The Kerala Authority for Advance Ruling (AAR) ruled that 1.5 % rate of GST is applicable for services of construction of affordable residential apartments and 7.5% for residential apartments other than affordable residential apartments and (Goods and Services Tax) GST for construction services will be charged after deduction of 1/3rd towards value of land and the actual value of land mentioned in agreement.
The applicant M/ s. Palal Realty is a partnership firm registered in Kerala and engaged in business as builders and developers.
The applicant contended that the landlords and villa buyers, they are engaged in construction therefore the rate of GST applicable for them on the construction of villas is 1.5% for affordable villas and 7.5% for villas as other than affordable villas. The effective rate of GST after excluding 1/3 of total consideration towards land portion shall be 1% for affordable villas and 5% for other than affordable villas, subject to fulfilment of other conditions
Further stated that the amount charged by them from the villa buyers for some structural changes, to add some additional area or undertake interior works etc carried out before completion of the construction is also part of the gross amount charged for construction and sale of the villa.
The Two Judge Bench comprising of Dr. S.L. Sreeparvathy and Abraham Renn held that the applicant is liable to pay GST at the rate of 1.5% in respect of the services of construction of affordable residential apartments and at the rate of 7.5% in respect of the services of construction of residential apartments other than affordable residential apartments subject to the conditions prescribed under the respective entries in the villa projects.
Further, the taxable value of the construction services supplied by the applicant is eligible to avail deduction of one-third of the total amount charge for the supply in arriving at the taxable value of the supply.
The amount so charged by the applicant from the villa buyers or some structural changes, to add some additional area or undertake interior works etc carried out before completion of the construction shall be liable to GST for structural changes before completion of construction is 1% for affordable villas and 5% for other than affordable villas.
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