IN RE: PRAJAPATI DEVELOPERS
GST
2018 (9) TMI 236 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2018 (16) G. S. T. L. 320 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AAR
Dated:- 3-7-2018
GST-ARA-02/2018-19/B-58
GST
Shri B.V. Borhade, And Shri Pankaj Kumar, Member
PROCEEDINGS
(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by PRAJAPATI DEVELOPERS, the applicant, seeking an advance ruling in respect of the following question :
“Whether the construction services provided under the project “Prajapati Magnum” qualifies for the reduced CGST Rate of 6% as provided in Sl. No 3 – item (v)- sub item (da) vide Notification 01/2018- CT (Rate) dated 25.01.2018?”
At the outset, w
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rcial complex.
2. Presently the applicant is undertaking development of residential apartments under a project called 'Prajapati Magnum' in Dronagiri, Navi Mumbai.
3. The details of the project are as follows:
a) Project Magnum was started in December 2013 and expected to complete in December 2022.
b) The Project Magnum has five wings with 19 floors in each wing.
c) Total number of flats in the projects are 352.
d) The flats are being developed over 12099 sq mtrs of Land. The Total FSI consumed is 18,099.50 Sq.Mtrs of area out of which 13,145.26 Sq.Mtrs of FSI are consumed in the flats having carpet area below 60 Sq.Mtrs.
e) Cost of flats ranges from Rs. 41.00.000/- to Rs. 87,00,000/-
4. Applicant has discharged Service Tax on the consideration received from the flat owners till 30.06.2017 at the applicate rate of service tax and later GST is being discharged at the effective rate of 12% after availing the 1/3rd deduction towards the land portion as provided in explanati
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o the total amount charged for such supply less the value of land or undivided share of land, as the case may be. The value of land/undivided share of land in such supply shall be deemed to be one third of the total amount charged for Such supply”
3. The rate Notification 11/2017- CT (Rate) has been amended from time to time to change the rate of GST towards supply of various goods and or services or both. Recently on 25.01.2018, it has been amended again vide Notification 01/2018-CT (Rate) to reduce the rate of GST on specified Construction Services from the earlier 18% to 12% (effectively '8%' after availing 1/3rd deduction towards value of land].
4. With effective from 25.01.2018, new item (v) sub item (da) has been inserted in Sl. 3 vide Notification 01/2018-CT (Rate) to specify the rate of CGST as 6% in case of following service:
“Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of constr
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ontract”
Discussion on Affordable Housing Project:
7. The reduced rate of 12% (8% after reducing 1/3rd towards land) is applicable only for the low-cost houses up to a carpet area of 60 Square Meters per house in an affordable housing project. Further the benefit is available only to those Affordable housing projects which have been given infrastructure status by Government of India vide F. No. 13/ 6/2009-INF, dated the 30th March, 2017.
8. “Affordable Housing” is defined as a housing project using at least 50% of the Floor Area Ratio (FAR)/Floor Space Index (FSI) for dwelling units with carpet area@ of not more than 60 square meters.
9. Accordingly, a housing project using at least 50% of the Floor Area Ratio (FAR)/Floor Space Index (FSI) for dwelling units with carpet area@ of not more than 60 square meters has been given the infrastructure status by the GOI and therefore would be eligible for the benefit of reduced rate.
10. Further it was also mentioned in the above referred n
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rper area usage in the project under consideration. As per the said Architect's Certificate, it is evident that the project 'Prajapati Magnum' has total consumed/ Permissible F.S.I. of 18099.50 Sq.Mtrs. Out of which 13145.26 Sq.Mtrs F.S.I area are consumed by flats having carpet area below 60 Sq.Mtrs, Therefore, the said housing project is using around 73% of the total Floor Area Ratio (FAR)/ Floor Space Index (FSI) for dwelling units with carpet area@ of not more than 60 square meters.
14. Architect's Certificate on carpet area usage and also flat wise FSI issued for the given project is enclosed for your kind consideration,
15. Further, following statements made in the press release by the Ministry of Finance, Government of India on completion of 25th GST council meeting dated 18.01.2018 would be relevant:
a) “The Fourth Recommendation of the Council is to extend the concessional rate of 12% to services by way of construction of low cost houses up to a carpet area of 60 sqm in a h
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Notification No. 11/2017-CT (Rate) dated 28.06.2017.
17. It would be relevant to note that the GST law do not provide any separate meaning to define the term 'low cost houses'- Thereby, applicant is of the understanding that the houses with carpet area of not more than 60 square meters could itself be considered as low-cost houses for determining the rate of GST.
Applicant's viewpoint:
18. The project “Prajapati Magnum” qualifies to be an Affordable Housing Project which has been given infrastructure status vide notification of Government of India.
19. Accordingly, Service by way of Construction of houses with carpet area up to 60 Square Meters per house in the said housing project would attract GST at 12% [CGST- 6% and SGST-6%] w.e.f. 25.01.2018. The effective tax rate would be 8% after reducing 1/3rd towards value of land.
03. CONTENTION – AS PER THE CONCERNED OFFICER
Vide letter dated 14.05.2018, the concerned officer has submitted a report as under:
Point No. 14 states that
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of 8% GST is only applicable to low cost houses/ flats only, not to the project which includes other dwelling units as well. Project Prajapati Magnum is an ongoing project since December, 2013. It is obvious that many of the dwelling units would have been sold out to different categories of buyers viz. prospective buyers, promoters, investors and partners which may or may not include low income groups and economically weaker section. The key conditions to qualify for taking the benefits of the said Notification are:
i) Low cost houses up to a carpet area of 60 square metre.
ii) Housing project using at least 50% of the FAR/FSI for dwelling units with carpet area of not more than 60 square metre.
Here, CGST Act 2017 does not define “low cost house”. There are different definitions given by various agencies like RBI and MOHUPA, etc. Therefore, cost is the most important factor while deciding the benefits of said Notification. The second condition is being fulfilled here as the perc
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different category of buyers viz prospective buyers, promoters and investors?
b) How many flats are there in each category i.e. a) 41 Lacs, b) 87 Lacs, c) In between 41 Lacs to 87 Lacs?
iv) Issue of Anti Profiteering:-Since there is no GST on second sale of flats. It is our apprehension that significant number of flats would be owned by promoter/ investor/partners may be sold to prospective buyers, thereby coming out of ambit of GST as there is no GST on second sale of flat. Consequently; it will be further Out of purview of Anti profiteering Authority also as this transaction does not involve in GST. This may become potential revenue loss for Government of India, Moreover, such a step will undermine the large objective of social welfare which is behind the recommendations and amendment in the Notification 1/ 2018-Central Tax (Rate) dt.25.01.2018.
04. HEARING
The Preliminary Hearing was held on date 15.05.2018. Shri Vasant K Bhatt, Chartered Accountant, duly authorized appeared al
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Notification No. 01/2018-CT (Rate) dated 25.01.2018.
This issue is with respect to the housing project called “Prajapati Magnum” in Dronagiri, Navi Mumbai which has been undertaken by them. The applicant has submitted that the said project was started in December 2013 and is expected to be completed in December 2022. They have also submitted that the total FSI consumed in the said project is 18,099.50 sq.mtrs out of which 13,145.26 sq mtrs. of FSI are consumed for flats having carpet area below 60 sq mtrs. They have, whilst submitting Architect's Certificate in support, submitted that their housing project is using around 73% of the total Floor Area Ratio (FAR)/ Floor Space Index and therefore their project falls under the definition of “Affordable Housing” as mentioned in notification issued by Government of India, Ministry of Finance, Department of Economic Affairs vide F. NO. 13/6/2009-INF, dated the 30th March, 2017.
Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, h
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works pertaining to the “In-situ rehabilitation of existing slum dwellers using land as a resource through private participation” under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana, only for existing slum dwellers;
(d) a civil structure or any other original works pertaining to the “Beneficiary led individual house construction / enhancement” under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana;
(e)…………………………………; or
(f)……………………………………
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(v) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, or installation of original works pertaining to,-
(a)…………………………………;
(b)………………………………….;
(c) low-cost houses up to a carpet area of 60 square metres per house in a housing project approved by competent autho
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taining to the “'In-situ redevelopment of existing slums using land as a resource, under the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana (Urban);';
(II) after sub-item (d), the following sub-items shall be inserted, namely: –
'(da) a civil structure or any other original works pertaining to the “Economically Weaker Section (EWS) houses” constructed under the Affordable Housing in partnership by State or Union territory or local authority or urban development authority under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana (Urban);
(db) a civil structure or any other original works pertaining to the “houses constructed or acquired under the Credit Linked Subsidy Scheme for Economically Weaker Section (EWS)/ Lower Income Group (LIG)/ Middle Income Group-1 (MIG-1)/ Middle Income Group-2 (MIG-2)” under the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana (Urban);';
(III)……………………………………………………”;
(B) in it
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authority or urban development authority.
According to sub item (db) in item iv “a civil structure or any other original works pertaining to the “houses constructed or acquired under the Credit Linked Subsidy Scheme for Economically Weaker Section (EWS)/Lower Income Group (LIG)/ Middle Income Group-1 (MIG-1)/ Middle Income Group-2 (MIG-2)” under the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana (Urban). This clause also shall not be applicable to the applicant since this clause states that the houses should be constructed or acquired under the Credit Linked Subsidy Scheme of the Government.
According to sub item (da) of item (v), “low-cost houses up to a carpet area of 60 square metres per house in an affordable housing project which has been given infrastructure status vide notification of Government of India, in Ministry of Finance, Department of Economic Affairs vide F. No. 13/6/2009-INF, dated the 30th March, 2017 would attract a tax rate of 12%. This clause will be
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Authority, an updated Harmonized Master List of Infrastructure Sub-sectors (Annexure-I) is hereby notified. The new list incorporates the following change to the notification dated 1st August, 2016;
1. Under the category of “Social and Commercial Infrastructure” a new sub-sector – “Affordable Housing” is added.
Annexure-I
Updated Harmonized Master List of Infrastructure Sub-sectors
Sl. No.
Category
Infrastructure sub-sectors
Transport
* Roads and bridges
* Ports
* Shipyards
* Inland Waterways
* Airport
* Railway Track, tunnels, viaducts, bridges
* Urban Public Transport (except rolling stock in case of urban road transport)
Energy
* Electricity Generation
* Electricity Transmission
* Electricity Distribution
* Oil pipelines
* Oil/ Gas/ Liquefied Natural Gas (LNG) storage facility
* Gas pipelines
Water and Sanitation
* Solid Waste Management
* Water supply pipelines
* Water treatment plants
* Sewage collection, tr
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…….
4. ……………………………….
5. ………………………..
6. ………………………..
7. ………………………..
8. ………………………..
9. ………………………..
10. “Affordable Housing” is defined as a housing project using at least 50% of the Floor Area Ratio (FAR)/Floor Space Index (FSI) for dwelling units with carpet area of not more than 60 square meters.
@ “Carpet Area” shall have the same meaning as assigned to it in clause (k) of section 2 of the Real Estate (Regulation and Development) Act, 2016.
One of the recommendations made by the GST Council in its 25th meeting held on 18th January 2018 at Delhi was to extend the concessional rate of 12% (8% CST after deducting value of land) to services by way of construction of low cost houses up to a carpet area of 60 sqm in a housing project which has been given infrastructure status under notification No. 13/06/2009 dated 30th March, 2009. The said notification of Departmen
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factoring in the full ITC available in the CST regime and reduces the ex-GST price of flats.” The CST Council has also mentioned that the builders/ developers are expected to follow the principles laid down under Section 171 of the CST Act (Anti-Profiteering Rules) scrupulously.
In response to a request for clarification to enable availing 8% GST on Affordable Housing made by the builders association namely , CREDAI vide their letter no. CREDAI/MOF/2018/14 dated 19th March, 2018, the Government vide F.No. 354/52/2018-TRU, Government of India Ministry of Finance Department of Revenue (TRU) dated 7th May, 2018 has clarified that “Low cost houses up to a carpet area of 60 .square metres per house in an affordable housing project, which has been given infrastructure status under notification F. No. 13/6/2009-INF, dated the 30th March, 2017 of MOF (DEA), attract concessional GST of 8% (the value of the undivided share of land is included in the price of the house). Whether the housing proj
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which Notification 1/2018-CentraI Tax (Rate) was issued and the benefit of this reduced rate would be applicable in case of only those flats which are of carpet area upto 60 sq mtrs. In this scheme which is covered in the category of affordable housing. In case of other flats which have carpet area more than 60 sq.mtrs. the applicant would be required to pay GST at normal applicable rate.
06. In view of the deliberations as held hereinabove, we pass an order as follows:
ORDER
(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
NO. GST-ARA-02/2018-19/B-58
Mumbai, dt.03/07/2018
For reasons as discussed in the body of the order, the question in answered thus-
Question : Whether the construction services provided by the applicant under the project “Prajapati Magnum” qualifies for the reduced CGST rate of 6% as provided in Sr. No. 3 – item (v) – sub item (da) of Notification No. 01/2018-CT (Rate) dated
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