The Karnataka AAR held that GST applicable on works contract service by land owner to prospective purchasers of apartments
FACTS
The applicant is a proprietary concern registered under the provisions of Central Goods and Services Tax Act, 2017 as well as Karnataka Goods and Services Tax Act, 2017 . The applicant is the owner of land and has entered into a joint development agreement (JDA) with M/s. Total Environment Building Systems Private Limited, Bengaluru for development of residential apartments.
ISSUES RAISED
Whether Applicant being land owner not executing construction work, is liable to pay tax in respect of agreements to be entered with customers for sale of apartments (other than affordable) belonging to the Applicant’s share before issuance of Completion Certificate in a project under JDA, area sharing model, where construction work is executed by developer & developer is liable to pay tax on the portion of apartments to be handed over to the Applicant on or before issuance of Completion Certificate?
If Applicant is liable for tax, applicable rate of tax on sale of apartments before issuance of completion certificate?
If Applicant is liable for tax, whether Applicant can claim credit of tax charged by developer on the portion of apartments belonging to the Applicant where developer has opted for payment of tax under old scheme i.e., 18%?
If Applicant is liable for tax, whether Applicant can claim input tax credit on other expenses, other than tax charged by Developer for supply of apartments?
RULING
The AAR opined that
The applicant is acting as a supplier of works contract service to the prospective purchasers of apartments and hence he is a supplier under Section 7(1) of the CGST Act, 2017 liable to pay tax under Section 9(1) of the CGST Act, 2017.
The applicant is liable to pay tax as per entries 3(i) to 3(id) of the Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 as amended by Notification No.3/2019, dated: 29.03.2019 depending on the nature of the apartment, whether it is a residential or commercial apartment; if the apartment is a residential apartment, whether it is affordable category or not and whether the project is a residential real estate project or a real estate project other than residential real estate project.
The applicant is eligible to claim input tax credit on the tax charged by the developer for supply of construction services subject to the two conditions (a) he is a registered dealer on the date the time of supply of construction services falls (b) the amount of tax payable by the applicant for his supply of apartments is more than the amount of tax charged by the developer from the applicant for the supply of construction services.
Input tax credit on other expenses, other than tax charged by developer for supply of apartments, is not eligible to be claimed.
Applicant’s Name: Vinod Kumari Goyal