Case Law Details
In re M/s Nagpur Integrated Township Private Limited (GST AAR Maharashtra)
We find that the applicant has in their application mentioned that ‘Applicant is developing the property by construction of Commercial & residential units and integrated facilities and is having exclusive rights to design, finance and develop the property and lease/assign/transfer same to prospective customers on lease basis on payment of amount referred to as ‘lease Consideration’. Thus, they are going to construct both commercial and residential units. However, it appears that their query is only limited to residential units. It also appears from the submissions made by the applicant that they are is going to construct the said property for their prospective lessees.
We have no doubt whatsoever that in the subject case there is a supply as defined under Section 7 of the CGST Act, 2017. As per Schedule 11 (2), in respect of Land and Building : (a) any lease, tenancy, easement, licence to occupy land is a supply of services; (b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services. As per Schedule II (5)(a), renting of immovable property shall be treated as a supply of services and as per Schedule II (5)(b), construction of a complex, building, civil structure or a part thereof, including a complex or building 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, shall be treated as a supply of services.
In the subject case we find that there is a composite supply of works contract in relation to construction of a complex, building, etc. which is intended to be handed over to the buyer, where the transaction is shown as a lease transaction and not, sale. The entire consideration will be received by the applicant before issuance of completion certificate by a competent authority which does not generally happen in a lease transaction. We are of the opinion that there is not a very large difference between the lease price and the ready reckoner rates of the properties in that area (as submitted by the applicant). We find that the transaction of sale of flats in a building under construction is being projected as a lease transaction of residential units by the applicant.
In view of the discussions made above we are of the view that there is a taxable supply in the subject case, which is a supply of services in the form of construction of a complex, building, civil structure or a part thereof, including a complex or building to their prospective lesses, a part of which i.e. flats are intended to be handed over to the buyer, for which consideration is received by the applicant in installments, on completion of work, slab wise viz. the developed units will be transferred to prospective customers through an agreement wherein the allotment is given to their customers. We therefore agree with the submissions made by the jurisdictional office that in the form of construction service, a composite supply of works contract as defined in clause 119 of Section 2 of the CGST Act, 2017, is provided to prospective lessee in compliance of an agreement and the same is taxable under GST Laws.
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