In re Varaha Land Private Limited (GST AAR Karnataka)
The applicant, engaged in the development of a residential villa project under a Joint Development Agreement (JDA), sought an advance ruling on whether its agreements with customers for construction of villas constitute a supply of goods or services, the applicable classification and tax rate, and the correct valuation method where separate agreements for land and construction exist.
The applicant entered into two agreements with buyers: one for sale of an undivided share of land and another for construction of a villa. The entire construction activity was proposed to be outsourced to an independent contractor, though the applicant retained responsibility for completion and delivery. The applicant contended that outsourcing resulted in no supply in its hands and alternatively argued that the construction service should be classified as works contract service under Heading 9954(xii), taxable at 9% CGST and 9% SGST. It further claimed that only the construction consideration should be taxed where land is sold under a separate agreement.
The Authority examined the definition of “supply” under Section 7 of the CGST Act, which includes all forms of supply of goods or services made for consideration in the course of business. It observed that the applicant enters into direct agreements with buyers, receives consideration, and assumes full responsibility for construction and delivery. The outsourcing of construction to a third party was held to be merely a mode of execution and did not negate the applicant’s role as a supplier. Each transaction in the supply chain was considered a distinct taxable supply.
