In Re: Shri Sanjeev Sharma
GST
2018 (4) TMI 1077 – AUTHORITY FOR ADVANCE RULING , NEW DELHI – 2018 (13) G. S. T. L. 395 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING , NEW DELHI – AAR
Dated:- 28-3-2018
ADVANCE RULING NO. 03\/DAAR\/2018
GST
Pankaj Jain Member (Centre) and Vinay Kumar Member (State) JJ.
\nPresent for the Applicant: Shri Puneet Agrawal, Advocate
\nPresent for the Revenue (Centre): Ms. Tanvi Gupta Assistant Commissioner Shri Ajay Dev Puri, Superintendent CGST (West),
\nStatement of Facts as per the Applicant:
\nThe applicant plans to engage itself in the development and sale of residential houses, generally floors\/ flats in India.
\nAcquisition of Land
\n2. The proposed modus operandi shall be that the applicant shall either purchase land or it shall enter into collaboration agreements with various land owners whereby the applicant shall acquire the right to develop the property and further sell the units developed thereon.
\na. In case of purchased lan<\/p>\n
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\n6. Following are the questions on which the applicant is seeking advance ruling:
\na) Whether GST will be applicable on the sale of undivided and impartible share of land represented by Agreement to sell the land?
\nb) Whether GST shall be applicable on sale of superstructure (which is under construction)?
\nc) If yes:-
\n i. What will be the value on which tax is payable?
\n ii. What would be the applicable rate for charging GST?
\nViews of The Applicant:
\n7. Sale of land is out of the scope of the definition of Supply under GST, as the same has been prescribed under Entry 5 of Schedule III of the CGST Act, 2017. Consequently, transfer of undivided and impartible share in land would not be leviable to GST.
\n8. For the purpose of analysing the above transaction, it is of importance to have a perusal of the relevant portion of the provisions providing for the scope of 'supply', which reads as under:
\n“7. (1) For the purposes of this Act, the expression “supply” includes-
\n…<\/p>\n
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\n12. Construction of superstructure would attract tax on Rs. 15. Further, even in respect of superstructure, GST should be imposed only on the value of construction on or after the agreement with the buyer i.e. after deducting the value of construction already completed till the date of agreement
\n13. Relevant Notification No. 11\/2017- Central Tax (Rate) dated 28.06.2017:
\nS.No.
\nChapter, Section or Heading
\nDescription of Service
\nRate (per cent.)
\nCondition
\n(1)
\n(2)
\n(3)
\n(4)
\n(5)
\n1
\nChapter 99
\nAll Services
\n
\n
\n2
\nSection 5
\nConstruction services
\n
\n
\n3
\nHeading 9954 (construction services)
\n(i) 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 <\/p>\n
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\n(a) consideration charged for aforesaid service; and
\n(b) amount charged for transfer of land or undivided share of land, as the case may be.
\nDiscussion:
\n14. The issue for decision in this case is regarding value and rate of tax for payment of GST on the service of construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.
\n15. It is observed that as per Section 7(2)(a) of the CGST Act, 2017, activities or transactions specified in Schedule III of the said Act shall be treated neither as a supply of goods nor a supply of services. Further, Paragraph 5 of the said Schedule III specifically covers sale of land. Hence, sale of land is not covered <\/p>\n
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\n18. The applicant has submitted that laws in India recognises “land” and “super-structure” as separate and independent immovable properties. The applicant has referred to provision of General Clauses Act, Indian Contract Act, 1872, Specific Relief Act, Transfer of Property Act, The Indian Evidence Act, Registration Act, Stamp Act, Income Tax Act etc. to claim that land and building are two different assets or immovable property and that land and superstructure can be independently sold and purchased. However, under GST, the valuation of supply of goods and services has to be done in accordance with Section 15 of the CGST Act, 20<\/p>\n
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\n23. The applicant wants the value of land to be ascertained by him on the basis of Rule 30 of CGST Rules, 2017, as the said Rules, do not provide any other specific provision to ascertain the value of land for exclusion.
\n24. It is also observed that a similar issue under Service Tax was decided by Hon'ble High Court of Delhi under W.P. (Civil) No. 2235\/2011 in the case of Shri Suresh Kumar Bansal V\/s Union of India. The Hon'ble High Court held in its judgement dated 03.06.2016 that in the case of sale of complex, which is a composite contract, the levy of service 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<\/p>\n
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\n25. However, under GST Notification No. 11\/2017 – Central Tax (Rate) dated 28.06.2017 – S. No. 3 r\/w Paragraph 2, the deemed value of land or undivided share of land has been fixed at one-third of the total amount charged. Hence, in GST, the machinery provisions to ascertain the value of land is available in the notification which has been issued under Sub-Section (5) of Section 15 of the CGST Act, 2017 regarding value of taxable supply. The said sub-section (5) of Section 15 of CGST Act, 2017 reads as under:
\n“Notwithstanding anything contained in sub-section (1) or sub-section (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed.”
\n26. The said Notification has been issued under Section 15(5) of the CGST Act, 2017 by the Government on the recommendation of the GST Council and<\/p>\n
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