IN RE: THE IDEAL CONSTRUCTION
GST
2018 (9) TMI 974 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2018 (17) G. S. T. L. 80 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AAR
Dated:- 5-9-2018
GST-ARA-01/2018-19/B-109
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)
The 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 THE IDEAL CONSTRUCTION, the applicant, seeking an advance ruling in respect of the following questions :
1. What is the rate of tax to be levied on the sale of Flats/ Units to the prospective buyers? And whether registration of project under Pradhan Mantri Awas Yojana is required?
2. What is the rate of tax to be levied by the supplier f
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rtnership firm duly registered under GST. The nature of business of the firm is that of builders and developers. The said firm is desirous to undertake an affordable housing project in Kolhapur. The land required for the project is already possessed by the Firm. The firm is currently in the process of designing and planning for the said project. The units to be constructed in the said project will be of upto 30 sqmtrs(EWS) or upto 60 sqmtrs (LIG). The firm is considering following two options regarding the activities of the project.
1. To undertake construction activity on its own. In this case the required material, labour etc and all other ancillary activities Will be undertaken by the firm itself. In that case the majority of tax rate on inward supplied will be of the rate 18% or 28%.
2. To sublet the entire construction activity to a third party contractor. In this case our inward supply will be in the form of a composite works contract service.
Since the impact of GST on costin
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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);';
As regards insertion of clause (db) above, flats/units in our project may be some times acquired by persons coming under EVVS/LIG/MIG-1/MlG-2 etc. So in that case what is the rate of tax to be applied? What documents to be collected from prospective buyer
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the affordable housing projects are given “infrastructure” status under the category of 'Social and Commercial Infrastructure” by adding a new sub-sector – “Affordable Housing”. In the same notification affordable housing is defined as 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.
Thus as per our interpretation we will be covered by the above said notification issued by Ministry of Finance, Department of Economic Affairs vide F.NO. 13/6/2009-INF, dated 30th March. And our project Will be covered in clause (da) under item (v) of serial no 3 of the amended notification 11/2017 dated 28/6/17. And the rate of tax applicable will be CGST 6% and SGST 6%) irrespective of the status Of t
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or is providing the works contract service to the affordable housing project the rate of tax which he will be levying in his tax invoice will have to be 12% and not 18%.
3. Admissibility of Input tax credit. Whether full ITC is allowable or it will be restricted to output GST liability?
If the rate of tax to be levied on our outward supply of works contract service is 12% (Effective rate after land deduction 8%), In this case our purchases or inward supplies will be of the rate 12% or 18% or 28% as the case may be. Thus there will be a considerable amount of ITC (Input Tax Credit) available in our electronic credit ledger. Section 16 of CGST Act specifies the Eligibility and conditions for taking input tax credit subject to conditions and restrictions mentioned in section 49. Section 17 lets the conditions for Apportionment of credit and Blocked credit. In our opinion we are not covered under sub section 5(c) of section 17 as the inward works contract service will be input service f
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nic credit ledger can be claimed as refund.
Vide further communication the applicant has submitted the Area Statement as follows:-
Area of Plot
16090.00 sq mtrs.
Less- Amenity Space
810.00 sq mtrs.
Net Plot Area
15280.00 sq mtrs.
Total consumed FSI of the plot
26055.00 sqmtrs.
FSI Area consumed in flats having carpet area below 60 sq mtrs.
26055.00 sq mtrs.
FSl Area consumed in flats having carpet area above 60 sq mtrs.
NIL
FSI consumed
1.7
03. CONTENTION – AS PER THE CONCERNED OFFICER
No contentions has been filed by the department in the matter.
04. HEARING
The Preliminary Hearing was held on date 24.04.2018. Shri Kedar P Hasabnis, Chartered Accountant, duly authorized appeared along with Shri Atul Powar, partner and Shri Anand Bhogle, Accountant. They orally contended for admission of their application in view of detailed submissions made by them. They were informed that in respect of Question No. 2, the question could only be raised by their supplier, and they
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ct under Pradhan Mantri Awas Yojana is required?
This issue is with respect to the affordable housing projects to be undertaken by the applicant in Kolhapur. The applicant has submitted that on the land already in possession with them, they are proposing to construct units which will be of upto 30 square meters [Economically Weaker Section (EWS) houses] or upto 60 sq.mtrs [Lower Income Group (LIG) houses].
Notification No. 11/2017-Central Tax (Rate) dated 28.062017, has specified the rate of central tax to be levied on Intra State supply of services of description specified in Column 3 of the Table in the said Notfn, falling under scheme of classification of services mentioned therein. The relevant clauses of the said Notfn as amended by Notfn No. 20/2017-Central Tax (Rate) dated 22.10.2017 is reproduced below:-
Sl.No.
Chapter, Section or Heading
Description of Service
Rate (per cent)
Condition
3.
Heading 9954 (Construction services)
(iv) Composite supply of works contract a
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……………………………; or
(f) ………………………………………………………………….;
6
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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 authority empowered under the 'Scheme of Affordable Housing in Partnership' framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India;
(d) low cost houses up to a carpet area of 60 square metres per house in a housing project approved by the competent authority under-
(1) the “Affordable Housing in Pa
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a) 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-I (MIG-I)/ Middle Income Group-2 (MIG-2)” under the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana (Urban);';
(III) ………………………………………………………………….”;
(B) in item (v),
(l) in sub-item (a), for the word “excluding”
(Il) after sub-item (d), the following sub-item shall be inserted, namely: –
“(da) low-cost houses up to a carpet area of 60 square metres per house in an affordable h
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oup (LIG)/ Middle Income Group-I (MIG-I)/ Middle Income Group-2 (MIG-2)” under the Housing for All (Urban) Mission/ Pradhan Mantri Azoas 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 applicable to the applicant if the project undertaken by them is an affordable housing project which has been given infrastructure status Vide Government of India notification mentioned above.
Department of Economic Affairs' notification issued vide F. No. 13/6/2
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ucture status to Affordable Housing. The recommendation of the Council would extend the concessional rate to construction of flats/ houses of less than 60 sqm in projects other than the projects covered by any scheme of the Central or State Government also. The GST Council has also observed that “It may be recalled that all inputs used in and capital goods deployed for construction of flats, houses, etc attract GST of 18% or 28%. As against this, most of the housing projects in the affordable segment in the country would now attract GST of 8% (after deducting value of land). As a result, the builder or developer will not be required to pay GST on the construction service of flats etc, in cash but would have enough ITC (input tax credits) in his books to pay the output GST, in which case, he should not recover any GST payable on the flats from the buyers. He can recover GST from the buyers of flats only if he recalibrates the cost of the flat after factoring in the full ITC available in
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ject or not, shall be determined by the builder/ developer as per the definition of affordable housing given in the above mentioned notification (i.e., affordable housing has been defined as a housing project using at least 50% of FAR/FSI for dwelling units with carpet area of not more than 60 SQM). No certificate from any authority is required.”
The applicant in their submissions have stated that the entire FSI of 26055.00 sq mtrs. are consumed in flats having an area less than 60 sq mtrs. Hence, from a reading of the above clarification, notification and the clause (day of item (v) of Notification No. 11/2017-CentraI Tax (Rate) dated 28.06.2017, we find that that the applicant's case is covered under the tax rate of 12%, under Heading 9954 (Construction Services), (v) (da) of above mentioned Notification No. 11/2017, as amended since the project undertaken by them falls under the definition of “Affordable Housing” as stated by them in the application (Whether the housing project
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e eligibility and conditions for availing input tax credit. Section 16 to Section 20 of the GST Act deals with Input Tax Credit. The GST Council in its 25th meeting held on 18th January 2018 at Delhi has extended concessional rate of 12% (8% GST 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 GST Council has also observed that “It may be recalled that all inputs used in and capital goods deployed for construction of flats, houses, etc attract GST of 18% or 28%. As against this, most of the housing projects in the affordable segment in the country would now attract GST of 8% (after deducting value of land). As a result, the builder or developer will not be required to pay GST on the construction service of flats etc. in cash but would have enough ITC (input tax credits) in his books to pay the out
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