In re Kolte Patil Developers Ltd. (GST AAAR Maharashtra)
The Appellate Authority for Advance Ruling upheld the ruling given by the Advance Ruling Authority by observing that since the Appellant has raised questions on the admissibility of the credit of the service tax and VAT paid under the pre-GST regime, it is held that neither AAR nor AAAR has the jurisdiction to pass any ruling on such matters
FULL TEXT OF ORDER OF APPELLATE AUTHORITY OF ADVANCE RULING, MAHARASHTRA
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the MGST Act.
The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act arid MGST Act”] by Kolte Patil Developers Ltd. (herein after referred to as the “Appellant”) against the Advance Ruling No. GST-ARA-40/2018-19/B-118 dated 24.09.2018
BRIEF FACTS OF THE CASE
A. Kolte Patil Developers Ltd ( ‘the Appellant’) is engaged in the activity of Construction of Residential and Commercial complex.
B. The application for Advance Ruling (AR) dated 19th June 2018 was filed by them with an intent to seek clarification whether the Service Tax/VAT paid earlier can be claimed as credit or allowed as refund to property buyers.
C. The facts in the instant case are that at the time of booking of flat by the customer, the applicable Service Tax and Maharashtra VAT (MVAT) was deposited. Given this, the Service Tax and MVAT burden borne by the individual customer on flat booked in pre-GST regime ranged from 4.50%- 5.50%. However, due to certain reasons, the flats booked by the customer in the pre-GST regime, are cancelled by the customer on or after 1st July 2017 (i.e. after implementation of GST).
D. In pre-GST regime, Developer was entitled to avail service tax credit in case of cancellation flat as per Rule 6(3) of Service Tax Rules, 1944. Hence, the customer who cancelled flat was not required to bear indirect tax cost as the CENVAT credit for the same was available to the Developer.
E. In view of the above, the issue for determination before the Authority for Advance Ruling (‘AAR’) was :-
a. Whether GST input tax credit of Service Tax and State VAT paid while booking of flat is available to the Developer, if cancelled in GST regime?
b. What will be the methodology to avail Input Tax Credit on the said taxes paid?
F. At the time of preliminary hearing dated 17th July 2017, the legal aspect of the submission were discussed and Advanece Ruling Authorities were of the view that, refund of Service Tax is required to be claimed under Pre-GST regime, hence, the underlying question may not be admissible for Advance Ruling. However, Authorities requested for additional submissions to share the contention as to why the underlying question can be considered for Advance Ruling.
G. Accordingly, additional submissions were submitted on 24th July 2018. Further, hearing in respect of the same was held on 01st August 2018.
H. After going through the cumulative submissions, the Authority passed an Advance Ruling that the instant case is not maintainable as it is not covered under the ambit of section 97 (2) of CGST Act.
Grounds of Appeal
The question/ issue before determination with the Authorities was what is the legal procedure for cancellation of flat which is booked in pre-GST Regime and cancelled in post-GST Regime in two scenarios (i.e. cancelled with some retention amount or without any retention amount.)
1.1 As per para 5 of the ruling given by AAR-
“It has been submitted before us that the cancellation with retention of some amount is being considered as a service by the applicant and GST is being discharged in respect of the same. For the reason being so, the applicant has decided not to contest, in the present proceedings, the issue about cancellation with retention of some amount.
1.2 The AAR had incorrectly mentioned that the Appellant had decided not to contest ruling in case of cancellation with the retention amount.
1.3 The issue under consideration was to determine the legal procedure in case of cancellation of flat booked in pre-GST regime and cancelled in GST regime in two-scenario given below
– Cancellation with retention of certain amount (may be called as cancellation charges) from customer and
– Cancellation without retention of any amount from customer (i.e. total amount refunded to the customer)
1.4 During the hearing dated 19th September 2018 the AAR had asked to submit the clarity whether the question under consideration was also for applicability of GST on retention charges collected from the customer.
1.5 As per the additional submission the primary question for advance ruling was whether GST input tax credit of Service Tax and State VAT paid while booking of flat was available to the Developer, if cancelled in GST regime (with and without retention amount) and not the applicability of GST on retention charges collected from the customer.
1.6 Given the aforesaid, the contention of the AAR that, the applicant had decided not to contest the issue about cancellation with retention of some amount is incorrect. Hence, both the question given below amongst which one question wrongly has not been considered by the AAR need to be considered:
– What is the legal procedure in case of cancellation with retention of certain amount (could be referred as cancellation charges)
– What is the legal procedure in case of cancellation without retention of any amount.
The underlaying transaction is well covered under GST law and hence can be considered for determination of GST liability.
1.7 As per para 5 of the of the ruling given by AAR:
