TaxTMI 
TaxTMI 
2026 (6) TMI 242
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....ed and held as taxable supply assuming that being "services of works contract service" is rendered to MHADA identified 20% flats then what is the value of supply for GST? Whether it is MHADA dictated value of supply or Market value of supply? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 1. FACTS AND CONTENTION - AS PER THE APPLICANT 1.1 The applicant, M/s. Vedant Construction, is a partnership firm engaged in the business of real estate development, undertaking primarily residential projects within the limits of the Thane Municipal Corporation (TMC). The applicant is registered under the CGST Act and the MGST Act with effect from 01.07.2017, bearing GSTIN 27AADFV3789N1ZB, and was previously registered under the erstwhile Maharashtra Value Added Tax Act, 2002 and the....
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....cate No. V.P. 508/0037/14/TMS/TDD/2258/17 dated 27.07.2017; Sr. No. 195 A/2 and 195/B. 1,00,071.52 sq.m. built-up; 203 flats; 13 shops. Area earmarked: 872.15 sq.m.; Number of MHADA flats: 19. MHADA rates: 1 BHK - Rs. 14,51,100; 2 BHK (Regular) - Rs.17,77,500; 2 BHK (Large) -Rs. 18,78,600. The applicant clarifies that there is no dispute with respect to the taxability of flats sold to non-MHADA customers; the present application is confined to the GST treatment of the 20% MHADA flats. 1.5 The applicant has placed on record the following material features of the MHADA supplies: 1.5.1 The 20% reservation is mandatorily to be allotted to MHADA-identified customers. For a plot of 5,000 sq. m., the area earmarked for MHADA is, illustratively, 1,000 sq. m. 1.5.2 The flats are to be sold at MHADA-directed and mandated rates. The rates are neither determined by the applicant nor does the applicant have any say in their determination. The 19 flats are meant for the Lower Income Group as identified by MHADA. 1.5.3 Approvals for commencement of the project from TMC and other regulatory authorities (Collector, Environment, Forest Department etc.) are not ....
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.... date of the OC. 1.7 The applicant has also relied on a Circular dated 08.09.2015 issued by the Inspector General of Registration and Controller of Stamps, Pune, which (according to the applicant) directs that where a sale is effected by a Government or semi-Government agency, or a local body, at predetermined administered values, such values are to be accepted as the 'market value' for the purposes of stamp duty. The applicant submits that, by parity, the MHADA administered price ought to be accepted as market value for GST purposes as well. 1.8 The applicant's paper-book indexes the GR dated 08.11.2013, the Commencement Certificate dated 27.07.2017, the Occupancy Certificate dated 31.12.2020, the MHADA rate schedule, the MHADA lottery advertisement dated 02.09.2021, and the TMC-approved project plan showing the specific buildings, floors and flat numbers earmarked for MHADA (Building B-1, Floors 1 to 3, 20 flats initially; 19 flats finally on area of 872.15 sq. m.). 2. STATEMENT CONTAINING APPLICANT'S INTERPRETATION OF LAW 2.1 The applicant has extracted the following provisions of the GST Act as the statutory framework relevant to the questions raised: 2.1.1 Secti....
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.... TMC (on 31.12.2020). Not a single rupee of consideration has been received from any customer or from MHADA up to the date of the OC, and the entire consideration will be received only after registration of the agreements. The transaction therefore falls outside the ambit of Para 5(b) of Schedule II and is not a supply of service. On the contrary, in terms of Para 5 of Schedule III of the GST Act, sale of building is neither a supply of goods nor a supply of services; and the exclusion in Para 5(b) of Schedule II - that the entire consideration has been received after issuance of completion certificate - is squarely attracted. The transaction is therefore not liable to GST. 2.3.2 Without prejudice to the above, if the transaction is treated as a works contract service for any reason - because the 20% earmarking of area is made at the stage of TMC-sanctioning of plans - the further question arises of what is the value of supply for GST purposes. The applicant contends that the MHADA-prescribed price is the consideration and is, on the facts of the case, the 'open market value' within the meaning of Section 15(1) read with Rule 28. The cost-plus price of Rs.24,400/- per sq. m. fix....
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....th Para 5 of Schedule III of the CGST Act, 2017, sale of a building is neither a supply of goods nor a supply of services, subject to the qualification in Para 5(b) of Schedule II. The recommendation of the GST Council dated 18.01.2018 clarifies that sale of flats after issuance of a completion / occupancy certificate is not liable to GST. In the instant case, since the Occupancy Certificate was received on 31.12.2020 - prior to execution of any agreement or receipt of any consideration from the MHADA-identified customers - the transaction is in the nature of sale of immovable property and is not taxable. However, the officer has added the caveat that input tax credit availed on inputs attributable to this exempt supply would require proportionate reversal under Rule 42 of the CGST Rules, 2017. The officer has cited the Advance Rulings in B.R. Sridhar, Karnataka (dated 07.11.2020) and Bindu Ventures, Karnataka, in support of the above position. 3.3 Query 2-Works Contract Classification. The officer has submitted that the definition of "works contract" under Section 2(119) of the CGST Act applies only where construction is carried out for an identified recipient and consideration....
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....minary hearing. On due consideration, the application was admitted. 4.2 The matter was called for final hearing on 24.09.2025. Shri D. V. Retharekar, Advocate, Authorised Representative, appeared for the applicant and made oral and written submissions reiterating and elaborating upon the contentions set out in Sections 1 and 2 above, including the supplementary submission dated 19.04.2022 and the additional paper-book filed on record. Shri Pramod Bachhav, Assistant Commissioner of State Tax, appeared for the revenue and reiterated the written submissions dated on record and as summarised in Section 3 above. We have heard both sides and carefully considered the rival submissions. 5. OBSERVATIONS AND FINDINGS: 5.1 We have carefully considered the facts of the case, the documents placed on record, the written as well as the oral submissions of the applicant, and the comments of the jurisdictional officer. The application raises two inter-related issues: (a) whether the supply of the 20% MHADA-reserved flats by the applicant to the MHADA-identified allottees is a taxable supply of service under the GST Act, or is a sale of immovable property outside the ambit of GST; ....
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....stomers post-OC. (g) The project is assessed under the pre-01.04.2019 GST regime (the 'old scheme'), under which input tax credit is available to the applicant. 5.3 Admissibility and Jurisdictional Scope. The questions raised by the applicant concern (i) whether the supply of flats to MHADA-identified customers is exempt from GST, which squarely falls under clauses (a), (b) and (e) of Section 97(2) of the CGST Act, 2017 read with the corresponding provision of the MGST Act, 2017 (classification, applicability of notification / statutory exclusion and determination of liability to pay tax), and (ii) the value of supply if held taxable, which is a question of valuation falling under clause (c) of Section 97(2). Both questions pertain to a proposed activity of the applicant - the agreements with MHADA-identified allottees were yet to be executed at the time of filing and are in contemplation - and are therefore within the scope of an 'advance ruling' as defined under Section 95(a) of the CGST Act. On a careful examination of the record, we do not find that any of the questions raised are pending or have been decided in any proceedings in the case of the applicant under any....
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....erance of business that entails a provision of goods or services for a consideration. Three essential elements must co-exist for a transaction to qualify as a supply: (i) there must be a form of transfer or disposition of goods or services or both; (ii) the transaction must be supported by a consideration; and (iii) the transaction must be in the course or furtherance of business. We are satisfied, and we so hold for reasons that follow, that each of these elements is present in the transaction under consideration. 5.4.4 We then turn to Section 2(119) of the GST Act, which defines 'works contract' as a contract for building, construction, fabrication, completion, erection, installation, fitting-out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of the contract. The activity of constructing and ultimately transferring 19 EWS/LIG tenements to MHADA-identified beneficiaries, involving employment of materials, labour and incorporation of goods into immovable property, falls squarely ....
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....ara 5 yields to Schedule II Para 5(b). Where the transaction is of the kind described in Schedule II Para 5(b) and the stipulated exception is not made out, the transaction remains a supply of service and Schedule III Para 5 does not rescue the applicant. Schedule III Para 5 is not a freestanding shelter for every builder-to-buyer transaction; its scope is confined to that which is not brought within Para 5(b) of Schedule II. 5.4.7 It is against this statutory backdrop that the uncontroverted facts must be tested. The critical factual matrix for Question 1 is set out in paragraphs 5.2(b), (c), (d), (e) and (f) above. Four features of this matrix are pivotal: (i) The obligation to construct the 19 EWS/LIG tenements was not a post-OC obligation. It originated at the stage of plan sanction by the TMC and was a statutory pre- condition for the grant of the Commencement Certificate dated 27.07.2017. Without the applicant's written commitment to reserve 20% of the plot area for MHADA, the TMC would not - indeed could not - have sanctioned the project at all. The commitment to construct and to transfer the 19 tenements was assumed at inception, not at or after the Occupancy Ce....
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....espect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply. The definition is deliberately wide. Three features merit emphasis: (a) 'whether in money or otherwise' - consideration need not be in money; non-monetary benefits qualify; (b) the monetary value of any act or forbearance qualifies; and (c) the consideration may flow from 'the recipient or any other person' -- it need not emanate from the direct recipient of the supply. The statutory text is therefore directly responsive to multi-limb consideration structures of the very kind we have before us. 5.4.9 Applying Section 2(31) to the present facts, we find that the consideration for the applicant's undertaking to construct and transfer the 19 MHADA flats consists of two inter- linked limbs: (i) the non-monetary consideration in the form of additional FSI of 872.15 sq. m. granted by the local authority (the TMC), which was received at the plan-approval/commencement-certificate stage; and (ii) the monetary consideration receivable from the MHXDA-identified customers a....
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....ution of the sale agreements with MHADA-identified customers is, in our considered view, misplaced. The execution of the sale deed post-OC is the final documentation of a transaction whose legal character was fixed long before - at the stage of the plan-approval and grant of the Commencement Certificate. Sub-section (1A) of Section 7, and the legislative objective of the GST Act more broadly, direct that the substance of a transaction is to prevail over its form. A transaction that is, in essence, a construction obligation undertaken at inception and reciprocated by additional FSI cannot shed its character merely because the final paperwork of transfer is signed later. The settled rule, expressed by the Supreme Court in McDowell & Co. v. Commercial Tax Officer, (1985) 3 SCC 230 - and retained through the refinements in later jurisprudence - is that structures which serve to disguise the true character of a transaction cannot displace the legal incidence of tax. While we do not impute any colourable motive to the applicant, the principle operates at the level of characterisation: the true nature of the transaction must be ascertained from its substance, not from its final label. ....
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....elated observation is merited on the structure of Section 7 read with Para 5(b) of Schedule II. Para 5(b) is so framed as to capture construction activity that is performed prior to completion and is referable to an agreement for sale or a like obligation. It is not framed as a provision that requires contemporaneous, named, identified buyers at the stage of construction. The MHADA-inclusive-housing arrangement fits squarely within the legislative imagination of Para 5(b): a builder undertakes to construct and transfer a class of tenements on the security of a regulatory obligation and in exchange for a reciprocal benefit, with identification of the individual buyer being accomplished by administrative mechanisms at a later stage. 5.4.16 The applicant's submission that the 20% MHADA supplies, being made at below-cost administered prices, are not 'commercial' transactions in the course or furtherance of business is also not a convincing ground to exclude them from the scope of Section 7. The applicant's Own submissions at paragraphs 1.5.10 and 1.6 confirm that the entire project - of which the MHADA tranche is an integral limb by virtue of which the project could be undertaken at....
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....ient of the supply are not related and the price is the sole consideration for the supply. Section 15(1) applies only where two conditions are satisfied: (i) the supplier and the recipient are not related persons, and (ii) the price is the sole consideration for the supply. In the present case, there is no contention of relatedness between the applicant and the MHADA-identified allottees, and we proceed on the footing that they are unrelated. However, on our finding at paragraphs 5.4.8 to 5.4.11 above, the price payable by the MHADA-identified allottees at MHADA-prescribed rates is not the sole consideration for the applicants supply: the applicant has also received the additional FSI of 872.15 sq. m. from the local authority as a non-monetary limb of the consideration. The second condition of Section 15(1) is therefore not satisfied. Consequently, the transaction value under Section 15(1) not directly applicable, and valuation must proceed under Section 15(4) read with the valuation rules prescribed under Chapter IV of the CGST Rules, 2017. 5.5.3 The next question is which rule of the CGST Rules is the appropriate rule of valuation. Rule 27 is the specif....
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....ble in an arms-length transaction where price is the sole consideration; it is an administered price which the applicant is compelled to charge as a pre-condition for the project's commencement and as a part of the reciprocal exchange for the additional FSI. The MHADA price is not 'freely' negotiated; it is imposed by regulatory fiat and it reflects a social-welfare cross-subsidy, not prevailing commercial conditions. More fundamentally, the MHADA-prescribed price is not the price at which the supply - being the construction-and- transfer of the 19 flats - 'would be obtained' in the open market at the same time: the open market is populated by arm's-length non-MHADA buyers whose transactions proceed without the administered-price overlay and without an additional-FSI quid-pro-quo. The MHADA price therefore cannot be equated with, or adopted as, the open market value of the supply. 5.5.6 What, then, is the open market value? In a case such as the present, the applicant itself sells flats of broadly comparable description - albeit in varying sizes and configurations - in the very same project to non-MHADA buyers on an arms-length basis. Those transactions are conducted at negotiat....
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....ii) the subsidy must be directly linked to the price. Each element fails on the facts. First, there is no disbursement or amount paid to the applicant in the nature of a subsidy. The applicant does not receive any sum, grant, concession, rebate, refund, reimbursement or similar payment from any Government or Government agency in respect of the MHADA supplies. What the applicant receives is (a) additional FSI from the local authority, and (b) MHADA-prescribed price from the ultimate allottees. Neither is a subsidy in the ordinary or statutory sense of the term. Second, even if the grant of additional FSI were to be characterised as a non-monetary concession, it is granted by the Thane Municipal Corporation - a local authority - and not by the Central Government or a State Government. The exclusion in Section 15(2)(e) is confined to subsidies provided 'by the Central Government and State Governments', and is not extended by the statute to subsidies from local authorities. A local authority, though clothed with public functions, is not conflated with the State Government for the purposes of Section 15(2)(e). Third, the applicant's construction - that the 'implicit subsidy' (t....
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.....10 - that the project is under the old scheme with ITC admissibility - provides the applicant the means to pass through the embedded tax on inputs, which partially mitigates the cascade. The policy plea, while earnest, does not alter the application of Section 15 and Rule 27. 5.5.11 Drawing the strands of the valuation analysis together, we hold that: (i) Section 15(1) is not applicable to the supply because price is not the sole consideration - the applicant also receive the additional FSI as non-monetary consideration; (ii) Rule 27 of the CGST Rules applies because the consideration is not wholly in money; (iii) the primary test under Rule 27(a) the open market value - is available and is to be adopted; (iv) the open market value is the price at which comparable flats in the same project are sold by the applicant to non-MHADA buyers on an arms-length basis, suitably adjusted for relevant attributes (size, floor, orientation, amenities and the like); (v) the MHADA-prescribed price is not the open market value and cannot be so adopted; and (vi) the subsidy exclusion under Section 15(2)(e) is not attracted on the facts. 5.....