In Re: M\/s. Gowra Ventures Private Ltd,
GST
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)
AUTHORITY FOR ADVANCE RULINGS, HYDERABAD TELANGANA – AAR
Dated:- 26-7-2018
TSAAR Order No. 11\/2018-A. R. Com\/6 \/2018
GST
SRI J. LAXMINARAYANA, AND SRI V. SRINIVAS, IRS, MEMBER
\nUnder Section 100(1) of the CGST\/TGST Act, 2017, any person aggrieved by this order can prefer an appeal before the Telangana State Appellate Authority for Advance Ruling, Hyderabad, within 30 days from the date of receipt of this Order.
\nM\/s. Gowra Ventures Private Ltd, 502, Gowra Grand, 1-8-384 & 385, Sardar Patel Road, Begumpet, Secunderabad-500003 registered under GSTIN 36AACCG5513B1Z5 has filed an application in Form GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 103 of CGST\/TGST Rules, seeking Advance Ruling on the following issues.
\nQuestions on which advance ruling is requested<\/p>\n
= = = = = = = =<\/p>\n
Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n and State GST Rules)? = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n be paid by them to the company. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n 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; = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n – = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n e Government or any local authority in which they are engaged as public authorities; = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n rols or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other; = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n nt supply? = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ) the activities specified in Schedule I, made or agreed to be made without a consideration; and = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n uld be treated a Supply of service under the Central and State GST act? = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n on 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. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n n reversed by the recipient of the supply. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n and recipient are related, other than where the supply is made through an agent, shall- = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n a supply besides the supply on account of recovery of construction cost as aforesaid by the Company? = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n","protected":false},"excerpt":{"rendered":" In Re: M\/s. Gowra Ventures Private Ltd,GST2018 (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)AUTHORITY FOR ADVANCE RULINGS, HYDERABAD TELANGANA – AARDated:- 26-7-2018TSAAR Order No. 11\/2018-A. R. Com\/6 \/2018 GSTSRI J. LAXMINARAYANA, AND SRI … Continue reading “In Re: M\/s. Gowra Ventures Private Ltd,”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-14559","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/14559","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=14559"}],"version-history":[{"count":0,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/14559\/revisions"}],"wp:attachment":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=14559"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=14559"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=14559"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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\n4. Whether in the facts and circumstances 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 Company?
\nStatement of relevant facts having a bearing on the question(s) raised:
\nGowra Ventures (“GV” \/ the “Company”), is a private limited company having its registered office at Hyderabad carrying on real estate development activity and owns a parcel of land (hereinafter referred to as “land 1”) in Survey No.84 at Madhapur, Hyderabad.
\nThe Company intends to develop the said land and construct a multi-storeyed building, and applied for approval of Building Plan and was permitted to construct 41,419.95 sq. mtrs. vide Permit No. 53334\/HO\/WZ\/Cir-11\/2016 dated 12-09-2017.
\nMr. Srinivas, Mr. Lakshminarayana, Mr. Subbaraj, Mr. Arvind Lakshmi Narayana, Mr. SubbaramLakshminarayana, Mr. Aditya Srinivas, Mr. Nagarjun Srinivas, (herein after refer<\/p>\n
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\nFollowing are the relevant terms and conditions of the MoU between the Company and the Partners in respect of the above arrangement:
\n1. Land 1 and Land 2 will be amalgamated for the purpose of construction of multi-storeyed building although the legal ownership of the said lands will continue to be vested with the existing owners, namely, the company and the Partners;
\n2. The cost of construction for the allowable floor area shall be paid by the Partners to the Company and the Company shall carry out the construction of the entire project.
\n3. Upon achieving the final milestone as agreed, the additional built-up area as mutually agreed shall vest with the Partners and the balance shall belong to the company, i.e., the company and the Partners will be the legal owners of their respective constructed portions.
\nThe necessary documents or agreements as required under the relevant laws will be entered into by the Partners to give effect to the above arran<\/p>\n
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\nHence, the construction activity is a “Supply of Service as per the terms of section 7 of the Central and State GST Act]
\nAs per Section 7 of the Central Goods and Services Tax Act, 2017 and The Telangana Goods and Services Tax Act, 2017 (GST) the expression supply includes –
\n (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;
\n (b) import of services for a consideration whether or not in the course or furtherance of business;
\n (c) the activities specified in Schedule I, made or agreed to be made without a consid<\/p>\n
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\n(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, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;
\n(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:
\nProvided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;
\nAs per Section 2 (17) of the Central and State GST Act “business” includes-
\n (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, wh<\/p>\n
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\nWhether the construction cost recovered by the Company from the Partners would be the transaction value within the meaning of Section 15 of the Central and State GST Act for the purpose of levy of tax under Section 9 of the Central and State GST Act?
\n[The value for the purpose of supply of construction service by the Company to the Partners shall be
\n (a) be the open market value of such supply;
\n (b) if the open market value is not available, be the value of supply of goods or services of like kind and quality;
\n (c) if the value is not determinable under clause (a) or (b), be the value as determined by the application of rule 30 or rule 31, GST Rules in that order
\nOn application of Rule 28 of the Central and State GST Rules since the open market value or value of like kind and quality of the service is not available, Rule 30 of the Central and State GST Rules shall apply and one hundred and ten pe<\/p>\n
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\n(vi) both of them are directly or indirectly controlled by a third person;
\n(vii) together they directly or indirectly control a third person; or
\n(viii) they are members of the same family;
\nAs per Rule 28 of the Central Goods and Services Tax (CGST) Rules, 2017 and Telangana Goods and Services Tax (CGST) Rules, 2017
\nThe 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, shall-
\n (a) be the open market value of such supply;
\n (b) if the open market value is not available, be the value of supply of goods or services of like kind and quality;
\n (c) if the value is not determinable under clause (a) or (b), be the value as determined by the applicatio<\/p>\n
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\n[No, this is not an independent supply because the land and the superstructure thereon have always remained during the construction activity as the property of the respective parties as represented by their shares in the Project].
\nDuring the time of personal hearing held on 17.05.2018 Mr Sampath Thirumalai Advocate & authorized representative of the applicant appeared for the hearing and reiterated the submissions made in their application and requested for advance ruling. Further the applicant submitted a copy of the agreement entered between the partners vide their letter dated 16.7.2018.
\nDiscussion & Findings:
\nThe applicant sought advance ruling on different issues and each issue is discussed below:
\n1) Whether in the facts and circumstances the pooling of land by way of amalgamation of the separate parcels viz Land 1 and Land2 as described in the “Statement of relevant facts” would constitute a supply under the Central Goods and Services Tax act, 2017 and Telangana G<\/p>\n
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\n (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.
\n(2) Notwithstanding anything contained in sub-section (1),
\n (a) activities or transactions specified in Schedule III; or
\n (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.
\n(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-
\n (a) a supply of goods and not as a supply of services; or
\n (b) a supply of services and not as a supply of goods.”
\nOn a careful reading of the above provisions of S<\/p>\n
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\n * 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, condition mentioned at Sl.No.3 ( page 4 of said MOU) stipulates to authorize M\/s Gowra Ventures Pvt Ltd to take lead for construction of the subject commercial complex.
\nIn 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'. In view of the above the activity undertaken by M\/s Gowra Venture Pvt Ltd with respect to the share belonging to the said partners (as described in t<\/p>\n
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\n(2) The value of supply shall include
\n (a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;
\n (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;
\n (c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goo<\/p>\n
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\n(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.
\n(5) 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.
\nExplanation.-For the purposes of this Act,
\n (a) persons shall be deemed to be “related persons” if
\n (i) such persons are officers or directors of one another's businesses;
\n (ii) such persons are legally recognized partners in business;
\n (iii) such persons are employer and employee;
\n (iv) any person directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them;
\n (v) one of them directly or indirectly controls the other;
\n (vi) both of them are direc<\/p>\n
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\n (a) be the open market value of such supply;
\n (b) if the open market value is not available, be the value of supply of goods or services of like kind and quality;
\n (c) if the value is not determinable under clause (a) or (b), be the value as determined by the application of rule 30 or rule 31, in that order:
\nProvided 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:
\nProvided 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.”
\nHaving regard to the nature of service, value cannot be determined under clause (a) or (b) of Rule 2<\/p>\n
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\nAs 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) 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.
\nIn view of the foregoing discussion, the following ruling is passed.
\nAdvance Ruling
\n1. The pooling of land by way of amalgamation of the separate parcels viz Land 1 and Land<\/p>\n
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