The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act” respectively] by M/s. Romell Real Estate Private Limited, the applicant, seeking an advance ruling in respect of the following question.
a. Whether Entry No. 3(v) (da) of Notification 11/2017-C.T.(R) dated 28/06/2017, as amended time to time, applies to the works contract service received from the contractors?
b. Whether the benefit of concessional rate would be available to construction of common amenities such as club house, swimming pool and amenities of like nature?
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression %ST Act’ would mean CGST Act and MGST Act.
2. FACTS AND CONTENTION – AS PER THE APPLICANT
2.1 M/s RomeII Real Estate Private Limited (Applicant) having GSTIN 27AAACR2503C1Z1 is undertaking certain Residential Real Estate Projects (RREP) primarily having residential apartments with a carpet area up to 60 sq. mts. Applicant wants to know whether Entry No. 3(v) (da) of Notification 11/2017-CT (Rate) dated 28/06/2017, as amended time to time, applies to the ‘works contract service’ received from its contractors.
2.2 The details of the Project “Amore” with carpet area (sq. mts.) are as under:
Total No. of Units
Total area of residential units below 60 sq.mts.
Total area of residential units below 60 sq. mts.
From the aforesaid, it can be observed that in this project more than 50% of Floor Space Index (FSI) is utilized towards construction of units (below 60 sq. mts.) and thus, the Project would qualify as an ‘Affordable Housing Project’ (AHP) which has been given ‘Infrastructure Status’ under the Notification F. No. 13/6/2009-INF, dated 30-3-2017 issued by Department of Economic Affairs.
2.3 The relevant entry, as contained in the Not. No. 11/2017-CT is reproduced for ease of reference:
Chapter, Section or Heading
Description of Service
Rate (per cent.)
Heading 9954 (Construction services)
(v) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 [other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above], supplied by way of construction, erection, commissioning, or installation of original works pertaining to-
[(da) low-cost houses up to a carpet area of 60 square meters per house in an affordable housing project which has been given infrastructure status vide notification of Government of India, in Ministry of Finance, Department of Economic Affairs vide F. No. 13/6/2009-INF, dated the 30th March, 2017]
2.4 Applicant refers to the decision of the West Bengal Advance Ruling Authority IN RE: PRIMARC PROJECTS PVT. LTD. [2020 (42) G.S.T.L. 536 (A.A.R. – GST- W.B.)] wherein the said authority has provided Advance Ruling exactly on rate of tax applicable to works contractor.
2.5 In case of the subject Project, the Applicant has not opted for paying tax at the rate specified in Entry No. 3 (ie) or 3(if) as the Project has been initiated after 1.4.2019 itself. Accordingly, the works contractors are entitled to levy GST @ 12% in terms of the Notification 11/2017-CT (R).
2.6 Applicant submits that the common amenities, are part of the overall construction service. Given this, the works construction services will qualify as composite supply of works contract service.
2.7 Applicant also refers to the Advance Ruling issued in the case of Bengal Peerless Housing Development Company Ltd. [2019-TIOL-137-GST = 2019 (24) G.S.T.L. 684 (A.A.R. – GST)] in support of their contention that, the concessional rate of GST will also be applicable, to the extent of area attributable to the affordable units.
2.8 Further, applicant submits that a cogent reading of Sections 95(a) and 97(2) of the CGST Act, 2017, doesn’t deny the application of AAR by the person who is receiving the goods or services or both as, an applicant to obtain the Advance Ruling.
2.9 Further, the Notification entry is qua the supply and not qua the person and therefore once a project qualifies as an Affordable Housing Project, the benefit of concessional rate of tax would be available in respect of ‘work contract services’ pertaining to low-cost houses, irrespective of it being supplied by the Developer or the Contractor. Also, the impugned question is with respect to applicability of rate on the specified supply of works contract services in respect of affordable housing project and thus, the question is qua the supply than qua the person.
03. CONTENTION – AS PER THE CONCERNED OFFICER:
Officer Submission dated 03.02.2022-
3.1 The Applicant, M/s. Rome!! Real Estate Pvt. Ltd., a developer receives ‘works contract services’ from contractors. The subject works contract entered into by the contractors with the Applicant is related to the residential project ‘Amore’. The Applicant has submitted that in this project more than 50% of Floor Space Index (FSI) is utilized towards construction of units (below 60 Sq.Mtrs.) and the project would qualify as an ‘Affordable Housing Project (AHP) which has been given Infrastructure Status’ under the Notification F.No. 13/6/2009-INF dated 30.03.2017 issued by
Comments with reference to Question No. 1 raised by the Applicant:
3.2 (i) Notification No. 11/2017 dated 28.06.2017 (w.e.f. 01.07.2017) issued under the CGST Act, 2017, specifies under Sr. No. 3 that the Construction Services under Heading 9954 would attract Central Tax @ 9% CGST. Subsequently vide Notfn. No. 1/2018-CT (Rate) dated 25.1.2018, a reduced CGST Rate of 6% was provided under Sr. No. 3 – Item (v) – sub-item (da) of the said Notification.
(ii) Sr. No. 3 (v)(da) of Notification No. 1/2018 provided the concessional rate of 6% CGST to, Composite supply of Works contract as defined in clause (119) of section 2 of the CGST Act, 2017, supplied by way of construction, erection, commissioning or installation of original works pertaining to,-‘ Low-Cost Houses upto a carpet area of 60 square meters per house in an affordable housing project which has been given infrastructure status vide notification of Government of India, in MOF, Dept of Economic Affairs vide F.No. 13/6/2009-INF, dated 30′ March 2017’.
3.3 As per submissions made by the Applicant, the works contract services are being provided by the contractor to the developer/applicant. Considering that the project in question qualifies to be an affordable housing project, the benefit of this reduced rate @6% would be available to the contractors who provide the composite supply of works contract to the developer/applicant. The benefit is available only in cases of supply effected after 25.01.2018 and the benefit would be applicable in case of only those flats which are of carpet area upto 60 Sq.Mtrs. and in case of other flats having carpet area more than 60 Sq.Mtrs., the CGST rate would be payable at normal applicable rate. This is also in line with the ruling as laid down by GST AAR Maharashtra in the case of M/s. Prajapati Developers (Order No. GST-ARA-02/2018-19/8-58 dated 3.07.2018).
Comments with reference to Question No. 2 raised by the Applicant
3.4 The amenities such as club house, swimming pool etc. are not covered under the descriptions as specified in Sr. No. 3(v)(da) of Notfn 11/2017 as amended by Notfn. 1/2018. The works contract services provided for the construction of these amenities is not covered under the ambit of the concessional rate & no such benefit would be applicable to the works contract services supplied in relation to such amenities. This is in line with the ruling of the GST AAR Maharashtra in the case of M/s. Shapoorji Pallonji and Co. Ltd. (Order No. GST-ARA-29/2019-20/B-123 dated 26.12.2019).
3.5 The Authority may decide as to whether the project with club house, swimming pool and other amenities still qualifies to be ‘low cost houses in an affordable housing project’ in terms of the said notification.
4.1 Preliminary e-hearing in the matter was held on 12.10.2021. Authorized representative of the Applicant, Shri. Pritam Mahure, C.A. was present. Jurisdictional Officer was absent. Application is admitted subject to condition that applicant will file/produce the written submission as to how the recipient of supply can seek advance ruling.
4.2 The application was admitted and called for final e-hearing on 22.02.2022. Authorized representative of the applicant, Shri. Pritam Mahure, C.A., was present. Jurisdictional officer Shri. Vinod Pisharody, Superintendent, Division-VI, Commissionerate Mumbai West was also present. Applicant admitted that questions asked in application are not capable of being covered under scope of Section 95(a) of GST Act.
05. OBSERVATIONS AND FINDINGS:
5.1 We have perused and considered the submissions made by the applicant i.e. M/s Romell Real Estate Private Limited as well as the jurisdictional officer.
5.2 Section 95 (a) of the GST Act reads as under:
95. In this Chapter, unless the context otherwise requires,-
(a) “Advance ruling” means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant ;
5.3 The above underlined words are very clear. It is the supplier who is expected to ask the questions by way of filing of the Advance Ruling application. In the present case, both the questions asked are such that in these transactions, the applicant is the recipient and not the supplier of goods or services or both. In the first question it is asked whether particular provisions of notification applies in respect of services received from contractor. Here, the contractor is the service provider and applicant is the recipient of service. In second question the applicant wants to know whether the benefit of concessional rate would be available to construction of common amenities such as club house, swimming pool and amenities of like nature in the subject case. Since construction activities are being undertaken by the respective contractor, in both the questions nature of transactions is such that the applicant is the recipient and not the supplier.
5.4 In this context, we would also like to refer sub-section (1) of section 103 of the CGST Act, 2017 which reads as follows:
“Applicability of advance ruling. –
(1) The advance ruling pronounced by the Authority or the Appellate Authority under this Chapter shall be binding only-
(a) on the applicant who had sought it in respect of any matter referred to in sub-section (2) of section 97 for advance ruling;
(b) on the concerned officer or the jurisdictional officer in respect of the applicant.”
The aforesaid sub-section, thus, categorically speaks that the ruling pronounced is binding only on the applicant and on the concerned officer or the jurisdictional officer in respect of the applicant. If an application is filed by the recipient of goods or services or both on the taxability of his inward supply of goods or services and ruling is pronounced accordingly, such ruling shall be binding only on him and on the concerned officer or the jurisdictional officer of him. In no way, the ruling shall be binding on the supplier of such goods or services.
To illustrate, say M/s X of Maharashtra receives inward supply of goods from M/s Y (Location of M/s. Y May be in Maharashtra or may be in other states). M/s. X files an application of advance ruling seeking the taxability of his inward supply. The Advance Ruling Authority may pronounce ruling declaring the supply to be an exempt supply. However, since the same is not binding on his supplier, the supplier may not follow the ruling and even find the supply as a taxable supply. In such a scenario, the ruling loses its relevance and applicability.
Any provisions of the Law, therefore, should not be interpreted in a way which defeats the very purpose of the objective and purpose of the law provision. We are therefore of the view that in the subject application, the applicant cannot seek an advance ruling in relation to the supply where he is a recipient of services.
5.5 The applicant mainly emphasized the following two issues, viz.
(1) The word ‘in relation to the supply of goods or services or both’ in Section 95(a) of CGST Act, 2017, can be interpreted to include supply of both inward supply and outward supply.
(2) The inward supply or outward supply are specifically defined in the Act which are two parts of the supply.
However, since provisions of Sec 95 (a) are very clear and unambiguous that only a supplier can file an application for advance ruling, the contentions of the applicant are not accepted. The said provisions were discussed with the applicant’s authorized representative during the course of the final hearing and he agreed that the questions are not maintainable and not capable of being covered under Scope of section 95(a) of GST Act.
5.6 We therefore do not answer the questions raised by the applicant.
06. In view of the extensive deliberations as held hereinabove, we pass an order as follows:
(Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
For reasons as discussed in the body of the order, the questions are answered thus –
Question 1: – Whether Entry No. 3(v) (da) of Notification 11/2017-Central Tax (Rate) dated 28/06/2017 (hereinafter the Rate Notification), as amended time to time, applies to the works contract service received from the contractors?
Answer: – Not answered in view of above discussion.
Question 2:- Whether the benefit of concessional rate would be available to construction of common amenities such as club house, swimming pool and amenities of like nature?
Answer:- Not answered in view of above discussion.