TaxTMI 
TaxTMI 
2026 (4) TMI 354
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....sults in a supply of goods or services considering the fact that the entire construction is proposed to be outsourced to a contractor? II. If the answer to the above question no 1 is in affirmative, (a) whether such supply is classifiable under heading 9954 (xii) and chargeable to CGST at 9% and SGST at 9% under Sl. No. 3 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended OR (b) Classifiable under heading 9954 (ia) and chargeable to CGST at 3.75 % and SGST at 3.75% under Sl. No. 3 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 ? III. If it is held that the supply is classifiable under the heading 9954 (ia) and chargeable to CGST @ 3.75% and SGST @ 3.75% under Sl.No. 3 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, then whether the consideration for construction as per the construction agreement can be treated as value of supply when there is a separate agreement for sale of land? 3. Admissibility of The Application: The Applicant, under Column 13 of Form ARA-01, has selected the following categories of issues, namely: (i) Classification of any goods and/ or services or both....
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....vities undertaken by it for its customers pursuant to the construction agreement are classifiable as works contract service falling under Heading 9954(xii) and are chargeable to CGST at the rate of 9% under Serial No. 3 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended. It is further contended that the Applicant, along with the landowners, enters into a tripartite agreement with the customer for the purpose of sale of plot. In terms of the said agreement, there is a transfer of title in the plot to the customer, which amounts to transfer of title in immovable property. Such transfer of title in immovable property is not exigible to GST and, according to the Applicant, does not form the subject matter of the present application. Further, vide a separate construction agreement, the customer appoints the Applicant for the purpose of undertaking construction of a villa on the plot agreed to be sold to the customer. Since the construction agreement is an independent and distinct contract from the agreement for sale of land, the Applicant submits that the same is classifiable under Heading 9954(xii) as works contract service." 5.3 In respect of Question....
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.... arguments advanced during the personal hearing. The main issues for consideration are "Classification of any goods and/ or services or both", "Applicability of a notification issued under the provisions of this Act" and Determination of time and value of supply of goods or services or both and 10. The applicant seeks advance ruling in respect of the question mentioned at paragraph 3 supra. We proceed to answer the questions. 11. The first question for consideration is "Whether the agreement entered into by the applicant with the customers for construction of villa results in a supply of goods or services considering the fact that the entire construction is proposed to be outsourced to a contractor". 11.1 The term "supply" is defined in an expansive manner under Section 7 of the Central Goods and Services Tax Act, 2017 to include all forms of supply of goods or services or both, such as sale, transfer, barter, exchange, licence, rental, lease or disposal, made or agreed to be made for a consideration by a person in the course or furtherance of business. For a transaction to qualify as a supply, there must be a supplier who provides goods or services and a recipient who rec....
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.... the ground that the construction activity has been entirely outsourced to a contractor. 12. The Second and Third questions in consideration are "Whether the supply undertaken by the Applicant in respect of construction of villas is classifiable under Heading 9954(xii) and chargeable to CGST at 9% and SGST at 9% under Sl. No. 3 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended, or alternatively, classifiable under Heading 9954(ia) and chargeable to CGST at 3.75% and SGST at 3.75% under the said notification; and if it is held that the supply is classifiable under Heading 9954(ia), whether the consideration attributable to construction under the construction agreement alone can be treated as the value of supply for the purposes of levy of GST, in cases where a separate agreement for sale of land is executed." 12.1 Serial No. 3 of Notification No. 11/2017-Cenral Tax (Rate) dated 28.06.2017 along with Heading 9954(ia) and 9954 (xii) read with Paragraph 2 of the said notification, as amended is reproduced below for better understanding of the issues before us. 12.2 Serial No. 3 of Notification No. 11/2017-CT (R) dated 28.06.2017 as amended. Sl.No. ....
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....instant case, the primary issue for determination is "whether the service provided by the Applicant is classifiable under Heading 9954 (ia) or Heading 9954(xii)". 12.4 On perusal of the Joint Development Agreement dated 17.08.2020 executed between the Applicant and the landowners, it is observed that both parties have mutually agreed to jointly develop and complete a residential villa project on the schedule property. Under the said agreement, the landowners have authorised the Applicant to obtain layout plan approvals from the competent authority, as well as individual villa plan approvals for the respective plots, for the purpose of developing the schedule property into a residential villa project comprising villas of various dimensions along with common amenities, infrastructure, and allied facilities. 12.5 Further, on examinations of the draft Agreement to sell and the Construction Agreement submitted by the Applicant, it is noticed that any purchaser desirous of owning a plot/villa in the schedule property is required to confer upon the Applicant an exclusive right to construct the villa on the said or plot by entering into a Construction Agreement. The Agreement to sell....
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....ended for sale, where consideration is received before issuance of completion certificate. 12.8 The Applicant's submission that the agreement for sale of land and the construction agreement are independent contracts has also been examined. While transfer of title in land is covered under Schedule III to the CGST Act, 2017 and is not exigible to GST, the facts reveal that the agreements are executed in pursuance of a single economic objective, namely, supply of a completed residential villa to the buyer. The sale of land and construction of villa are naturally bundled as elaborate in paragraph 13.5 supra and supplied in van conjunction with each other in the ordinary course of business. Therefore, the transaction qualifies as a composite supply in terms of Section 2(30) of the CGST Act, 2017, with construction service being the principal supply. In terms of Section 8 of the CGST Act, 2017, a composite supply is to be treated as a supply of the principal supply. Accordingly, the entire consideration attributable to the construction of the villa is liable to tax in the manner applicable to construction services under the GST law, subject to the valuation mechanism prescribed for....
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....etition, being SLP (C) No. 21703 of 2022, before the Hon'ble Supreme Court challenging the aforesaid decision, and the matter is pending adjudication. In such circumstances, the said judgment cannot be treated as laying down settled law. In any event, a judicial pronouncement rendered in the facts of an individual case cannot override or dilute the express provisions of a statutory rate notification issued under the CGST Act, 2017, which continues to remain in force and is binding on both the tax authorities and the taxpayers, unless and until it is set aside or read down by a court of competent jurisdiction with finality. 12.14 The Applicant's contention that the value of land is readily ascertainable due to the existence of a separate agreement for sale of land also does not merit acceptance. It is well settled that for GST purposes, where multiple agreements are executed in respect of a single transaction intended to provide a bundled supply to the buyer, the substance of the transaction has to be examined rather than the form. In the present case, the agreement for sale of land and the construction agreement are inextricably linked and together result in the supply of a c....