The Maharashtra Authority of Advance Ruling (AAR) ruled that 18% GST applicable on ‘Other services’ not naturally bundled with Construction services.
The applicant, M/s Puranik Builders Pvt. Ltd. has been engaged in the business of construction and sale of residential apartments and discharge Goods and Services Tax (GST) in respect of the supply of construction services in respect of residential units for which consideration is received before the receipt of Occupancy/Completion Certificate.
The applicant has raised the issue of whether the Other Charges received by the company will be treated as consideration for construction services of the Company and classified under HSN 9954 along with the main residential construction services of the Company or whether the same will be treated as consideration for independent service(s) of the respective head and consequently, what will be the applicable effective rate of GST on services underlying the Other Charges.
The Coram of members Rajiv Magoo and T.R. Ramnani observed that ‘Construction services’ and the ‘other services’ provided by the applicant are not naturally bundled and are not supplied in conjunction with each other in the ordinary course of business with main supply. These are the facilities/amenities provided by the applicant to its customers for the limited period because for these facilities created the customers have not been given perpetual rights as per the said agreement. The amount of consideration is charged separately for different services. And even the stamp duty is also not paid on the full amount collected from the customer along with the said other charges. Therefore, the other charges for the other services provided are not covered under the scope of ‘Composite supply of services’.
“The ‘other charges’ mentioned as above are held taxable as per their SAC under the GST Act, at 18% in terms of the respective and appropriate entries (against the SAC mentioned in the Table at para 5.9.1 above) in Notification No.11/2017 CT (R) dated 28.6.2017 as they are covered under services, other than construction services,” the AAR ruled.
The AAR further said that the consideration for providing the construction services by way of construction of residential units and the consideration for the other services (i.e. other charges collected) are considerations against separate independent services being provided by the applicant. Considering the nature of supplies in question, the services for each of the service heads/descriptions are covered under Notification 11/2017 mentioned above, and therefore, the Other Charges would attract 18% GST. Thus, the 1/3rd deduction from total value as per Sr. No. 2 of the Notification (as claimed by the applicant) cannot be allowed as a deduction from the Other Charges. A plain reading of the items or the list of other charges itself shows that services supplied against the said charges have no connection with the land and therefore, the question of considering the 1/3rd deduction or rebate towards land cost does not arise, particularly, as the entries applicable to both of the above services are different.
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