The Gujarat Authority of Advance ruling (AAR) ruled that the benefit of the reduced rate as provided under Entry Number 3(v)(da) of the Notification No.11/2017-Central Tax (Rate) as amended by Notification No.01/2018-Central Tax (Rate) dated January 25, 2018, available for houses constructed with a carpet area of 60 square metres per house and the applicant is ineligible to avail the benefit of reduced rates as it is not covered under ‘affordable housing project’.
The applicant, M/s. Amba Township Pvt. Ltd. is engaged in the construction of residential and commercial construction on a works contract basis; at present they are engaged in the construction and development of a township namely “Amba Township”.
The applicants are developing a township which consists of many real estate projects within a township. Since the development of the town is a continuous process, the applicant is developing the township in a phased manner; that different schemes or projects are being undertaken by the applicant at different spans of time. At present, Sector-4 of the township is being constructed which is also divided into two parts namely Part-A and Part-B.
As per Notification No.01/2018-Central Tax (Rate) dated January 25, 2018, the effective rate of GST has been reduced from 18% to 12%.
The advance ruling was sought on the issue whether, under given facts and circumstances, is the benefit of the reduced rate as provided under Entry Number 3(v)(da) of the Notification No.11/2017-Central Tax (Rate) as amended by Notification No.01/2018-Central Tax (Rate) dated January 25, 2018, available to the applicant for houses constructed with a carpet area of 60 square metres per house.
The Authority consisting of Sanjay Saxena and Mohit Agarwal ruled that The applicant M/s. Amba township pvt.ltd. is not eligible for the benefit of the reduced rate as provided under Entry Number 3(v)(da) of the Notification No.11/2017-Central Tax (Rate) as amended by Notification No.01/2018-Central Tax (Rate) dated January 25, 2018, available for houses constructed with a carpet area of 60 square metres per house for various reasons.
Firstly, the benefit of the notification would be available to the applicant subject to the condition that he builds a housing project using 50% or more of the FAR/FSI for dwelling units with carpet area up to 60 square metres.
Secondly, 74.08% of the FSI of Part-B of the township of Sector-4 has been used for constructing units with a carpet area of up to 60 sq meters. However, since Part-B is not an independent/standalone housing project, total FSI of Part-B cannot be considered as the denominator to arrive at 50% as required under notification dated March 30, 2017, of the Department of Economic Affairs, Ministry of Finance to determine the applicability of the benefit of Sr.No.3(v)(da) of Notification No.11/2017-Central Tax(Rate) dated June 28, 2017.
Lastly, since Part-B of Sector-4 of the township cannot be considered as a standalone housing project and since 50% of FAR/FSI of the entire housing project of Sector-4 which comprises of Part- A and Part-B has not been used for the construction of dwelling units with a carpet area of not more than 60 sq.meters, the said housing project cannot be considered as an ‘affordable housing project’ in terms of the said notification.
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