In re Victoria Realtors (GST AAR Kerala)
1. Whether the new tax rate of 7.5% (effective rate of 5% after excluding land portion), with no ITC, is applicable to the 11 unbooked units in the said VRINDHAVAN project?
No. Since the applicant has exercised option for paying tax at the rate as specified in Item (if) of Sl No. 3 of Notification 11/2017-CT (Rate) dated 28.06.2017 as amended by Notification No. 03/2019 CT (Rate) dated 29.03.2019 in respect of the ongoing project “VRINDHAVAN”, the old rate of tax at 18% [9%- CGST + 9% – SGST] with input tax credit is applicable for all the apartments / villas comprised in the project-“VRINDHAVAN”.
2. Whether the answer given for the first question to VRINDHAVAN project is also applicable to the other similar projects in similar situations?
The answer to Question No. 1 above is applicable to the other similar projects of the applicant in similar situations.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING,KERALA
M/s. Victoria Realtors (hereinafter referred to as the applicant) is a partnership firm registered in Tamil Nadu and engaged in promotion of gated community villa projects in the State of Kerala for the prospective villa buyers.
2. At the outset, the provisions of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act) and the Kerala State Goods and Services Tax Act, 2017 (hereinafter referred to as KSGST Act) are same except for certain provisions. Accordingly, a reference hereinafter to the provisions of the CGST Act, Rules and the notifications issued there under shall include a reference to the corresponding provisions of the KSGST Act, Rules and the notifications issued there under.
3. Brief facts of the case:
3.1. The applicant started the activities from 2012 onwards. They first identify locations suitable for the gated community villa projects and will buy land in their own name and take layout approval in their name and promote the villas to various villa buyers. In another situation they identify locations suitable for the gated community villa projects and enter into agreement with the landlords for the purchase of the entire land area required for the project. The total area of land is divided into various plots and the layout approval is taken in the name of landlord and the villa approval is taken either in the name of landlord or in the name of villa buyers from concerned local authorities at their expense. After the approval from local authorities, they provide amenities like road, arch, compound wall, rain water harvest, health club etc required for the gated communities. They do marketing activities such as digital, paper ads, media advertisement etc and identify the suitable villa buyers for the projects.
3.2. They are having several projects out of which one project is “VRINDHAVAN” (all units in this project are “other than affordable villas”) in which there are 20 units. Out of the 20 units, 9 units were already booked and got approval for villa from local authorities before 31.03.2019 and the balance 11 units in that project were unbooked and have not got the approval for villa from local authorities before 31.03.2019.
3.3. They opted (by exercising One time option in Form Annexure IV) for old GST rate of 18% – effective rate being 12% after excluding land portion – (as per SI.No.3, Clause No.(if) of Notification No.11/2017-Central Tax (Rate) dated 28-06-2017 as amended by Notification No. 03/2019 – Central Tax (Rate) dated 2903-2019) for the 9 units which were already booked and got the approval from local authorities before 31.03.2019 and have not opted the old rate of tax for the balance 11 units since they are unbooked and not got approval from local authorities before 31.03.2019. In the Option Form Annexure IV, only 9 villas were included and balance 11 villas were not included. The Form Annexure IV with only 9 villas was accepted by the proper officer. Since they have not opted for the old rate of 18%, for the balance 11 villas, they are made liable to pay GST at the new rate of 7.5% without ITC, (as per item (ia) in SI.No.3 in the Notification) effective tax rate being 5% after excluding land portion.
4. The applicant requested advance ruling on the following;
1. Whether the new tax rate of 7.5% (effective rate of 5% after excluding land portion), with no ITC, is applicable to the 11 unbooked units in the said VRINDHAVAN project?
2. Whether the answer given for the first question to ‘VRINDHAVAN project is also applicable to other similar projects in similar situations?
5. Contentions of the Applicant:
5.1. The applicant submits that as per SI.No.3, item (ia), in Notification No.11/2017-Central Tax (Rate) dated 28-06-2017 as amended by Notification No. 03/2019 CT (Rate) dated 29.03.2019 the CGST Rate of 3.75% (effective tax rate being 5% without ITC) is applicable for the following:
“Construction of residential apartments other than affordable residential apartments by a promoter in an RREP which commences on or after 1st April, 2019 or in an ongoing RREP in respect of which the promoter has not exercised option to pay central tax on construction of apartments at the rates as specified for item (ie) or (if) below, as the case may be, in the manner prescribed therein, intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.”
5.2. As per SI.No.3, item (if), in Notification No.11/2017-Central Tax (Rate) dated 28-06-2017 as amended by Notification 03/2019 CT (Rate) dated 29.03.2019 the old CGST rate of 9% (effective tax rate being 12% with ITC) is applicable for the following;
“Construction of a complex, building, civil structure or a part thereof, including;
(i)…………………………………… (ii) residential apartments in an ongoing project,
other than affordable residential apartments, in respect of which the promoter has exercised option to pay central tax on construction of apartments at the rates as specified for this item in the manner prescribed herein.”
5.3. As per Sl.No.3, item (if), in Notification 11/2017 CT (Rate) dated 28.06.2017 as amended by Notification 03/2019CT (Rate) dated 29.03.2019 the old CGST rate of 9% (effective tax rate being 12% with ITC) is applicable for Construction of a complex, building, civil structure or a part thereof including residential apartments in an ongoing project, in respect of which the promoter has exercised option to pay central tax on construction of apartments.
5.4. As can be seen from the above, the exercise of the option to pay tax at old rate is available even for a part of a project and the exercise of option to pay tax is in respect of the residential apartment in an ongoing project and not on ongoing project itself.
5.5. The heading of the Form Annexure IV states that this is a “form for exercising onetime option to pay tax on construction of apartments in a project “ That means the option is to pay tax on construction of apartments and accordingly, the option is on unit or villa wise and not on project wise. Point No.5 in the form also ask data for “the number, type and carpet area of the apartments for booking or sale in the project”.
5.6. Moreover, applicant had filed the Form Annexure IV by exercising the option to pay tax at old rate only for 9 Villas stating clearly in the Form itself by attaching a separate list of 9 villas opting the old tax rate and the authority had also accepted such Annexure and raised no objection in opting the old tax rate only for 9 villas in the project.
5.7. Based on the above points, applicant is of the view that the new tax rate of 5% (effective rate after excluding land portion), with no ITC, is applicable to the 11 unbooked units in the said VRINDHAVAN project. They are also of the view that the above principle applied for VRINDHAVAN project is also applicable for similar projects under similar situations.
6. Comments of the Jurisdictional Officer:
The jurisdictional officer submitted that the applicant had filed option on 09.05.2019 before the Joint Commissioner of State GST with the following details of 13 on-going projects.
