In re Om Prakash Mahawar (GST AAR West Bengal)
The West Bengal Authority for Advance Ruling has issued a clarification on Goods and Services Tax (GST) implications for a proposed Hotel-cum-Shopping and Multiplex project, which includes residential flats, to be developed on a 99-year lease from West Bengal Housing Infrastructure Development Corporation Ltd. (WBHIDCO). The ruling addresses queries regarding GST liability on construction work, applicable rates, land value deductions, and maintenance charges.
The applicant, Mr. Om Prakash Mahawar, intends to acquire land from WBHIDCO, a Government of West Bengal company, on a 99-year lease. The project’s primary use is defined as “Assembly – Mercantile Retail,” which includes the construction and sale of residential flats.
Key Questions and Applicant’s Submissions
The application, filed under Section 97 of the GST Act, sought clarification on four primary questions:
1. GST liability on construction work for prospective clients: Whether GST is applicable when lump sum payments are charged or when periodic payments are charged for agreed terms.
2. HSN/GST rate and land deduction: If GST is liable, what would be the HSN (now SAC) and GST rate, and whether GST would be on the entire amount or after a 1/3rd deduction attributable to the land portion, as per Notification No. 11/2017.
3. Exemption for accommodation service: Whether the applicant is eligible for exemption under Clause 12 of Notification No. 12/2017 if it qualifies as an accommodation service.
4. GST on monthly/annual maintenance charges: Whether GST is payable on these charges, along with the applicable HSN (now SAC) and GST rate.
The applicant highlighted that the draft lease deed permits them to sub-lease/assign rights on the constructed area, even though they cannot sub-lease the land itself. This implies transferring ownership rights of the constructed units to prospective clients. They proposed two models for sub-leasing/assigning rights: one-time lump sum payment (with future rights for clients) or periodic payments for use of constructed area (without registry and repossession by the applicant at term expiry). Additionally, maintenance charges would be collected.
