In re Godrej Residency Private Limited (GST AAR Maharashtra)
Maharashtra Authority for Advance Ruling (AAR) has addressed the GST implications for Godrej Residency Private Limited, which acquired an ongoing real estate project “One Mahalaxmi” from Neelkamal Realtors Towers Private Limited. The project, consisting of two residential towers, had commenced development in 2011 and was registered under RERA in 2017. Following the introduction of a new GST regime for the real estate sector effective April 1, 2019, the then-promoter had exercised a one-time option to continue paying GST at the old rate of 12% (after a 1/3rd abatement for land value) with input tax credit.
Godrej Residency, as the new promoter after acquiring the project in December 2022, sought a ruling on the applicable GST rate for the sale of the remaining residential premises to both existing and new buyers. The applicant questioned whether it was bound by the previous promoter’s option of paying GST at 12% with ITC or if it could opt for the new rate of 5% without ITC under Notification No. 3/2019-Central Tax (Rate).
The AAR examined the provisions of Notification No. 11/2017-CT (Rate) as amended, which provided a one-time option for ongoing projects to continue with the old GST rates. An “ongoing project” was defined based on specific criteria related to the commencement certificate, completion certificate, and partial or full booking of apartments before March 31, 2019, all of which were met in the case of “One Mahalaxmi.” The AAR highlighted that the then-promoter had duly exercised this option by filing Annexure IV within the stipulated time, choosing to pay GST at the old rate with ITC.
The AAR emphasized that the one-time option provided in the notification is project-centric and not promoter-specific. This interpretation was supported by the format of Annexure IV, which focuses on the project details rather than solely on the promoter. The objective of the dual rate structure for ongoing projects was to ensure a consistent tax treatment throughout the project’s lifecycle. The AAR also referred to a CBIC press release dated March 19, 2019, which clarified that the option is to be exercised once for an ongoing project.
In further support of its ruling, the AAR cited the case of Victoria Realtors decided by the Kerala Authority for Advance Rulings. In that case, it was held that once an option is exercised for an ongoing project, the old rate of tax with ITC applies to all units within the project, including those sold after the new rate came into effect.
Based on these observations, the Maharashtra AAR ruled that Godrej Residency Private Limited, as the new promoter, is bound by the option exercised by the previous promoter to pay GST at the effective rate of 12% with input tax credit for the sale of all residential premises in the “One Mahalaxmi” project, including those already sold and those to be sold to new customers. The applicant cannot opt for the new GST rate of 5% without ITC. The one-time option is qua the project, ensuring a uniform tax rate throughout its completion, irrespective of changes in promoters.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, MAHARASHTRA
