The Karnataka Bench of the Authority for Advance Ruling (AAR) has ruled that the seller of plot is liable to charge Goods and Services Tax (GST) on other common facilities even if the booking and agreement follow the release of roads to authorities.
The applicant had sought advance ruling in respect of the question “whether the applicant is not liable to charge GST on Basic Infrastructure Development charges if the booking of plot, receipt of consideration and agreement for sale is entered as well as sale deed is executed after the release certificate.”
The applicant relied on the decision of the advance ruling No.KAR ADRG 31/2022 dated 08-09-22 in the case of M/s. Rabia Khanum where the advance received towards sale of plot is not liable to GST. In the said case, the authority has relied on clarification issued in Circular No. 177 /09/2022 TRU dated 03-08-2022.
Therefore, the applicant expressed the understanding that in case of advance received towards sale of plot as well as basic infrastructure development and other common amenities and facilities charges before the release certificate is not liable to GST.
As for as the consideration separately shown to have been collected towards common amenities and facilities, the clauses in the agreement were verified and the following were found –
(a) The clause 17.1 of the agreement clearly states that the Promoter is going to construct a Club House at the location reserved for civic amenities in Future Development, which the Promoter has taken on lease/ allotment basis from the concerned authorities or on one of the plots in Additional Land.
(b) The Purchasers are entitled to use the facilities and services of the Club House upon payment of subscription fees as prescribed by the Promoter or its nominees
(c) The Club House shall be in complete control of the Promoter/ remain in exclusive ownership of the Promoter and the Promoter has the sole right and discretion to sell, lease, mortgage, encumber, construct buildings, complexes, etc.
(d) The Promoter, at its own discretion, may also hand over the Club House to the Association of Owners/ Apex Body for maintenance and management of the Club House.
The Authority Bench of Dr. M P Ravi Prasad and Kiran Reddy T observed that it could be seen that the applicant was collecting Estimated Other Charges on behalf of the future service provider in advance and is treated as deposit in the invoice. Since the same was not refundable and adjusted towards the future services to be provided to the plot owners, the same was held to be in the nature of advance. Further, it was noted that the Promoter is in control of the services and is the service provider till the new service provider is employed and handed over, the same is clearly a service provided and hence is a supply by the applicant.
It was thus ruled that, “the applicant is liable to charge GST on Other common amenities and facilities charges if the booking of plot, receipt of consideration and agreement for sale is entered as well as sale deed is executed after the release certificate.”
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