The Karnataka Bench of the Authority for Advance Ruling (AAR) has recently ruled that Goods and Services Tax (GST) is applicable on charges in proportion to common amenities and facilities charges if sale proceeds of plot is consolidated.
The applicant sought an advanced ruling with regard to the question “If the sale price is a consolidated price, then charges proportionate to common amenities and facilities charges are applicable to GST?”
The Applicant sought the applicability of GST if the sale price is a consolidated price which includes land cost, basic infrastructure development charges and other common amenities and facilities charges. There is only service of access to club house and common amenities and the same is considered as a supply as explained and the value proportionate to club house and common amenities are applicable to Goods and Services Tax.
The applicant was of the understanding that even where single price is charged for sale of plot, basic infrastructure development charges and other common amenities and facilities charges in the agreement for sale, it was not liable for GST considering the decision of authority for advance ruling in No.KAR ADRG 31/2022 dated 08-09-2022 and based on Circular No. 177 /09/2022 TRU dated: 03-08-2022.
The Authority Bench noted that, “As far as corpus fund is concerned, the same is found to be in the nature of deposit for future expenses and if the future expenses are known when the amount is collected, the same attains the nature of advance and hence becomes taxable at the time of its collection itself. If the nature of expenses are not known at the time of collection and it is for unforeseen expenses, it would be in the nature of a deposit and is not a part of consideration for a supply at the point of collection but when the same is applied to an expense, the supply would be constituted and would be taxable.”
It was thus ruled by the panel of Dr. M P Ravi Prasad and Kiran Reddy T, considering the definition of “consideration” in clause (31) of Section 2 of the Central Goods and Services Tax Act that, “If the sale price is a consolidated price, then charges proportionate to common amenities and facilities charges are applicable to GST.”
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