2018 (4) TMI 1077 – AUTHORITY FOR ADVANCE RULING , NEW DELHI – 2018 (13) G. S. T. L. 395 (A. A. R. – GST) – Levy of GST – Valuation – construction services / superstructure – undivided and impartible share of land – Entry 5 of Schedule III of the CGST Act, 2017 – Whether GST will be applicable on the sale of undivided and impartible share of land represented by Agreement to sell the land? – Held that: – From a conjoint reading of Section 7 and Entry 5 of Schedule III of CGST Act, any activity/ transaction which is in the nature of ‘sale of land’ is not covered within the purview of GST. Consequently, no GST is payable on the transactions resulting in the sale of land.
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Composite supply – Whether GST shall be applicable on sale of superstructure (which is under construction)? – N/N. 11/2017- Central Tax (Rate) dated 28.06.2017 – Held that: – the measure of tax should be the value of goods and services supplied by excluding the value of land. However, since land cannot be separatel
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for levy of GST. The said machinery provisions cannot be equated with exemption Notification issued under Section 93(1) of the Finance Act, 1994 which were held to be insufficient by the Hon’ble High Court [2016 (6) TMI 192 – DELHI HIGH COURT].
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Ruling:- the value of land, or the undivided share of land, as the case may be, would be deemed to be one-third of the total amount, which is excluded from the value for the purposes of payment of GST
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Even if agreement between the applicant and the buyer is entered after part of the construction is already completed, whole of the consideration would be added for payment of GST.
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The applicable rate of GST on the said two-third of total amount is 9% (CGST) and 9% SGST under S. No. 3(i) of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 and parallel SGST notification. – ADVANCE RULING NO. 03/DAAR/2018 Dated:- 28-3-2018 – Pankaj Jain Member (Centre) and Vinay Kumar Member (State) JJ. Present for the Applicant: Shr
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apply for the requisite approvals. b. The applicant plans to get the construction work done by contractors as well as on its own. 4. Following agreements would be entered into by the Applicant: a. One for sale of undivided and impartible share in land; and b. Another agreement for sale of superstructure. Details of Question on which Advance Ruling is requested: 5. In case where there are two transactions each represented by a separate Agreements i.e. i. One for sale of undivided and impartible share in land @ say ₹ 100; and ii. Another agreement for sale of superstructure @ say ₹ 15 6. Following are the questions on which the applicant is seeking advance ruling: a) Whether GST will be applicable on the sale of undivided and impartible share of land represented by Agreement to sell the land? b) Whether GST shall be applicable on sale of superstructure (which is under construction)? c) If yes:- i. What will be the value on which tax is payable? ii. What would be the applicab
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nt Entry under the said Schedule, for the purpose of instant application, reads as under SCHEDULE III ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES. 1. … 2. … 3. … 4. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. 5. … 6. … 11. From a conjoint reading of Section 7 and Entry 5 of Schedule III of CGST Act, any activity/ transaction which is in the nature of sale of land is not covered within the purview of GST. Consequently, no GST is payable on the transactions resulting in the sale of land. 12. Construction of superstructure would attract tax on ₹ 15. Further, even in respect of superstructure, GST should be imposed only on the value of construction on or after the agreement with the buyer i.e. after deducting the value of construction already completed till the date of agreement 13. Relevant Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017: S.No. Chapter, Se
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ided share of land, as the case may be, the value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, as the case may be, and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply. Explanation .- For the purposes of paragraph 2, total amount means the sum total of,- (a) consideration charged for aforesaid service; and (b) amount charged for transfer of land or undivided share of land, as the case may be. Discussion: 14. The issue for decision in this case is regarding value and rate of tax for payment of GST on the service of 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
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deration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier . Hence, if construction activity is done on behalf of the buyer i.e. as a supply of goods or services to the buyer, GST is payable. 17. It is also observed that during the construction of a complex, building etc., the land and its superstructure becomes inseparable and hence, separate sale of land and its superstructure does not appear to be permissible. During the hearings, the applicant was asked to submit a sample copy of Registered Sale Agreement in Delhi where sale of land and sale of its superstructure have been separately registered. However, they could not produce any such registered agreements. 18. The applicant has submitted that laws in India recognises land and super-structure as separate and independent immovable properties. The applicant has referred to provision of General Clauses Act, Indian Contract Act, 18
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t GST cannot be levied on the value of land or value of undivided share of land, the question which needs to be answered is how the value of the said land needs to be ascertained. 22. In this case, the measure of tax should be the value of goods and services supplied by excluding the value of land. However, since land cannot be separately sold, a deemed value of land need to be ascertained on which GST would not be payable. 23. The applicant wants the value of land to be ascertained by him on the basis of Rule 30 of CGST Rules, 2017, as the said Rules, do not provide any other specific provision to ascertain the value of land for exclusion. 24. It is also observed that a similar issue under Service Tax was decided by Hon ble High Court of Delhi under W.P. (Civil) No. 2235/2011 in the case of Shri Suresh Kumar Bansal V/s Union of India. The Hon ble High Court held in its judgement dated 03.06.2016 that in the case of sale of complex, which is a composite contract, the levy of service ta
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ation No. 26/2012 – ST dated 20.06.2012 which had been issued under Section 93 (1) of Finance Act, 1994. The scope of the said Section 93 of the said Act, was limited to grant of exemption provided the service tax was leviable under Section 66/66B of the Finance Act, 1994. It was held that the abatement to the extent of 75% or 70% by a notification or a circular cannot substitute the lack of statutory machinery provisions to ascertain the value of services involved in a composite contract. 25. However, under GST Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 – S. No. 3 r/w Paragraph 2, the deemed value of land or undivided share of land has been fixed at one-third of the total amount charged. Hence, in GST, the machinery provisions to ascertain the value of land is available in the notification which has been issued under Sub-Section (5) of Section 15 of the CGST Act, 2017 regarding value of taxable supply. The said sub-section (5) of Section 15 of CGST Act, 2017 reads
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y of 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, the GST would be payable on two-third of the total amount consisting of amount charged for transfer of land or undivided share of land, as the case may be, and whole of the consideration charged for the supply of goods and service. Hence, the value of land, or the undivided share of land, as the case may be, would be deemed to be one-third of the total amount, which is excluded from the value for the purposes of payment of GST. Even if agreement between the applicant and the buyer is entered after part of the construction is already completed, whole of the consideration would be added for payment of GST. The applicable rate of GST on the sai
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