18% GST payable if Builder fails to exercise option of Lower Rate: AAR [Read Order]

The Kerala Authority of Advance Ruling (AAR) ruled that 18% GST payable if the builder fails to exercise the option of the lower rate.

The applicant, Victoria Realtors started the activities from 2012 onwards. They first identify locations suitable for the gated community villa projects and will buy land in their own name and take layout approval in their name and promote the villas to various villa buyers. In another situation, they identify locations suitable for the gated community villa projects and enter into an agreement with the landlords for the purchase of the entire land area required for the project. The total area of land is divided into various plots and the layout approval is taken in the name of the landlord and the villa approval is taken either in the name of the landlord or in the name of villa buyers from concerned local authorities at their expense. After the approval from local authorities, they provide amenities like roads, arches, compound walls, rainwater harvesting, health club, etc required for the gated communities. They do marketing activities such as digital, paper ads, media advertisement, etc, and identify suitable villa buyers for the projects.

The applicant has sought the advance ruling on the issue of whether the new tax rate of 7.5% (effective rate of 5% after excluding land portion), with no ITC, is applicable to the 11 unbooked units in the said VRINDHAVAN project.

The coram of Joint Commissioner of Central Tax, Shiva Prasad, and Additional Commissioner of State Tax, Senil A.K.Rajan ruled that Since the applicant has exercised the option for paying tax at the rate as specified in Item (if) of Sl No. 3 of Notification 11/2017-CT (Rate) dated 28.06.2017 as amended by Notification No. 03/2019 CT (Rate) dated 29.03.2019 in respect of the ongoing project “VRINDHAVAN”, the old rate of tax at 18% (9%- CGST + 9% – SGST) with the input tax credit is applicable for all the apartments/villas comprised in the project-“VRINDHAVAN”.

To Read the full text of the Order CLICK HERE

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