The Telangana State Authority for Advance Ruling (AAR) has held that the labour and manpower supply by agency would attract 18% GST.
The applicant, M/s. Sri Bhavani Developers are into constructions of residential buildings and have opted for new tax scheme as per Notification No.3/2019, dt: 29.03.2019. The applicant submitted that, in a particular case they have entered into JDA with one Mr.Sadanda Chary for construction of residential units at Moulali. The Joint Development Agreement between land-owner and Builder was entered on 7 December 2017 and subsequently supplementary development agreement was entered on 17 December 2018 on area sharing basis. And that they have started the work however that they didn’t have any bookings as on 31-03-2019 and therefore, approached the AAR for clarification if they are falling into “other than Ongoing Projects” as per the notification No 3/19 and 4/19 and that they are left with GST@5% without ITC.
The bench comprising Sri B. Raghu Kiran, IRS, Additional Commissioner (Central Tax) Sri S.V. Kasi Visweswara Rao, Additional Commissioner (State Tax) observed that 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 bench added.
“If the initial contract for land and building, even if entered through (2) different un severable agreements, constitutes a single contract and hence will attract tax @0.5% for affordable housing and @2.5% for other housing under CGST & SGST respectively without ITC. However, any other agreement which is beyond the scope of initial agreement and is a severable agreement vis-à-vis the initial agreement then the construction made under this contract will attract 9% tax under CGST & SGST each with ITC,” the bench said.
Concluding the order, the bench held that “If the initial contract for land and building, even if entered through (2) different un severable agreements, constitutes a single contract and hence will attract tax @0.5% for affordable housing and @2.5% for other housing under CGST & SGST respectively without ITC. However, any other agreement which is beyond the scope of initial agreement and is a severable agreement visà-vis the initial agreement then the construction made under this contract will attract 9% tax under CGST & SGST each with ITC.”
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