2018 (10) TMI 1140 – AUTHORITY FOR ADVANCE RULINGS, HYDERABAD TELANGANA – [2018] 59 G S.T.R. 134 (AAR), 2018 (18) G. S. T. L. 625 (A. A. R. – GST) – Supply or not? – Whether the construction activity undertaken by the Company is a supply? – Held that:- The construction activity undertaken by the Company falls within the definition of the business as it includes any adventure, whether or not for a pecuniary benefit Sec 2 (17) the Central and State GST Act – The reimbursement of construction cost by the Partners to the Company would fall within the definition of consideration under Sec 2(31) Central and State GST Act as it includes (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both – Hence, the construction activity is a “Supply of Service as per the terms of section 7 of the Central and State GST Act.
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Whether in the facts and circumstances the pooling of land by way of
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and Services Tax act, 2017 and Telangana Goods and Services Tax Act, 2017.
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Whether in the facts and circumstances construction activity undertaken by the Company with respect to the share belonging to the Partners would be treated a Supply of service under the Central and State GST act? – Held that:- In terms of clause 5 (b) of Schedule II of the CGST, Act, 2017, ‘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 shall be treated as supply of service’ – the activity undertaken by M/s Gowra Venture Pvt Ltd with respect to the share belonging to the said partners (as described in the “Statement of relevant facts” of the subject Application) is a supply of service under the Central and State
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see (Owner 1) and the title of the property of the parcels of land remained with the respective owners at any point of time. Further M/s Gowra Ventures Pvt Ltd have provided construction service on the amalgamated land for a consideration to the Owners 2 to 8. Neither any service nor any consideration has been received by owner1 for vesting of constructed portion to the partners (owners 2 to 8) and hence the same cannot be treated as an independent supply.
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Ruling:- The pooling of land by way of amalgamation of the separate parcels viz Land 1 and Land 2 as described in the “Statement of relevant facts” would not constitute a supply under the CGST/TGST Act, 2017.
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The activity undertaken by M/s Gowra Venture Pvt. Ltd., with respect to the share belonging to the partners (as described in the “Statement of relevant facts” of the subject Application) is a supply of service under the CGST/TGST Act, 2017.
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The applicant is providing service to owners 2 to 8 who are related per
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read with Rule 103 of CGST/TGST Rules, seeking Advance Ruling on the following issues. Questions on which advance ruling is requested : 1. Whether in the facts and circumstances the pooling of land by way of amalgamation of the separate parcels viz Land 1 and Land 2 as described in the Statement of relevant facts would constitute a supply under the Central Goods and Services TaxAct, 2017 and Telangana Goods and Services Tax Act, 2017 (herein after referred to as Central and State GST Act)? 2. Whether in the facts and circumstances construction activity undertaken by the Company, with respect to the share belonging to the Partners (as described in the "Statement of relevant facts ) would be treated a Supply of Service under the Central and State GST Act? 3. Whether in the facts and circumstances, the recovery of construction cost by the Company from the Partners would be the transaction value for purpose of Section 15 of the Central and State GST Act to be valued in accordance with
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. Subbaraj, Mr. Arvind Lakshmi Narayana, Mr. SubbaramLakshminarayana, Mr. Aditya Srinivas, Mr. Nagarjun Srinivas, (herein after referred to as Partners ) own parcels of land (hereinafter referred to as land 2 ) adjoining the land 1 owned by the Company in Survey Nos. 80 to 84 at Madhapur, Hyderabad. These Partners, who are also directors in the Company intend to develop the said land by constructing a multi-storeyed building and hence approached the Company for construction services. Both the Company and the Partners have agreed to amalgamate their land parcels and construct a multi-storeyed building (Project) on the amalgamated land parcels, i.e., land 1 & land 2 taken together. This is found beneficial to all parties in terms of enhanced floor space index and area in addition to several other benefits like common areas and facilities. As agreed a revised plan has been filed for approval by the competent authorities and the extra built-up area that will accrue on account of the am
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ments or agreements as required under the relevant laws will be entered into by the Partners to give effect to the above arrangement. Statement containing the applicant s interpretation of law based on the facts, in respect of the aforesaid questions: Whether the activity of pooling (amalgamation) of individual parcels of land is a supply? There is no disposal by any of the modes described in terms of Sec 7 of the Central and State GST Act for consideration in this case where the respective land parcels (land 1 and land 2) are amalgamated for purpose of constructing a multi-storied building after obtaining necessary approval from the competent authority under the Building Laws. This is because the parties to the amalgamation retain their respective shares in the combined parcel of land. Whether the construction activity undertaken by the Company is a supply? The construction activity undertaken by the Company falls within the definition of the business as it includes any adventure, whe
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furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. (2) Notwithstanding anything contained in sub-section (1),- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as- (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. As per Section 2(31) of the Central
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, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) admission, for a consideration, of persons to any premises; (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; (h) services provided by a race club by way of totalisator or a licence to book maker in such club; and (i) a
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ral and State GST Rules shall apply and one hundred and ten percent of the cost of construction would represent the value in this case where the parties are related in terms of Rule 30 of the Central and State GST Rules] As per Section 15 Central and State GST Act (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (4) Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed. As per explanation to Section 15, the persons shall be deemed to be related if- (i) such persons are officers or directors of one another s businesses; (ii) such persons are legally recognized partners in business; (iii) such persons are employer and employee
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e value as determined by the application of rule 30 or rule 31, in that order: Provided that where the goods are intended for further supply as such by the recipient, the value shall, at the option of the supplier, be an amount equivalent to ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person: Provided further that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services. Rule 30. Value of supply of goods or services or both based on cost.- Where the value of a supply of goods or services or both is not determinable by any of the preceding rules of this Chapter, the value shall be one hundred and ten percent of the cost of production or manufacture or the cost of acquisition of such goods or the cost of provision of such services. Whether the vesting of the constructed portion to the Partner
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rvices Tax act, 2017 and Telangana Goods and Services Tax Act, 2017? As per the copy of the MOU for construction of Commercial Complex at Madhapur, furnished by M/s Gowra Ventures Pvt Ltd vide their letter dated 16-07-2018, Parcels of land pertaining to the Owners 2 to 8 of the said MOU are amalgamated with the land of the assessee (Owner 1). The activity of pooling of land owned by Owner1 with that of the owners 2 to 8 needs to be examined in the light of the provisions of Section 7 of the CGST/TGST Act,2017 and the Schedules there under. The provisions of Section 7 of the CGST Act, 2017 is extracted hereunder: 7. (1) For the purposes of this Act, the expression supply includes- (a) 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; (b) import of services for a consideration whether or not in the course or furthe
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ns of Section 7 it can be inferred that the said activity of amalgamation of the land do not fall under any of the sub-clauses (1) to (3) of Section 7 of the CGST Act,2017. Further, in terms of clause 1(c) of Schedule II of the GST Act, 2017 any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods. But as per Section 2(52) of the CGST Act,2017, goods includes only moveable property but land is not covered under the definition of goods . Hence pooling of land by way of as described in the Statement of relevant facts of the subject Application would not constitute a supply under the Central Goods and Services Tax act, 2017 and Telangana Goods and Services Tax Act, 2017. 2) Whether in the facts and circumstances construction activity undertaken by the Company with respect to the share belonging to the Partners (as described in the Statement of relevant facts ) wo
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tement of relevant facts of the subject Application) is a supply of service under the Central and State GST Act, 2017. 3) Whether in the facts and circumstances, the recovery of construction cost by the Company from the partners would be the transaction value for purpose of Section 15 of the Central and state GST Act to be valued in accordance with Sec 15 read with Rule 30 of the Central Goods and Services Tax Rules, 2017 and Telangana Goods an Service Tax Rules, 2017(Central & State GST Rules)? M/s Gowra Ventures Pvt Ltd(owner 1) is providing the construction service to the Owners 2 to 8 on the amalgamated land belonging to the owner1 and owners 2 to 8 and it is also seen from the subject Application and the said MOU that the Owners 2 to 8 are also Directors of M/s Gowra Ventures Pvt Ltd. Further Section 15 of CGST Act,2017 which stipulates the issue of valuation is extracted hereunder: 15. (1) The value of a supply of goods or services or both shall be the transaction value, whic
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h at the time of, or before delivery of goods or supply of services; (d) interest or late fee or penalty for delayed payment of any consideration for any supply; and (e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. Explanation.-For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy. (3) The value of the supply shall not include any discount which is given- (a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and (b) after the supply has been effected, if- (i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and (ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the
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y directly or indirectly control a third person; or (viii) they are members of the same family; (b) the term person also includes legal persons; (c) persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related. On going through the MOU, the nature of service provided by the assessee and in the light of the provisions of the Section 15 of CGST Act,2017 recourse needs to be made to the provisions of Rule 28 and Rule 30 of the CGST Rules, 2017. Rule 28 and Rule 30 of the CGST Rules, 2017 are extracted hereunder: 28. Value of supply of goods or services or both between distinct or related persons, other than through an agent.-The value of the supply of goods or services or both between distinct persons as specified in sub-section (4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is made through an agent,
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value needs to be determined by applying the provisions of rule 30 of CGST Rules, 2017. Rule 30 of CGST Rules, 2017 is extracted hereunder for ready reference: 30. Value of supply of goods or services or both based on cost.- Where the value of a supply of goods or services or both is not determinable by any of the preceding rules of this Chapter, the value shall be one hundred and ten percent of the cost of production or manufacture or the cost of acquisition of such goods or the cost of provision of such services In view of the above, the applicant is providing service to owners 2 to 8 who are related persons and therefore the value of the construction service supplied by M/s Gowra Ventures Pvt. Ltd shall be 110% of the cost of provision of the said service. 4) Whether in the facts and circumstance the vesting of the constructed portion upon the Partners , would independently constitute a supply besides the supply on account of recovery of construction cost as aforesaid by the Compan
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