GOODS AND SERVICES TAX (GST)

I.     AUTHORITY OF ADVANCE RULING
 
24. [2020-TIOL-285-AAR-GST] Mr. B.R. Sridhar Date of order: 7th November, 2020 [AAR-Karnataka]
 
Sale of residential flats under a Joint Development Agreement after obtaining Occupation Certificate is not liable to GST
 
FACTS
The applicant, being the owner of an immovable property, entered into a Joint Development Agreement (JDA) on 19th May, 2016 with M/s Suprabhat Constructions authorising them to construct residential flats together with certain common amenities by incurring the necessary cost; upon the development of the said property, the applicant would get 40% share of undivided right, title and interest in the land proportionate to super built-up area and 40% of car parking spaces. The question before the Authority is whether the total amounts received by the owner towards the advances or sale consideration of the flats fallen to his share of 40% in terms of the JDA of 19th May, 2016 and the subsequent Area Sharing Agreement of 3rd January, 2018 are not amenable for payment of GST, since the applicant has sold or agreed to sell or gift the flats after obtaining Occupancy Certificate dated 26th August, 2019 and that they have not received any part of the sale consideration prior to the said date of Occupancy Certificate, thus falling under Entry No. 5 of Schedule III of the CGST Act read with Notification No. 11/2017-Central Tax (Rate).
 
HELD
In this case the applicant stated that his share of residential flats had been handed over by the developer after the issuance of Completion / Occupation Certificate dated 26th August, 2019 and also that clause 1.7 of the Area Sharing Agreement restricts their right to execute any sale agreement or any conveyancing deeds till the issuance of Completion Certificate and taking over of their share of units / flats. Thus, the sale of said flats is not exigible to GST if and only if they are sold after issuance of Completion / Occupancy certificate, in which case the said transaction is to be treated neither as supply of goods nor supply of services in terms of Entry clause 5 of Schedule III – however, if the applicants themselves or the developer on their behalf have sold the applicant’s share of units / flats prior to issuance of Completion Certificate, then the transactions amount to supply of ‘Works Contract Service’ and are liable to GST.
 
 
25. [2020-TIOL-287-AAR-GST] Vrinda Engineers Pvt. Ltd. Date of order: 4th December, 2020 [AAR-Kolkata]
 
Fabrication of steel structures and applying a coat of paint thereon for a single price is not naturally bundled
 
FACTS
The applicant states that M/s S.P. Singla Construction Pvt. Ltd. is engaged in the reconstruction of the Majherhat Railway Overbridge. The Principal has contracted with the applicant for fabrication, painting and transportation at the site of the ‘Viaduct and Cable Stay’ part of the ROB. The applicant wants to know the applicable rate of tax for the above activity.
 
HELD
The Authority noted that the contract combines two separate services: (1) the job work of fabrication of steel structures and delivery thereof at the site with incidental supply of paint, and (2) works contract of applying a coat of paint to the steel structures after erection. Although they are supplied in conjunction with each other at a single price, they are not naturally bundled. The job work of fabrication ends with the delivery of the fabricated structures at the site. The works contract of applying paint to the erected structures is a separate supply made in conjunction with the job work and is, therefore, a mixed supply. The taxability of the mixed supply depends on the applicable rate of tax on each of the two supplies. Being supply of manufacturing service (SAC 9988) to a registered taxable person, the supply of the job work is taxable @ 12% in terms of Sl. No. 26 (id) of the Rate Notification 11/2017-Central Tax (Rate). On the other hand, the Principal is the main contractor engaged by the Public Works (Roads) Department of the State Government. Thus, the works contract service, being that of a sub-contractor engaged by the main contractor, is taxable @ 12% in terms of Sl. No. 3(ix) of the Rate Notification. The mixed supply is, therefore, taxable @ 12% in terms of the provisions u/s 8(b) of the GST law.