 2019, is ultravires Section 15(5) of CGST Act, 2017 and hence is inapplicable until there is prescription of rules in terms of Se....
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.... for obtaining necessary approvals from authorities; • Owners will continue to be title holders of the land until the sale deed conveying undivided shares are registered The applicant has stated that as on date, pending minor works, the construction work for the owner's portion is substantially completed in all aspects. The transaction will be complete in all aspects, in terms of the JDA, once the key is handed over to the landowners. 2.2 On interpretation of law, the applicant has submitted that, Paragraph 2A in Notification no 03/2019-Central Tax (Rate) is applicable only when a registered person transfers development right. They have further stated that paragraph 2A was amended vide Notification No. 20/2019- Central Tax (Rate) dated 30^th September, 2019, wherein, the word 'registered' mentioned in Notification no 03/2019-Central Tax was omitted.; it is evident from the above that, for the period commencing from 29th March 2019 until 29th September, 2019, paragraph 2A was applicable only to a registered person transferring development rights; however, with effect from 30th September, 2019, paragraph 2A was applicable to any person transferring the ....
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....also stated that the construction service has been availed by them against UDS and not for TDR, FSI and on this account the Notification No.03/2019 is not applicable to their case. The AR undertook to furnish the Joint Development Agreement, paperbook (referred by him), construction agreement with owners/others and the method of valuation proposed by them with workings and proof. 4.1 In furtherance to the hearing held on 19.02.2021, the applicant submitted the copy of agreement dt. 17.04.2019 entered into between them and the land owners Mrs Alamelu & Mrs Rama Swaminathan, for provision of construction services in lieu of UDS along with excerpts of relevant notifications, provisions of law and the case law they relied upon. They further submitted the following documents on 25.03.2021. • Synopsis of Advance ruling application filed • Copy of construction agreement between developer and third party • Workings for the proposed valuation to be adopted by the applicant • Self-attested copy of actual cost incurred for construction service rendered by them. 4.2 In their additional submissions the applicant has inter-alia stated as ....
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....er into a contract, which is relevant in determining the nature of service provided by either parties. • The applicant has relied upon the following case laws to substantiate their contentions i. M/s. Super Poly Fabrics Ltd Vs Commissioner of Central Excise, Punjab ii. Assam Small Scale Ind. Dev. Corp. v M/s J.D. Pharmaceuticals and Another. 2005 (10) TMI 494-Supreme Court 4.3 Registry issued a letter dt. 12.04.21 requiring the applicant to submit proof of valuation and certified copy of valuation which were required to be submitted. Applicant vide their letter dt.14.07.21 submitted a certified copy of valuation, CA Certificate to substantiate veracity of cost workings and proof of valuation. They also submitted that the delay in submission of documents was due to lock down restrictions. 4.4 The applicant was addressed vide letter dt.28.07.21 offering them another Personal hearing in view of the change in the constitution of the bench due to change in the state authority for Advance ruling. Accordingly another PH was fixed on 10.08.21, wherein the authorized representative of the applicant, Shri.J.Srinivasan, Tax consultant, appeared and reitera....
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.... when the actual cost of construction of services are known? 3. If the answer to the question (1) or (2) is negative, which valuation rule is applicable for identifying the value of supply for construction services rendered? 4. What will be the value of supply, in case, Applicant adopts Rule 30 of CGST Rule, 2017? 5. What will be the value of supply, in case, Applicant adopts Rule 31, instead of Rule 30 of CGST Rule, 2017 in terms of proviso to Rule 31 of CGST Rules? 6. Whether paragraph 2A of Notification no 03/2019-Central Tax (Rate) dated 29th March, 2019, is ultravires Section 15(5) of CGST Act, 2017 and hence is inapplicable until there is prescription of rules in terms of Section 15 (5) read with Section 2(87) of CGST Act, 2017. Of the above questions, Q.No.6 is not applicable under Section97(2) of the CGST Act, which has already been communicated to the applicant in the first Personal hearing held on 19.02.2021 and accepted by the applicant. Hence the ruling in respect of Questions 1 to 5 being sought on the applicability of notification issued under the provisions of the CGST Act, 2017 and also on determination of time and value of sup....
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....hare of UDS in favour of those who buy flats from the applicant, specified number of flats will be handed over to the land owners by the applicant. They also have stated that the object and purport of the transaction was never to transfer any development rights in lieu of construction services to be rendered by them. Hence they contend that the construction services are provided in lieu of the UDS of land transferred and no transfer of development rights is involved as stipulated in the notification no.3/19 cited supra. Further they state that such transactions will fall in the purview of para 2A of the said notification if and only if there is transfer of development rights. 7.3 The term development right has not been defined in the GST Law or the notification issued in this regard. However as per The Real Estate (Regulation and Development) Act, 2016, Development is defined under Section 2 (s) as follows: (s) "development" with its grammatical variations and cognate expressions, means carrying out the development of immovable property, engineering or other operations in, on, over or under the land or the making of any material change in any immovable property or land ....
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.... JOINT DEVELOPMENT AGREEMENT WITNESSETH AS FOLLOWS:- ........... 2. The Developer hereby agrees that it will at its own cost and expense will obtain approval for construction from CMDA and Corporation of Chennai and construct the said building...... 6. In lieu of the DEVELOPER having agreed to construct and allot flats as mentioned above to the OWNERS, the OWNERS agree to convey/transfer 953.33 Sq.ft undivided share of land in the Schedule A property to the DEVELOPER or their nominee/ s by executing and registering a power of attorney in favour of the DEVELOPER or its nominee simultaneously upon DEVELOPER obtaining approval from statutory authorities........ 8. The OWNERS shall at no point of time be liable to contribute any moneys for or towards the construction of the building or any part thereof. The OWNERS shall also not be liable to pay any further money s to the DEVELOPER on account of any escalation in the cost of construction of the Building. 9. All the cost incurred in obtaining necessary sanctions, permits and approvals for the construction of the new building shall be borne by the DEVELOPER. All expenses such as Architect fees....
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....dditional FSI), nearest to the date on which such development right or FSI (including additional FSI) is transferred to the promoter, less the value of transfer of land, if any, as prescribed in paragraph 2 above.". (ii) Para2A was inserted vide notification no.3/2019-CT (Rate) dt. 29.03.2019 and this notification has added Section 148 of the CGST Act in the Preamble of the Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 along with Section 9(3),9(4), 11 (1),15(5), 16(1) of the CGST Act. Section 148 of the Act is as below:- "148. The Government may, on the recommendations of the Council, and subject to such conditions and safeguards as may be prescribed, notify certain classes of registered persons, and the special procedures to be followed by such persons including those with regard to registration, furnishing of return, payment of tax and administration of such persons". From the above, it is seen that Section 148 allows the Government, on the recommendations of the GST Council, to notify a certain class of registered persons and to prescribe special procedures with regard to payment of tax and administration of such persons. 8.2 GST council in its 34th Meet....
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.... (including additional FSI) on or after 1st April, 2019 for construction of a project against consideration payable or paid by him, wholly or partly, in the form of construction service of commercial or residential apartments in the project or in any other form including in cash; as the registered persons in whose case the liability to pay central tax on, - (a) the consideration paid by him in the form of construction service of commercial or residential apartments in the project, for supply of development rights or FSI (including additional FSI); (b) the monetary consideration paid by him, for supply of development rights or FSI (including additional FSI) relatable to construction of residential apartments in project; (d) the supply of construction service by him against consideration in the form of development rights or FSI (including additional FSI), - shall arise on the date of issuance of completion certificate for the project, where required, by the competent authority or on its first occupation, whichever is earlier." Above provisions notifies the class of persons i.e., the promoters who receive development rights for construct....
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....d to the land owners both registered or unregistered against the development rights and therefore, the applicant has to adopt the value as per Para 2A to the Notification and the liability to tax arises on the date of issuance of completion certificate for this project or the date of first occupation. The value to be adopted for construction services provided to land owner, when such land owner is not registered is provided in FAQ (part-II) dated 14th May 2019, the relevant portion is extracted as under: "FAQs (Part II) Dated the 14th May, 2019 on real estate issued by the CBIC vide F. No. 354/32/2019-TRU vide Point no.26 clarifies as follows: Sl.No. Question Answer 26. How to determine value of construction services provided by the promoter to land owner in lieu of transfer of development rights, when land owner is not registered? Value of construction services provided by the promoter to land owner in such cases shall be determined based on the total amount charged by the promoter for similar apartments in the project from independent buyers, other than the land owner, nearest to the date on which such development right etc. is transferred to the promoter, le....
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....ecommendations of the Council shall be determined in such manner as may be prescribed. In the instant case, the date of levy being the date of issuance of completion certificate, Para 2A becomes applicable to them and so the value should be calculated only as prescribed in the said para. The said para prescribes that the value of construction in respect of such apartments shall be deemed to be equal to the Total amount charged for similar apartments in the project from the independent buyers, other than the person transferring the development rights/FSI. From the wording of this para, it is seen that the only value which can be adopted is as prescribed, there being no choice of adoption of any other value. As the law has provided for such valuation, the contention that para 2A is not applicable when the actual cost of construction is available does not hold water as we cannot go beyond the law pronounced. Hence the valuation as prescribed in the said para 2A becomes squarely applicable in the present case. 10. From the above, it is clear that Para 2A of the Notification no. 3/19 is applicable to the transaction between the applicant and the owners of the land and the valuatio....