TaxTMI 
TaxTMI 
2022 (2) TMI 1101
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....ivate Limited, S 21, G 1, Western Heights, 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 ....
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....t - 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. " • Furthermore, the meaning of Composite Supply has been clarified in a Flyer issued by 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'.....
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....applicant is of the view that the said supply of services should be considered as Composite Supply under Section 8 of CGST and RGST Act, 2017 wherein 'Construction Services' are considered as 'principal supply'. 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? • 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 a....
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.... is earlier. (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 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. 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 applicab....
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....e. • Therefore, without prejudice to the applicant's interpretation for Question 1 to 3, if the ancillary' services are taxable at 18% then, ITC in respect of the said services (as mentioned in Para 5 above) shall be eligible as the same are incurred in the course or furtherance of business. B. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT:- Question No 1. Whether recovery of charges for 'the ancillary services' by builders would be considered as a 'composite supply' naturally bundled with 'Construction Services' 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 certifica....
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....st of these services are included in the land construction cost, and, b. If the stamp duty is paid on the amount of the basic land construction cost only and does not include the cost of the other amenities, then, 1. 'the ancillary services' would be considered as a 'composite supply' naturally bundled with 'Construction Services' under Section 8 of CGST and RGST Act, 2017. As definition of composite supply as mentioned under Section 2(30) of the CGST Act as follows - "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or 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....
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.... supply for which, consideration is received before receipt of Occupancy/Completion Certificate. 3. Applicant submitted that apart from consideration for the main construction activity, they also recover charges for 'the ancillary services' like JDA Lease Charges, Electrification Charges, Sewage Treatment Plant Charges, Non-refundable IFMS (Interest Free Maintenance Security) and Club Membership from the residents. 4. To provide 'the ancillary services', broadly the applicant makes the following inward supplies:- a. Civil expenses related to club formation, interior furnishing, air conditioning and equipment expenses b. Electrification Transformer, Vacuum Circuit Breaker, Ring Main 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 o....
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....ss, one of which is a principal supply: Illustration: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply." 8.2 Principal Supply Section 2(90):- "Principal supply" means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary'" 8.3 Section 8 of the CGST Act which provides the manner of determining tax liability on a composite supply or a mixed supply, is reproduced as under: "8. The tax liability on a composite or a mixed supply shall be determined in the following Manner, namely:- (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 tax....
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.... bundled and supplied in conjunction with each other in the ordinary course of business with main supply of residential flat in the subject case. 12. We find that Heading 9954, Entry No. 3 covers 'construction services" of Notification No.11/2017 CT (R) dated 28.6.2017. The entry no. 3 is reproduced as below: 13 '3 (i) 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. (Provisions of paragraph 2 of this notification shall apply for valuation of this service) 14. The above entry 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), ....
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....st 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 (against upfront payment in the form of premium, salami, development 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....
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...., 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) 3.75 (ib) Construction of commercial apartments (shops, offices, godowns etc.) by a promoter in an 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. (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) o....
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....tion to pay tax at the rates as applicable to item (i) or (ia) or (ib) or (ic) or (id) above, as the case may be, shall be deemed to have been exercised; Provided also that invoices for supply of the service can be issued during the period from 1st April 2019 to 10th May 2019 before exercising the option, but such invoices shall be in accordance with the option to be exercised.; (if) Construction of a complex, building, civil structure or a part thereof, including,- (i) commercial apartments (shops, offices, godowns etc.) by a promoter in a REP other than RREP, (ii) residential apartments in an ongoing project, other than affordable residential apartments, in respect of which the promoter has exercised option to pay central tax on construction of apartments at the rates as specified for this item in the manner prescribed herein, but excluding supply 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 ....
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....nary course of business with main supply. These are the facilities/amenities provided by the applicant to its customers for the limited period because, for these facilities created the customers have not been given perpetual rights. The amount or consideration is charged separately for different services. Therefore, the other charges for the ancillary services provided is not covered under the scope of 'Composite supply of services'. Therefore, the contention of the applicant is found not acceptable. 19. In view of above, the other charges to be charged for ancillary services' mentioned as above are held taxable as per their SAC under the GST Act, at 18% in terms of the respective and appropriate entries (against the SAC mentioned in the Table at Para No. 17 above) in Notification No. 11/2017 CT (R) dated 28.6.2017 as they are covered under services, other than construction services. 20. Therefore, in our view, the consideration for 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 t....