The Haryana Appellate Authority of Advance Ruling ( AAAR ) has held that GST applicable on External & Infrastructure Development contributing to value of flats.
The Appellant M/s.Ashiana Housing Ltd. is registered under GST in Gurugram and is a State administered taxpayer. They are engaged in the construction of residential complexes and have entered into a ‘development agreement’ with a Landowner M/s. Universe Heights (lndia) Private Limited Gurugram for construction of a Group Housing colony. The Landowner is the licensee of Department of Town and Country Planning, Haryana (DTCP) for the development of a Group Housing colony and the conditions of the license require the Landowner to pay the External Development Charges and Infrastructure Development Charges to the Haryana Urban Development Authority / Department of Town and Country Planning.
Under the conditions of agreement entered by the Appellant with Landowner, all ancillary and incidental rights , benefits, interests, easements, privileges appurtenant thereto and have accordingly entered into ‘Flat Buyer agreements’ with prospective buyers. The Appellant is paying GST in respect of construction service being provided to the flat buyers on the consideration received under such agreements when agreements have been entered into before the receipt of Completion Certificate. As per the Flat Buyer Agreement ibid, the flat buyer agrees to pay the ‘External Development Charges‘ (EDC) and ‘Infrastructural Development Charges’ (lDC).
The applicant filed the application before the AAR for clarifying that the Statutory charges i.e. External Development Charges and Infrastructural Development Charges recovered by the Applicant from buyers and paid further to respective Government Authorities will form part of value of taxable supplies being made by the applicant.
After notice and opportunity, the Advance Ruling Authority held that the amount of statutory charges i.e. Extemal Development Charges and Infrastructure Development Charges, recovered by the Applicant from buyers and paid further to respective Government Authorities will form part of value of taxable supplies being made by the applicant. Being aggrieved with the impugned order the appellant M/s Ashiana Housing Ltd. had filed appeal before AAAR.
The Appellant submitted that the appellant is liable to pay the amount of EDC and IDC in terms of the HDRUA ACT. These are mandatorily to be paid by the Appellant and to be used by the authorities for development of state. The Appellant recovered these amounts from the Buyers in terms of the HDURA Act only. These amounts are not for supply of any service by the Appellant, but only recovery of statutory charges. Such charges are not for supply of services by the Appellant and therefore do not form part of the transaction value for the purposes of Section 15(1)of the CGST Act. Section 15(2) refers to any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than the CGST Act, the SGST Act, the UTGST Act and the GST (Compensation to States) Act, if charged separately by the supplier. These taxes, duties, cesses, fees and charges are those, which are levied on the underlying transaction, i.e. supply of deemed construction services by the supplier. These do not refer to each and every charge, which is incidentally related with supply of services. It has to be read as to mean only those which are levied on the supply of services. In the instant case, the EDC and IDC are not levied on the transaction of supply of services. These charges are mandatorily recovered from a developer holding license under HDRUA Act as a condition of the license. Thus, these charges are not covered with the purview of Section 15(2)(a of the CGST Act.
The Coram of Sri Shekhar Vidyarthi, Member (SGST) and Sri Suresh Kishnani Member (CGST) by upholding the ruling of AAR has held that “however the HDRUA (Haryana Development and Regulation of Urban Areas) Act 1975, the External Development and Infrastructure Development charges are meant to meet, respectively, the cost of external development work to be carried out in respect of an individual infrastructure project viz. a colony, and the cost on developing infrastructure projects development in the State. It is not related to the sale of the flats”. It was further held that “both EDC and IDC are not related with the number of flats to be constructed / sold or are to be paid even if the some/all flats kept for personal use. Since, the ‘External Development’ and ‘Infrastructure Development’ do contribute to the value of the flats, the charges for these beyond doubt form a constituent of the value of the construction service provided to the flat owners by the Appellant. The GST shall be applicable, as also provided under Section 15(2)”.
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