Order date – 01 June 2022

 Facts –

• The applicant, M/s GALAXYHOMES PRIVATE LIMITED is engaged in the business of construction of residential apartments. They are not doing any joint venture projects but are purchasing the land in their own name and obtaining building permit in their name for constructing of apartment complex.
• The appellant enters in to two agreements with the customers who purchase homes from them. One is for sale of undivided land on which they have to pay the stamp duty at the time of registration. The other one is for allowing them to execute the construction activity. VAT, Service Tax/GST is paid on the same. Since these are projects that started before introduction of GST, they were paying VAT and Service Tax and after introduction of GST they are paying GST [Now at the rate of 18%]
• Few of their customers have raised a contention that the rate of GST to be collected should be 12% only on the ground that land value should be deemed to be taken as 1/3rd of the total price of the apartment and that after land value is deemed at 1/3rd of the price of the apartment, then only 12%should be collected from the customers. They have relied on the GST Notification 11/2017 -Central Tax (Rate) for this contention.

Issue – 

• Whether the value in respect of the construction services of the apartments rendered by appellant from 01.07.2017; the date of introduction of GST onwards are chargeable as per Notification 11/2017 -Central Tax (Rate)?

Order – 

• The AAR observed that a new tax structure for the real estate sector was introduced with effect from 01.04.2019 onwards by amendment of Notification No.11/2017-CT(R) dated 28.06.2017 by Notification No.03/2019-CT(R) dated 29.03.2019. The Notification No.03/2019-CT(R) dated 29.03.2019 substituted the rate for services related to the real estate sector with effect from 01.04.2019 and also made provisions for continuing the old rate of tax (as it existed up to 31.03.2019) for the ongoing projects.
• It is evident that the concessional rate of 12% [6%CGST+ 6% SGST is available only in respect of the construction services of apartments in any of the schemes specified in item (ie) of entry at Sl No: 3 of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 03/2019 Central tax (Rate) dated 29.03.2019;
• The applicant has exercised the option of paying tax at the rate as specified in Item (if)of S1.No.3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No.03/2019 Central Tax (Rate) dated 29.03.2019. Accordingly, the applicant is liable to pay GST at the rate of 18% [9% - CGST + 9% - SGST) in respect of the services of construction of residential apartments supplied by them.
• The provisions of Section 15 of the CGST Act, 2017 read with Para 2 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 will apply for determining the taxable value of the services supplied for the period from 01.07.2017 onwards and accordingly one-third of the total amount charged for the supply shall be deemed to be the value of land or undivided share of land involved in the supply.