In re M/s. Jaypee Enterprises (Proprietor – Poonapalli Ramchandran Jaiprakash) (GST AAR Tamilnadu)
The applicant, a GST-registered sole proprietorship engaged in construction services, sought an advance ruling on the applicable GST rate and valuation method for construction of residential houses where land and construction are contracted through separate documents. The applicant developed a layout on self-owned land and entered into a Memorandum of Understanding (MOU) with buyers, followed by two agreements executed on the same day—one sale deed for land and one construction agreement for the residential house. The MOU fixed a single consolidated consideration covering both land and construction, with stage-wise payments linked to construction progress.
The applicant accepted that GST is payable on construction services but contended that the value attributable to land, being available from the sale deed, should be excluded from the taxable value instead of applying the deemed deduction of one-third of the total amount. It further argued that GST should be charged at 18% only on the construction agreement value with input tax credit, or alternatively, if concessional rates under Notification No. 11/2017 applied, the actual land value should be deducted rather than the deemed one-third.
The Authority examined the facts and noted that construction commenced after 1 April 2019, making the amended real estate provisions applicable. It held that the applicant qualifies as a “promoter” undertaking a “Residential Real Estate Project” (RREP), with construction of residential apartments intended for sale before issuance of completion certificate. Accordingly, the applicable GST rates are those under Entry 3(i) and 3(ia) of Notification No. 11/2017 as amended—1.5% for affordable residential apartments and 7.5% for other than affordable residential apartments—subject to conditions and without input tax credit.
