TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 1101
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.... Shyam Nagar, Sodala, Jaipur-302019, RAJASTHAN -(hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (b),(d) (e) & (g) given as under:- (b) applicability of a notification issued under the provisions of this Act; (d) admissibility of input tax credit of tax paid or deemed to have been paid; (e) determination of the liability to pay tax on any goods or services or both; (g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. A. SUBMISSION AND INTERPRETATION OF THE APPLICANT: 1. Brief facts of the case : * Richwell Enterprises Private Limited is the company is engaged in the business of construction of residential complex. * Currently, as per Notification No, 03/2019 - Central Tax (Rate) dated 29 March 2019, the applicant is paying outward tax liability on Construction Services at the rate of 1% or 5%, as the case maybe. * Further, the applicant does not pay GST in respect of flats/units sold after the issuance of Completion Certificate or its first occupation, whichever....
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....y CBIC and relevant extract has been produced below for ready reference:- i. The concept of composite supply under GST is identical to the concept of naturally bundled services prevailing in the existing service tax regime. This concept has been explained in the Education Guide issued by CBEC in the year 2012 as under- 'Bundled service' means a bundle of provision of various services where in an element of provision of one service is combined with an element or elements of provision of any other service or services. Each service involves differential treatment as a manner of determination of value of two services for the purpose of charging service tax is different. " ii. The rule is - 'If various elements of a bundled service are naturally bundled in the ordinary course of business, it shall be treated as provision of a single service which gives such bundle its essential character'." * In view of, it is submitted that the primary business of the applicant is construction of Residential Complex. In addition to construction services, the applicant also provides 'the ancillary services 'to the residents of the complex. * It is submitted that the sai....
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....rincipal supply), i.e., 1% or 5% as the case maybe? * As per Section 8 of CGST and RGST Act 2017, GST on the composite supply shall be applicable on the basis of the principal supply and therefore, in the given instance, the ancillary services would attract GST liability as applicable on the Construction Services being the principal supply. * As per Notification No. 03/2019 - Central Tax (Rate) dated 29 March 2019 following rates are applicable: * Since, GST is payable on construction services (before Completion Certificate is issued) at the rate of 1% or 5%, as the case maybe, the applicant is of the view that charges for 'the ancillary services' would also attract GST at the rate of 1% or 5%, as the case maybe. * Accordingly, the applicant is view of, 'the ancillary services' would be taxable as 'construction services' entry number 3 of Notification No. 11/2017-Central Tax (Rate) dated 28 June 2017 as amended from time to time. Extract of Notification has been attached herewith as Annexure G. Particulars Rate applicable on Value of Flats after 1/3rd abatement for Land Effective Rate i) Construction of affordable residential apartments by a prom....
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....ale 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. 3. 75 (CGST) + 3.75 (SGST)= 7.5% 5% Question No 3. Further, if answer to Question No. 1 is yes, whether recovery of charges for the ancillary services by builders after completion certificate would not attract GST liability considering them to be composite supply naturally bundled with Construction Services which does not attract GST once completion certificate is issued? * As per above mentioned applicant's interpretation, the ancillary services would attract GST liability as applicable on the Construction Services being the principal supply. Now we are assessing that whether such charges would be taxable post issuance of completion certificate also. For assessing the same, taxability of construction services needs to be rationalized. * As per Para 5 of Schedule III of CGST Act, 2017. the following shall be treated neither as a supply of goods nor a supply of services:- "Sale of land and, subject to clause tb) of paragraph 5 of Schedule II. sal....
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....vices' under Section 8 of CGST and RGST Act, 2017? Question No 2. If answer to Question No. 1 is YES, whether the charges for 'the ancillary services' would attract GST at the rate specified for 'Construction Services' (principal supply), i.e., 1% or 5% as the case maybe? Question No 3. Further, if answer to Question No. 1 is YES. whether recovery of the charges for 'the ancillary services' by builders, after completion certificate would not attract GST liability considering them to be composite supply naturally bundled with Construction Services which does not attract GST once completion certificate is issued? Question No 4. If answer to Question No. 1, 2 and 3 is NO and GST is levied on charges for 'the ancillary services' as individual respective service (considering 18% GST rate) then whether Input Tax Credit can be claimed in respect of GST paid on expenses incurred to provide the said ancillary services? C. PERSONAL HEARING In the matter personal hearing was granted to the applicant on 15.11.2021. Shri Sunil Goyal, CA & Deepak Goyal, CA appeared for personal hearing. They reiterated the submission already made in written submission. Th....
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....r services or both, or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply * Further as per Section 8 of the CGST Act - i. "a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply. " It is submitted that the said ancillary services are provided in conjunction to the construction services in the ordinary course of business and are naturally bundled. It should be treated as provision of composite service which gives such bundle its essential character, provided, that the ancillary services are not provided separately to parties other than buying the flat / unit from the company. Hence 'the ancillary services' shall be treated as composite supply with construction while charging GST on the same. 2. As per Section 8 of CGST and RGST Act 2017, GST on the composite supply shall be applicable on the basis of the principal supply and therefore, in the given instance, the ancillary' services would attract GST liability as applicable on the Construction Services being the prin....
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....in Unit. Variable Renewal Energy, Main Panel, Active/Automatic Power Factor Correction/Control (Panel), Panel Distribution Channel, High Tension Low Tension Cable, CTPT Combined Metering Panel, Solar Panel. Inverter and Net Metering Expenses c. Sewage Treatment Plant related equipment as well as civil expenses 5. Applicant feels that the charges for the 'Ancillary Services' are primarily for supply of construction services since they are received only from the customers to whom construction services are supplied and therefore the services underlying the 'Ancillary' Services' may be treated as naturally bundled with supply of main construction services which are supplied in conjunction with each other, in the ordinary course of business. Hence, in case these services are treated as 'Composite supply', construction services may be treated as principal supply of such composite supply; since the same clearly constitutes predominant element of such transactions and is the primary supply giving rise to the associated or ancillary supplies. As per the applicant, in such a situation, the entire value of the charges of the 'Ancillary Services' should a....
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....y:- (a) a composite supply comprising two or more supplies, one of which is a supply, shall be treated as a supply of such principal supply: (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax." 8.4 In order to be held as 'Composite supply' as per Section 2 (30) of the CGST Act, 2017, there must be two or more taxable supplies of goods oi of services or both or any combination thereof, which are naturally bundled and are supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. 9. In the present case, we observe from said agreement for sale that, the applicant has mentioned the value of supply of construction of residential unit and the value of other ancillary services separately. As per para no. 1.2 of page 3 & 4 of the impugned agreement for sale, the applicant intend to collect the value of construction of residential unit supply (having saleable area of apartment No. A-704 is 1603 Sq Ft.), for an amount of Rs. 40,50,000/- + taxes extra separately from the customer on which stamp duty is payable. Para no. 1.2 of page 4 ....
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....try is specifically related to 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. 15. Further, the Entry No. 3 of Notification No. 11/2017 CT (R) dated 29.6.2017 has been amended vide Notification No. 1/2019 CT(R) dated 29.01.2010, Which is as under:- (a) against serial number 3, for item (i), and the entries relating thereto in column (3), (4) and (5), the following items and entries shall be substituted, namely, - Table "(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 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. (P....
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....nt charges etc.) or FSI (including additional FSI), electricity, high speed diesel, motor spirit, natural gas], used in supplying the service shall be received from registered supplier only; Provided also that inputs and input services on which tax is paid on reverse charge basis shall be deemed to have been purchased from registered person; Provided also that where value of input and input services received from registered suppliers during the financial year (or part of the financial year till the date of issuance of completion certificate or first occupation of the project, whichever is earlier) falls short of the said threshold of 80 per cent., Central tax shall be paid by the promoter on value of input and input services comprising such shortfall at the rate of nine percent on reverse charge basis and all the provisions of the Central Goods and Services Tax Act, 2017 (12 of 2017) shall apply to him as if he is the person liable for paying the tax in relation to the supply of such goods or services or both; Provided also that notwithstanding anything contained herein above, where cement is received from an unregistered person, the promoter shall pay tax on supply of such ceme....
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....of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier. (Provisions of paragraph 2 of this notification shall apply for valuation of this service) 3.75 (ic) Construction of affordable residential apartments by a promoter in a Real Estate Project (herein after referred to as REP) other than RREP, which commences on or after 1st April, 2019 or in an ongoing REP other than 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 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.(Provisions of paragraph 2 of this notification shall apply for valuation of this service) 0.75 (id) Construction of residential apartments other than affordable residential apartments by a promoter in a REP other than a RREP which commences on or after 1st April, 2019 or in an ongoing REP oth....
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....ly by way of services specified at items (i), (ia), (ib), (ic), (id) and (ie) above 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. Explanation. -For the removal of doubt, it is hereby clarified that, supply by way of services specified at items (i), (ia), (ib), (ic), (id) and (ie) in column (3) shall attract central tax prescribed against them in column (4) subject to conditions specified against them in column (5) and shall not be levied at the rate as specified under this entry. (Provisions of paragraph 2 of this notification shall apply for valuation of this service 9 16. The services to be provided by the applicant covered under entry No. (i) or (ia) as the case may be, is specifically related to Construction of affordable residential apartments other than affordable residential apartments by a promoter in a Residential Real Estate Project (RREP). 17. Further, as per the explanatory note published by the Government, for the purposes of the CGST Act. 2017 'the ancillary services....
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....or providing the construction services by way of construction of residential unit and the consideration for the ancillary services (i.e. other charges collected) are considerations against separate independent services being provided by the applicant. Considering the nature of supplies in question, the services for each of the service head/description are covered under Notification No. 11/2017 CT (R) dated 28.6.2017 mentioned above and therefore, the Other Charges would attract GST @18%. Thus, the l/3rd deduction from total value as per Sr. No. 2 of the Notification (as claimed by the applicant) cannot be allowed as deduction from the Other Charges. A plain reading of the items or the list of other charges itself shows that ancillary services supplied against the said charges have no connection with land and therefore, question of considering the 1 /3rd deduction or rebate towards land cost does not arise, particularly, as the entries applicable to both of the above services are different. 21. As tar as availability of Input Tax Credit (ITC) on goods & services received for supply of the 'ancillary services' is concerned, we are of the view that as 'ancillary services&....