In Re: M/s. NBCC (India) Limited
GST
2018 (10) TMI 1054 – AUTHORITY FOR ADVANCE RULING , NEW DELHI – 2018 (18) G. S. T. L. 724 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING , NEW DELHI – AAR
Dated:- 5-10-2018
ARN No. 07/DAAR/2018 (in Application No. 07/DAAR/2018)
GST
PANKAJ JAIN AND VINAY KUMAR, MEMBER
Present for the Applicant: Shri PK Sahu, Advocate
Present for the Revenue (Centre): Shri Prem Chand, Superintendent, CGST (Delhi East)
Present for the Revenue (State): Shri SS Bajwan, Assistant Commissioner, DGST (Ward-115)
Statement of Facts:
The applicant is a Government of India enterprise and engaged in project management consultancy, real estate development and EPC contracts. It has signed a memorandum of understanding on 25.10.2016 with Ministry of Housing and Urban Affairs (MoHUA), Government of India, wherein MoHUA has appointed the applicant as the executing agency for redevelopment of colonies having “General Pool Residential Accommodation” (in short
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le proceeds of commercial built-up area shall be deposited in an escrow account which shall be managed by Capital Management Committee constituted by MoHUA. Capital Management Committee shall review the status of the escrow account on yearly basis, determine the amount, accrued in excess of 20% of the total cost of the said redevelopment work which is required to be deposited in Consolidated Fund of India. MoHUA will be responsible for allotment/handing over of commercial space to the allottees/shopkeepers/schools after completion of the project. L&DO shall be responsible for relocation and rehabilitation of JJ clusters, if any.
3. In terms of the MOU dated 25.10.2016, the applicant has announced sale of commercial super built-up area on behalf of MoHUA through e-auction on MSTC website on 30.05.2017 and 05.12.2017. In the e-auction details given on MSTC website, inviting bid for sale of proposed built-up area in the buildings to be constructed by the applicant as part of re-developme
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Details of Question on which Advance Ruling is requested:
6. Whether the applicant is liable to pay GST on sale of commercial super built-up area on behalf of Ministry of Housing and Urban Affairs, Government of India, in the colonies being re-developed at Nauroji Nagar, Netaji Nagar and Sarojini Nagar at Delhi?
Views of the Applicant:
7. The applicant is of the view that it is not liable to pay GST on sale of commercial super built-up area being developed by it at Nauroji Nagar and Sarojini Nagar in Delhi for the following reasons:
The applicant is not liable to pay GST on sale of commercial super built-up area on behalf of MoHUA, Government of India, because it cannot be construed as supplier of service while selling built-up space on behalf of the Government in the colonies under redevelopment.
8. A person is liable to pay GST on its transactions which are falling within the “scope of supply” as prescribed in section 7 of CGST Act as reproduced below:
(1) For the purposes of
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ods 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.
9. In case of supply of goods and services within a State, it would be a dual GST, the Union/Centre and the State/Union Territory would simultaneously levy CGST and SGST/ UTGST on a common base. Provisions of CGST and SGST are in pari materia, levying tax on the same transactions in unified manner.
10. Under section 9 of the CGST Act, tax is payable by the taxable person on the transaction value of supply of goods or services, except in the situations carved out in section 9(3) and 9(4) of the Act where the receiver of the supply of goods or services is liable to pay tax.
9. Levy and collection.
(1) Subject to the provisions of sub-section (2), there s
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stered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
11. From a combined reading of section 2(107), which defines “taxable person”, and sections 2(105), 22 and 24 of the CGST Act, it can be appreciated that a supplier of goods or services is a taxable person. Hence, ordinarily, supplier of goods or services is liable to pay tax on the consideration received by him. Therefore, it is necessary to examine the documents describing the transaction to understand who are the supplier and the receiver. The applicant has to perform its activities as per the MOU signed on 25.10.2016 with MoHUA. In terms of the MOU, the applicant is responsible for development of the area for MoHUA by constructing of dwelling units, commercial space and supporting infrastructure and maintaining thereof for thi
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plicant is not selling proposed built-up area in the buildings under construction on its own account but acting on behalf of the Government is also reflected from the fact that it has no control or right on the sale proceeds except for recovering the cost of development undertaken by it. The MOU specifically provides that the sale proceeds of the commercial built-up area shall be deposited in an escrow account which shall be managed. by Capital Management Committee constituted by the Government. Capital Management Committee shall review the status of the escrow account on yearly basis and determine the amount which is accrued in excess of 20% of the total cost of the said redevelopment work to be deposited in Consolidated Fund of India.
13. Further, in the e-auction details given on MSTC website, inviting bids for sale of proposed built-up area in the buildings to be constructed by the applicant as part of redevelopment work, it is mentioned that the applicant has announced sale of co
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otor of the said project. The applicant has received a letter dated 14.09.2017 from MoHUA, in which the Ministry has asked it to apply for registration under RERA as promotor. It has taken registration under RERA being a representative of MoHUA. In fact, the applicant cannot be construed as promotor under RERA. The provision of section 2(zk) of the Act is reproduced below:
(zk) “promoter” means,-
(i) a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees; or
(ii) a person who develops land into a project, whether or not the person also constructs structures on any of the plots, for the purpose of selling to other persons all or some of the plots in the said project, whether with or without structures thereon; or
(iii) any development authority or any ot
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on:- For the purposes of this clause, where the person who constructs or converts a building into apartments or develops a plot for sale and the persons who sells apartments or plots are different persons, both of them shall be deemed to be the promoters and shall be jointly liable as such for the functions and responsibilities specified, under this Act or the rules and regulations made there under;
15. From the above, it seems that a person who is not selling planned unit in a complex under development and merely constructing the building for the land owner cannot be construed as promotor and, therefore, such person cannot be saddled with the responsibility of a promotor under the Act. Therefore, registration under RERA, which is not warranted under the law would not have any implication on the tax liability under GST laws on the revenue generated from the sale of the proposed units in the planned buildings.
MoHUA, Government of India, is not liable to pay GST on sale of commercial
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he said tax calculated at the rate as specified in the corresponding entry in column (4) of the said Table, unless specified otherwise, subject to the relevant conditions as specified in the corresponding entry in column (5) of the said Table, namely:-
Sl.No.
Chapter, Section, Heading, Group or Service Code (Tariff)
Description of Services
Rate (per cent)
Condition
(1)
(2)
(3)
(4)
(5)
4
Chapter 99
Services by Central Government, State Government, Union territory, local authority or governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution.
Nil
Nil
6
Chapter 99
Services by the Central Government, State Government, Union territory or local authority excluding the following services-
a) services by the Department of Posts by way of speed post, express parcel post, insurance, and agency services provided to a person other than the Central Government, State Government, Union territory;
b)
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em to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Municipalities, subject to such conditions as may be specified therein, with respect to –
(i) the preparation of plans for economic development and social justice;
(ii) the performance of functions and the implementation of schemes as may be entrusted to them including those in relation to the matters listed in the Twelfth Schedule;
(b) the Committees with such powers and authority as may be necessary to enable them to carry out the responsibility conferred upon them including those in relation to the matters listed in the Twelfth Schedule.
18. As per the above Article of the Constitution, State legislatures can empower municipalities to function as institutions of self-government with respect to preparation of plans for economic development and social justice and performance of functions and implementation of schemes as may be entrusted to
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ric crematoriums.
(o) Cattle pounds; prevention of cruelty to animals.
(p) Vital statistics including registration of births and deaths.
(q) Public amenities including street lighting, parking lots, bus stops and public conveniences.
(r) Regulation of slaughter houses and tanneries
19. The activities given in Twelfth Schedule quoted above, relevant to the present context, are urban planning including town planning, regulation of land use and construction of buildings and planning for economic & social development. The applicant submits that construction and sale of houses (residential as well as commercial) by municipalities are in line with the provisions of Article 243W of the Constitution. Article 243W enables State Legislatures to endow municipalities with such powers as may be necessary for self-governance. The activities of the municipalities pertain to implementation of any scheme as may be entrusted to them as also those specified in Twelfth Schedule. The municipalities ar
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houses, but also provide an opportunity for optimum utilization of land-a scarce resource, by applying a higher Floor Area Ratio (FAR) as permissible under the latest Master Plan norms. Accordingly, the Government of India has decided to redevelop the following three GPRA colonies through NBCC (India) Ltd.”
20. The planning authorities are not only responsible for formulating plans for development in their areas, but also for executing the said plans. This is evident from the extracts of relevant portions from Maharashtra Regional and Town Planning Act, 1966.
33. Plans for areas of Comprehensive development:-
(1) Any time after the publication of notice regarding preparation of draft Development plan under section 26, a Planning Authority may prepare plan or plans showing proposals for the development of an area or areas which in the opinion of the Planning Authority should be developed or re-developed as a whale (hereinafter referred to as “the area or areas of Comprehensive devel
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ogramme by which it is proposed to execute the plan or plans;
(b) giving an appropriate estimate of the cost involved in executing the proposals of the plan or plans.
(3) The State Government may, after consulting the Director of Town Planning by notification in the Official Gazette, sanction the plan or plans for the area or areas of comprehensive development either without, or subject ta such modifications as it may consider necessary not later than three months of the date of receipt of such plans from the Planning Authority or not later than such further period as may be extended by the State Government.
21. The Supreme Court in Manohar Joshi v. State of Maharashtra, (2012) 3 SCC 718 = 2011 (10) TMI 729 – SUPREME COURT OF INDIA, has dealt with the role of municipalities as under:
Role of municipalities
201. The municipalities which are the planning authorities for the purpose of bringing about the orderly development in the municipal areas, are given a place of pride in this
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(1991) 3 SCC 91 = 1990 (9) TMI 349 – SUPREME COURT. Here, Jalgaon Municipal Council contemplated erection of an Administrative Building and commercial complex on a piece of its land for better use of the same. The construction of the project was to be done through a developer at his own cost and he was to handover certain constructed space to the municipality free of cost. The developer was free to sell his share of the space and the allottees (buyers) were to be given occupancy right for a period of 50 year under section 272 (1) of Maharashtra Municipalities Act, 1965. They were expected to pay rents to the Municipal Council for a period of 50 years at the rate prescribed in the scheme. The project was awarded to a real estate developer by the Municipality through competitive bidding. However, this was challenged by the appellants in the Bombay High Court on the following grounds:
(a) That the scheme of financing of the project was unconventional and was not one that was, as a matte
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. The project is patently one intended to and does provide for an unjust enrichment of respondent 6 at public expense.
The High Court however, did not accept the above grounds and the appellants moved the Supreme Court. The Supreme Court dismissed the appeals and held as under:
A project, otherwise legal, does not become any the less permissible by reason alone that the local authority, instead of executing the project itself, had entered into an agreement with a developer for its financing and execution. The criticism of the project being 'unconventional' does not add to or advance the legal contention any further. The question is not whether it is unconventional by the standard of the extant practices, but whether there was something in the law rendering it impermissible. Though there is a degree of public accountability in all governmental enterprises, but the present question is one of the extent and scope of judicial review over such matters. With the expansion of the State's pr
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an life and the emerging stresses and strains of planning, wide range of policy options not inconsistent with the objectives of the statute should be held permissible. Therefore, in the context of expanding exigencies of urban planning it will be difficult for the court to say that a particular policy option was better than another. The contention that the project is ultra vires the powers of the Municipal Council is not acceptable.
23. Therefore, MoHUA is also not liable to pay GST on sale of commercial built-up space, as this relates to function entrusted to a municipality under Article 243W of the Constitution.
The applicant is not liable to pay GST on sale of built-up space prior to 01.07.2017.
24. The applicant submits that some built-up space has already been sold through e-action on 30.05.2017 and, instalment of sale price has been received prior to 01.07.2017, i.e. prior to notification of GST laws. Section 173 of the GST Act, 2017 states that Chapter V of the Finance Act, 1
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as held that no service tax was payable on the consideration received from a prospective buyer for sale of unit in a residential complex being developed by virtue of explanation to section 65(105)(zzzh) as applicable prior to 01.07.2012 on the ground that there is no mechanism under the Act to levy service tax on the service portion of the transaction. This conclusion of the High Court decision in Suresh Kumar Bansal case is valid even after amendment in the Finance Act, 1994, with effect 01.07.2012.
25. Even assuming that service tax was payable on the transaction of sale of commercial space treating it as a declared service under section 66E(b) of Finance Act, 1994, there was exemption for the service rendered by government agencies, on the same reasoning as in case of GST. It is because this activity is in relation to functions entrusted to a municipality under Article 243W of the Constitution and exemption under S. No. 39 of Mega Exemption Notification No.25/2012-ST dated 20.06.20
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ee v. Manilal 1967(2) SCR 100 = 1966 (11) TMI 87 – SUPREME COURT OF INDIA and Pappu Sweets and Biscuits v. Commissioner of Trade Tax, U.P. 1998 (7) SCC 228 = 1998 (10) TMI 452 – SUPREME COURT OF INDIA, the Supreme court has held that subsequent legislation may be looked into to fix the proper interpretation to be put on the statutory provisions as stood earlier. Therefore, it can be inferred that the sale/leasing services provided by MoHUA prior to 01.07.2017, i.e. during service tax regime, are exempt, being in the nature of a function entrusted to municipality under Article 243W of the Constitution.
26. Even otherwise, GST cannot be levied on a part of consideration received for a continuing transaction which was not taxable earlier. It may be noticed that sale of flat is a single supply which is performed over a period of time. Under GST law, tax is payable on supplies made on or after 01.07.2017. But in a composite supply which has already commenced prior to 01.07.2017, the amount
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efining any of those components of the levy will be fatal to its validity. Out of the prescribed four components, one is “the measure or value to which the rate will be applied for computing the tax liability”. The Court observed as under:
The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity.
28. In CIT vs. B.C. Srinivasa Setty, 1981 (
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is accompanied by a set of provisions for computing the income subject to that charge. The character of the computation provisions in each case bears a relationship to the nature of the charge. Thus, the charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. Otherwise, one would be driven to conclude that while a certain income seems to fall within the charging section there is no scheme of computation for quantifying it. The legislative pattern discernible in the Act is against such a conclusion. It must be borne in mind that the legislative intent is presumed to run uniformly through the entire conspectus of provisions pertaining to each head of income. No doubt there is a qualitative difference between the charging provision and a computation provision. And ordinarily the operation of the
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has already been comprehended and, it is merely entering into agreement to sell the predesigned units in the buildings which is to be constructed. Transfer of built-up area would take place after construction of the building. Transaction of sale of constructed space cannot be construed as “supply” in terms of section 7 of the Act, read with paragraph 5 of Schedule Ill of the Act. In Schedule Ill, activities or transactions which shall be treated neither as a supply of goods nor supply of service are specified. In paragraph 5 of Schedule Ill, 'sale of land and, subject clause (b) of paragraph (5) of Schedule II, sale of building” has been mentioned. Hence, the transaction of sale of units in constructed buildings is transaction of sale of building and, therefore, covered in paragraph 5 of Schedule III of the Act.
31. It is relevant to mention that the transaction in the present case is not covered in clause (b) of paragraph (5) of schedule Il of the Act and, therefore, it is not exclud
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Council of Architecture constituted under the Architects Act, 1972 (20 of 1972); or
(ii) a chartered engineer registered with the Institution of Engineers (India); or
(iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority;
(2) the expression 'construction” includes additions, alterations, replacements or remodelling of any existing civil structure;
32. Under this entry, construction of building for sale has been classified as service. The intending buyers would not receive any construction service. They would be buying constructed built-up space as promised to them. The scope of this entry cannot be enlarged to cover a situation where building has been constructed for self. There is no contract for construction of any building for any of the intending buyers. The whole complex is being constructed for MoHUA. This entry cannot be interpreted to levy tax on land and building which is exclusively in States' domain
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e of the extended meaning of sale in Article 366(29A)(b) by applying it to the expression “sale” appearing in M.P. Entry Tax Act, 1976. The Supreme Court held that the legal fiction applicable to Entry 54 cannot be applied to Entry 52 covering entry tax.
34. During the hearing, the applicant has given additional submissions wherein they have mentioned the following case law to support their various contentions:
i. Navi Mumbai Municipal Mazdoor Union vs. The State of Maharashtra [judgement dated 1st October 2014 in Writ Petition No. 2720/2013] = 2014 (10) TMI 986 – BOMBAY HIGH COURT – Under Article 243W, State Legislature may endow municipalities with powers and responsibilities in regard to planning, economic development, social justice, etc. [Para 36, 37]
ii. Farzana Khan vs. Municipal Corporation of Greater Mumbai, 2018 SCC Online Bom 314 = 2018 (3) TMI 1654 – BOMBAY HIGH COURT – Under Maharashtra Regional Urban Planning Act, 1966, municipalities are entrusted with duties o
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ll some units itself. The Supreme Court approved the mode of financing as a permissible policy for urban planning. [Paras 6, 7, 22, 26]
vi. Suresh Kumar Bansal vs. Union of India, 2016 (43) STR 3 (Del.) = 2016 (6) TMI 192 – DELHI HIGH COURT- In agreement to sell real estate unit by booking, no service is render. Such a contract is to sell an immovable property. [Paras 27]. Without any machinery provisions for bifurcating the taxable value, different tax treatments cannot be accorded to two segments of a contract. [Para 48]
Comments of Jurisdictional Officer (SGST):
35. The dealer is working as PSU engaged in construction activities for Government Department. The dealer has entered into MOU dated 25.10.2016 with MoHUA, Government of India to sell the built-up area located in Netaji Nagar, Sarojini Nagar and Nauroji Nagar. The built-up area available for sale is made the part of MOU. The dealer has the option to sell the complete area to one person or a part. The dealer is sell
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t.
39. As per Para 6(a) of Schedule Il of the CGST Act, 2017, Works Contract Service shall be treated as supply of services. Thus, there is no dispute as to whether or not Works Contract Service is supply of service. As per notification 11/2017-Central Tax (Rate) dated 28.06.2017, services provided to Central Government or State Governments by construction/ repair/ maintenance has been taxed at Nil rate of Central Tax, except for those cases where the construction is meant to be for commerce, industry or any other business or profession. In the instant case, as M/s. NBCC India Limited will construct and sell built-up space for commercial purposes such as shop, schools, etc., the applicant is liable to pay GST on such
40. Applicant is of the view that MoHUA, GOI, are not liable to pay GST on commercial built-up space as this relates to functions entrusted to party under Article 243W of the Constitution of India.
41. Article 243W of the Constitution of India, read with the 12th Schedu
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been received prior to 01.07.2017.
43. As already discussed above, these activities cannot be construed to be covered under Article 243W of the Constitution of India and hence the services are taxable. Regarding the determination of value of declared service in a composite transaction of sale of constructed flat, which includes transfer of land, as per Service Tax Determination of Value Rules, 2006, as amended, Works Contract, where sale of land was included in the part of transaction, was taxable and the valuation was determined at 40% of the total amount charged as consideration.
44. In GST, similar activities are to be taxed at two-thirds of the transaction value as per notification 11/2017-Central Tax (Rate) dated 28.06.2017.
45. Regarding some payment received before GST and part payment after GST, a combined reading of Section 7, Section 13 and Section 142 of the CGST Act, 2017, stipulates that such part payment made after GST attracts GST for sale of under construction flats
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Services
Rate (%)
Condition
(1)
(2)
(3)
(4)
(5)
4
Chapter 99
Services by Central Government, State Government, Union territory, authority or governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution.
Nil
Nil
6
Chapter 99
Services by the Central Government, State Government, Union territory or local authority excluding the following services-
a) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory;
b) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
c) transport of goods or passengers; or
d) any service, other than services covered under entries (a) to (c) above, provided to business entities.
Nil
Nil
49. It is observed that vide Notification No. 14/2018-Central Tax (Rate) date
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(b) a Municipal Council for a smaller urban area; and
(c) a Municipal Corporation for a larger urban area, in accordance with the provisions of this part:
Provided that a Municipality under this clause may not be constituted in such urban area or part thereof as the Governor may; having regard to the size of the area and the municipal services being provided or proposed to be provided by on industrial establishment in that area and such other factors as he may deem fit, by public notification, specify to be an industrial township.
53. Hence, according to the Article 243Q of the Constitution of India, only Nagar Panchayats, Municipal Councils and Municipal Corporations are considered as Municipalities. However, jn certain urban areas, called industrial townships, an industrial establishment may provide municipal services and a Municipality may not be constituted in that urban area. However, it appears that Ministry of Housing and Urban Affairs (MoHUA) or NBCC are not covered in
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ssary to enable them to carry out the responsibilities conferred upon them including those in relation to the matters listed in the Twelfth Schedule.
55. The “Twelfth Schedule” of the Constitution of India reads as under:
1. Urban planning including town planning.
2. Regulation of land-use and construction of buildings.
3. Planning for economic and social development.
4. Roads and bridges.
5. Water supply for domestic, industrial and commercial purposes.
6. Public health, sanitation conservancy and solid waste management.
7. Fire services
8. Urban forestry, protection of the environment and promotion of ecological aspects.
9. Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded.
10. Slum improvement and upgradation.
11. Urban poverty alleviation,
12. Provision of urban amenities and facilities such as parks, gardens, playgrounds.
13. Promotion of cultural, educational and aesthetic aspects.
14. Burials and burial groun
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development and social justice' and 'performance of functions and implementation of schemes' including those which are in relation to matters listed in the Twelfth Schedule. The construction of huge commercial complex are not covered in Article 243W or in Twelfth Schedule of the Constitution.
DISCUSSIONS:
57. The applicant, M/s. NBCC (India) Limited has been appointed as implementing/executing agency by the Ministry of Housing and Urban Affairs (MoHUA), Government of India, for re-development of Nauroji Nagar, Sarojini Nagar and Netaji Nagar colonies in Delhi. The applicant is required to organise construction of GPRA (i.e. General Pool Residential Accommodation), GPOA (i.e General Pool Office Accommodation), commercial built-up space/area and supporting infrastructure such as local convenience shopping centre, banquet hall/community centre, creche, schools, hospitals/dispensary, ATM/Banks, parking facilities, parks and playgrounds etc. in place of old existing buildings. The applic
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cute the construction of approx. 2.16 lakh square meters supporting social infrastructure in Sarojini Nagar, Nauroji Nagar and Netaji Nagar. NBCC will execute the construction of approx. 8.07 lakh square meters commercial Built-up Area (BUA) in Nauroji Nagar (2.97 lakh sqm) and parts of Sarojini Nagar (5.09 lakh sqm).
58.3 The social Infrastructure facilities to be developed may include the following:
* Local Convenient Shopping centre/market
* Banquet Hail/Community Centre
* Creche/play schools
* Primary and Sr. Secondary schools
* Skill Development Centre
* Post Office
* Banks and ATMs
* Dispensary/Hospital
* Adequate parking facilities
* Neighbourhood Parks and play grounds
* Public toilets (bio-degradable)
* Solid and Liquid waste management facility
* Any other social infrastructure as per the area specific requirement.
58.4 The total estimated cost of the project to be executed by NBCC would be Rs. 24,682 crores, which includes the cost of construction
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gh to meet the cost of construction, maintenance costs for 30 years and NBCC's investment with interest, then up to 10% of residential BIJA is to be sold by NBCC on free hold basis for further revenue generation. However, sale of residential space may be avoided.
58.9 NBCC shall invest upto Rs. 1,500 crore into the project from own funds, in phases, as and when required or as directed by the Capital Management Committee. NBCC is entitled to a fixed interest @ 12% per annum on their investment till it is returned. The investment along with interest shall be returned by MoHUA to NBCC from the amount realised through sale of commercial BIJA.
58.10 The entire proceeds from saleable BIJA shall be deposited in an Escrow account opened by the Ministry in a selected nationalised bank through invitation of an Expression of Interest (Eol)/Request for Proposal (RFP) from various banks. The Escrow Account shall be managed by the Capital Management Committee constituted by MoHUA. CMC will devise
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charges and interest @ 12% per annum as cost of capital on investment are mutually exclusive to each other. In addition, 1% of the sale proceeds shall be payable to NBCC on account of expenditure towards appointment of real estate consultant, publicity, e-auction etc., of commercial and residential areas.
58.14 NBCC shall maintain the buildings constructed by them in the following manner:-
(i) Maintenance of GPRA & GPOA: NBCC would be responsible to maintain the assets, services of the GPRA Colonies & GPOA including Social Infrastructure as well as special repairs for a period of 30 years. The expenditure on this account shall be met from Maintenance Corpus Fund (MCF) created for the purpose. The amount in MCF will be transferred from Escrow Account, wherein sale proceed shall be parked. For special repairs, a lump sum provision will be made as determined by Empowered Committee. MCF will be managed by Capital Management Committee (CMC) and every year, a percentage of MCF will be fixe
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y at the rate of Rs. 5.00 per sq. feet per month on delayed uncompleted work, subject to overall limit of 10% of the agency charges of NBCC.
58.16 NBCC will incorporate advanced state of art technologies during construction, minimizing the pollution hazard, improving quality and reducing the overall completion timelines. They will award the works on EPC (Turnkey/Design & Build) contract, wherever possible.
59. Role of Ministry of Housing and Urban Affairs (MoHUA): The following actions shall be undertaken by MoHUA:
59.1 MoHUA shall handover all the three Colonies mostly free from all encumbrance and encroachment. The encumbrance free land shall be handed over on “as it is where it is” basis after occupants of GPRA are relocated by Directorate of Estate (DOE), MoHUA.
59.2 DOE shall be responsible for the allotment/handing over of shops to the existing allotees/shop keepers after completion of the project.
59.3 DOE shall be responsible for handing over the schools constructed as a p
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ge consists of obtaining approval of design/drawing of the layout plan, execution of work through contract management, supervision of work, periodical testing and commissioning, maintenance of all documents and records, handling disputes/litigation, if any, during construction stages, all audits by Government agencies, implementation of labour bye-laws and others etc.
60.3 Post construction activities consists of obtaining completion certificate from local bodies including fire clearance, handling over of the project on completion to the allottees/buyers, settlement of accounts, handling of disputes/litigation, if any, with the agencies/contractors engaged for the construction.
60.4 NBCC shall execute the project only after getting building plans approved as per the statutory requirements and after approval of design by the Empowered Committee.
60.5 NBCC shall obtain environmental clearance for the redevelopment work in three colonies assigned to them from SEIAA, Delhi.
60.6 The su
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rges, claims (past or future) in respect of properties developed for the project on the corresponding land.
60.11 All the required approvals from the local bodies such SEIAA, NDMC, DUAC, Delhi Fire Services, Airport Authority of India (AAI), National Monument Authority (NMA), MOEF, Tree cutting permission etc. will be obtained by NBCC. Assistance of MoHUA may be sought where necessary and the same shall be provided forthwith to NBCC.
61. To finance the re-development scheme, the following saleable built up area is likely to be available to NBCC for commercial exploitation:
(i) Approx. 8.07 lakh sqm. commercial Built up Area in Nauroji Nagar and parts of Sarojini Nagar,
(ii) Surplus shops to be constructed by NBCC and CPWD as a part of Social Infrastructure in all the seven colonies, after earmarking sufficient number of shops for existing allottees.
(iii) up to 10% of total residential area developed (only if needed.)
62. The saleable commercial and residential (if needed) areas
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In addition, all income accrued from the sale of earth, demolition and construction waste (bricks, iron, wood and others) etc., shall be deposited into the Escrow Account. The interest accrued thereon shall also be credited to the Escrow Account.
66. NBCC shall open and maintain separate Books of Accounts for each colony to be redeveloped by them. NBCC shall submit quarterly returns of the physical and financial progress of the project to MoHUA in the format prescribed by the CMC.
67. The ownership of GPRA and GPOA including social infrastructure shall continue to be with the Government of India and these shall be handed over to the Government after completion.
68. After completion and commissioning of the redevelopment project, any surplus funds available shall be deposited into the Consolidated Fund of India.
69. The Jurisdictional Officer (CGST) has argued that the applicant is M/S NBCC (India) Limited and not the MoHUA and therefore the question no. 2 i.e. whether MoHUA is req
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rticle 243W of the Constitution.
(iii) Whether the applicant is liable to pay GST on sale of built-up space for which part of the consideration was received prior to 01.07.2017, and partly on or after 01.07.2017
(iv) Whether the applicant is liable to pay GST on consideration received under an agreement to sale of constructed units in a building which is under construction.
Question No.1:
72. As far as the first issue mentioned above is concerned i.e. whether the applicant is liable to pay GST on sale of commercial super built up area on behalf of MoHUA, Government of India, in the colonies under redevelopment, the first argument of the applicant is that they cannot be considered as 'supplier of services'. They have stated that under Section 9(1) of the CGST Act, 2017, the CGST is required to be paid by the taxable person but they cannot be called “taxable person” which is defined in Section 2(107) of the CGST Act, 2017. However, before deciding whether the applicant can be called
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Sale, any amount towards GST on payment shall also be payable by the allottee/buyer to the applicant.
75. The MOU between the MoHUA & NBCC is not on Principal-to-Principal basis. It is also not on partnership /joint venture /collaboration basis. There is no mutual revenue, profit or loss sharing arrangement between the two. The applicant is not acquiring any right or interest in the project. It is not selling the commercial built-up units on its own account. The applicant is simply acting as an agent of MoHUA.
76. Section 2(5) of the CGST Act, 2017 reads as follows:
“agent” means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another;
77. Since, it is admitted by the applicant that they are constructing and selling the commercial built-up space on behalf of the Ministry of Housing and Ur
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“taxable person” means a person who is registered or liable to be registered under section 22 or section 24;
82. Now, it may be decided whether the applicant is required to be registered under Section 22 or Section 24 of the CGST Act, 2017 while supplying services as an agent on behalf of Ministry of Housing and Urban Affairs (MoHUA).
83. Section 22 of the CGST Act, 2017 reads as follows:
Persons liable for registration:
(1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees:
Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees.
Explanation.-For the purposes of this section,-
(i) the ex
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the applicant is covered in the definitions of “Agent”, “Supplier” and “Taxable Person” in respect of the said project while providing services on behalf of the Ministry of Housing and Urban Affairs. Further, the applicant is falling under the categories of persons under Section 22 and also under Section 24 requiring compulsory registration in respect of the said project.
88. Hence, the contention of the applicant that they cannot be construed as “supplier” of service as they are selling the commercial built up space on behalf of the Ministry of Housing and Urban Affairs (MoHUA) is not acceptable. Accordingly, they are liable to pay GST under Section 9(1) of the CGST Act, 2017, being taxable person as per Section 2(107) of the said Act in respect of the said project. The sale of the commercial built-up area by the applicant on behalf of MoHUA cast a responsibility on the applicant to also collect and/or deposit GST on the taxable supply of goods or services, even, if they are acting o
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al Tax (Rate) dated 28.06.2017 (as applicable upto 25.07.2018), Services supplied by the Central Government, State Government, Union Territory, local authority or Governmental authority are fully exempted from payment of CGST provided that the said services are by way of any activity in relation to any function entrusted to a municipality under Article 243W of the Constitution. A similar exemption is applicable from payment of SGST and IGST also.
92. It is observed that vide Notification No. 14/2018-Central Tax (Rate) dated 26.07.2018, certain amendments have been made in the Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 and against S. No. 4, in column (3), the words 'Central Government, State Government, Union Territory, local authority or” have been omitted.
93. Hence, after the said amendment, the exemption under S. No. 4 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 is admissible only if such services are provided by a “governmental authority”.
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pear to be covered in the definition of 'governmental authority' and impugned services rendered by MoHUA are not covered under S. No. 4 of Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017, as amended.
96. Also, under S. No. 6 of the said Notification, services supplied by the Central Government, State Government, Union Territory or local authority are fully exempted except for certain specified services like postal services, transport services and also except for services which are provided to business entities.
97. Since, sale of commercial built-up units is a service provided to business entities, such services provided by MoHUA are also not covered in S. No. 6 of the said Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017.
98. The applicant has contended that the construction of commercial built up space in the said project is covered in S. No. 4 of the said Notification. They have claimed that the functions of Municipalities given in Twelfth Schedule of
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t in the case of Manohar Joshi vs. State of Maharashtra reported in (2012) 3 SCC 718 = 2011 (10) TMI 729 – SUPREME COURT OF INDIA. However, in the said case, the issue for decision was regarding power of the State Government to interfere in the decision making powers of the Municipalities. The scope of Article 243W or Twelfth Schedule of the Constitution was not under decision in that case. Hence, the said case law is not relevant in the present case.
101. The applicant has also argued that in the case of G.B. Mahajan and Others vs. Jalgaon Municipal Council and Others, (1991) 3 SCC 91 = 1990 (9) TMI 349 – SUPREME COURT, the legality of construction of a commercial complex by a Municipality has been upheld by the Hon'ble Supreme Court of India. However, the said judgment is not relevant in the present case as the said judgement pertains to a case where construction of a Central Administrative building intended to be used by the Municipal Council for locating its own offices and an adj
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icles 243P and 243W of the Constitution is not relevant in the present case. The said paras 36 and 37 provides that subject to the provisions of the Constitution, it is the legislature of a state which may by law endow the Municipalities with such powers and authority as may be necessary to enable them to function as Institutions of self Government and State Government is the source of their powers. In the present case, there seems to be no State law which has entrusted the applicant or the MoHUA to construct such a huge commercial built-up area for sale to general public. Further, the construction of such commercial built-up area does not enable them to function as Institution of self-Government.
103. Similarly, para 27 to 32 of the Judgment of the Hon'ble High Court of Bombay in Farzana Khan v/s Municipal Corporation of Greater reported in Mumbai 2018 SCC Online Bom 314 in PIL No. 119 of 2017 = 2018 (3) TMI 1654 – BOMBAY HIGH COURT mentioned by the applicant is not relevant to
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ities. In the said case, scope of Article 243W or Twelfth Schedule of the Constitution was not discussed. Hence, the said judgement is not relevant in the present case.
105. Similarly, in para 7, 8 and 10 of the Judgement of Hon'ble Supreme Court in the case of Nagarpalika Parishad vs State of UP reported in 2010 SCC online All 1959 = 2010 (10) TMI 1184 – ALLAHABAD HIGH COURT, the issue was whether Additional District Magistrate was empowered to restrain the Municipality from auction of shops. The scope of activities covered under Article 243W or Twelfth Schedule of the Constitution was not subject matter of the judgment. Hence, the said judgement is not relevant in the present case.
106. It has been submitted by the applicant during the hearing that as per Section 42 of the Delhi Municipal Corporation Act, 1957, the obligatory functions of the Corporation includes:
(k) the construction and maintenance of municipal markets and slaughter houses and the regulation of all markets and s
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Final Order No. A/8905089051/2017-WZB/STB, dated 18.07.2017 (reported in 2017 (9) TMI – 786) in the case of Commissioner of Central Excise, Goa v/s Mormugao Municipal Council (MMC) that MMC, who was engaged in collecting rent contested payment of Service Tax and argued that certain markets were made by them as per their duty under the Constitution of India. They had argued that the renting of immovable property service in such markets cannot be considered as taxable service as the said markets were developed in discharge of Constitution responsibility under Article 243W of the Constitution of India and the 12th Schedule thereunder. They argued that they were not engaged in the trade or commerce and the shop rent out are not in the course of furtherance of business or commerce but are statutory responsibility under the Goa Municipality Act and are for discharge of Constitutional obligation.
111. Hon'ble CESTAT held that perusal of Entries 12 and 17 of Schedule XII clearly shows that wh
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t services for commercial built-up space by the Ministry of Housing & Urban Affairs (MoHUA) are not covered in Twelfth Schedule r/w Article 243W of the Constitution of India and hence not exempted from payment of GST under S. No. 4 of Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017. Further, from 26.07.2018, the exemption is limited to services supplied by the Governmental Authorities. Also, the said services are not covered in S. No. 6 of the said Notification.
Question No. 3
115. The third issue for decision is whether the commercial built up area against which a part of the consideration has been received prior to 01.07.2017 i.e. prior to the appointed date of 01.07.2017 defined under Section 2(10) of the CGST Act, 2017, can be subjected to GST on the amount received on or after 01.07.2017 or not.
116. It is observed that construction of commercial built-up space is a continuous supply of service and in many cases, the part of the service may be rendered in pre-GST
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Suresh Kumar Bansal v/s Union of India = 2016 (6) TMI 192 – DELHI HIGH COURT. It was held that in the case of sale of complex, which is a composite contract, the levy of service tax would be restricted to the service element of the contract, after excluding the value of goods as well as the value of land from such contracts. It was also held that statutory framework must provide for machinery provisions to ascertain the value of such service element which are charged to Service Tax. In Service Tax, the Section 67 of the Finance Act, 1994 and by virtue of Section 67(1)(iii) of the said Act, Rule 2A of the Service Tax (Determination of value) Rules, 2006 provided mechanism to ascertain the value of services and goods in a composite works contract. However, the said Rule did not cater to determination of value of services in case of a composite contract which also involves sale of land. Further, circulars or other instructions could not provide the machinery provisions for levy of tax, wh
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ermination of value) Rules, 2006 and Notification No. 26/2012 – ST dated 20.06.2012 whereas the present application for advance ruling is regarding various provisions of the CGST Act, 2017.
121. The claim of the applicant that such sale of commercial space was exempted from payment of Service Tax under S. No. 39 of Notification No. 25/2012 – ST dated 20.06.2012 is not being examined as the same is beyond the jurisdiction of this Authority.
122. Similarly, the Judgements of Hon'ble Supreme Court in Gem Granites vs Commissioner of IT, Tamil Nadu reported in AIR 2005 SC 1455 = 2004 (11) TMI 13 – SUPREME COURT, Municipal Committee vs Manilal reported in 1967 (2) SCR 100 = 1966 (11) TMI 87 – SUPREME COURT OF INDIA and Pappu Sweets and Biscuits vs Commissioner of Trade Tax, UP reported in 1998(7) SCC 228 = 1998 (10) TMI 452 – SUPREME COURT OF INDIA mentioned by the applicant to claim that the services rendered by MoHUA prior to 01.07.2017 i.e. during Service Tax regime were also exempted,
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Finance Act, 1994. Nevertheless, the leviability of Service Tax on the subject services shall be determined by applying the Point of Taxation Rules, 2011 as per which if services have been provided or deemed to have been provided on or before 30.06.2017, no GST is payable on the same.
15.
Please clarify as to whether Service Tax or GST is payable in respect of on-going projects, for which neither occupancy certificate was received nor it is yet to be occupied, as on the appointed date 01.07.2017?
The sec. 142(10) and 142(11) of the CGST Act, 2017 provides for the provisions to deal with the liability towards the ongoing projects. These provisions are explained with reference to the following possible situations:-
(i) when the total consideration was received prior to 30.06.2017 from the customers in respect of the property under construction (for which neither occupancy certificate was received nor it is yet to be occupied) – Service tax is/was payable on the consideration receive
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ied), when the milestone for payment was achieved by the builder/developer, who raised an invoice within 30 days from the same(as required by law) prior to 30.06.2017, but the payment is received from the customers in respect of the said invoice on or after 01.07.2017, – Service tax is/was payable on the consideration so received @15% on 1/4th of the consideration; and there would be no GST to that extent. On the balance amount payable or paid w.r.t the subsequent payment milestones falling on or after 01.07.2017, GST is payable, as mentioned at (ii) above.
(iv) when the total consideration is received, as per the agreed terms, on or after 01.07.2017 from the customers in respect of a property under construction (for which neither occupancy certificate was received nor it is yet to be occupied) – GST is payable @ 18%, on 2/3rds of the consideration.
124. Hence, for the reasons mentioned above, the judgements of Hon'ble Supreme Court in the case of Govind Saran Ganga Saran vs Commissi
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perty. On the other hand, para 5(b) of Schedule-Il of the CGST Act, 2017 specifically provide that 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, will be treated as Supply of Services.
128. It is observed that during Service Tax regime, an Explanation was inserted by the Finance Act, 2010 in the definition of taxable service of 'Construction of Complex' and 'Commercial or Industrial Construction Service' [section 65(105)(zzzh) and 65(105)(zzq)]. Thereby, the construction of buildings intended for sale wholly or partially by builder or other person authorized by builder before, during or after construction was deemed to be service provided by builder to the buyer. The Explanation provided tha
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IO reported in (2007) 5 SCC 447 = 2007 (5) TMI 591 – SUPREME COURT and in Geo Miller & Co. (P) Limited v/s State of Madhya Pradesh reported in (2004) 5 SCC 209 = 2004 (5) TMI 296 – SUPREME COURT OF INDIA are not relevant in the present case.
131. As per FAQ on GST in respect of Construction of Residential Complex by Builders/Developers:
S.No.
Question
Answer
1.
Whether sale of a Flat/House by a builder / developer is a supply of a service or a immovable property under GST law?
As per the clause 5(b) of the Schedule II of CGST, Act, 2017, construction of a flat / house/ complex intended for sale is a supply of service. However, the entire consideration towards the Flat/House/complex is received after the receipt of completion/occupancy certificate from the competent authority or after its first occupation, whichever is earlier, then such activity is neither a supply of goods nor a supply of Service, as provided under Clause 5 of Schedule-III of CGST Act, 2017. Accordingly, a tran
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, is not exempted from payment of GST on sale of commercial built-up space, as it does not relates to any function entrusted to a municipality under Article 243W of the Constitution. Hence, the exemption under S. No. 4 of Notification No. 12/2017 – Central Tax (Rate) and parallel notifications under SGST and IGST are not admissible. After amendment of S. No. 4 of the said Notification by Notification No. 14/2018 – Central Tax (Rate) dated 26.07.2018, only services provided by “governmental authority” are exempted which does not cover the MoHUA. Further, MoHUA, Government of India is not a Municipality under Articles 243P and 243Q of the Constitution. Also, since, such services are being provided to business entities, exemption under S. No. 6 of the said Notification is also not admissible.
135. The applicant is liable to pay GST on the services supplied under GST regime i.e. w.e.f 01.07.2017, even if part of the consideration had been received prior to 01.07.2017.
136. The applicant
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