Order date: 14 July 2022

Facts –

• The applicant, M/s. Sri Bhavani Developers, are residential developers and had entered into a Joint Development agreement with Mr. Sadanda Chary. They had also opted for the new tax scheme.
• The joint development agreement between the land owner and the builder was signed on December 7, 2017.
• A supplementary development agreement on an area sharing basis was signed on December 17, 2018.They have started the work, but they did not have any bookings as of 31-03-2019. Therefore, the applicant falls into “other than on-going projects” as per the notification No. 3/19 and 4/19, they are left with 5% GST without ITC.
• The applicant sought an advance ruling on the issue of whether notification 4/2019 can be followed and GST be paid on an RCM basis for the share of the landlord as the project falls under “other than on-going Projects” as it can be considered as a new project.
• The applicant submitted that the customer is entering into two types of agreements at the time of selling the semi-finished residential flat namely, “Sale Agreement” and completion of semi-finished works called “Work Order”. 
• The applicant has sought the ruling in respect of the GST rate applicable on the Sale Agreement and Work Order and the eligibility of ITC.

Issue –

• Weather the project is considered as ‘on-going project’ or ‘other than on-going project’?

Order –

• The Notification No. 03/2019 makes a distinction between ‘On-going project’ in clause (xx) of Para 4 and ‘Other than on-going project’ in clause (xxviii) of Para 4. Accordingly ‘Other than on-going project’ means a project which commences on or after 01.04.2019. Therefore the project undertaken by the applicant does not fall under this definition as claimed by him in the statement of facts submitted separately on 21.12.2021
• The tax on the portion of constructed area shared with the land owner-promoter has to be paid by applicant as his liability in the capacity of developer-promoter and not as Reverse charge mechanism. The land owner-promoter will claim such tax as ITC
• Further, the applicant is liable to pay tax on reverse charge mechanism as developer-promoter in case of cement, capital goods unsold residential apartment.
• The law regarding services by an employee to the employer in the course of or in relation to his employment enumerated in Schedule III to CGST Act, 2017 remains unchanged. Therefore Tax will not be attracted for labour engaged on daily basis or employees etc., if the service is rendered in the course of such an employment. However manpower supply or labour supply services by manpower supply agency falls under SAC 98519 and is taxable @18%. This tax has to be paid by the manpower supply agency. 
• The AAR held that if the initial contract for land and building, even if entered through different severable agreements, constitutes a single contract, Hence, it will attract tax at the rate of 0.5% for affordable housing and 2.5% for other housing under CGST and SGST, respectively, without ITC. However, if any other agreement which is beyond the scope of the initial agreement and is a severable agreement in relation to the initial agreement, then the construction made under the contract will attract 9% tax under CGST & SGST each with ITC.