In re NBCC (India) Limited (GST AAR Delhi)
(i) Whether the applicant is liable to pay GST on sale of commercial super built up area on behalf of Ministry of Housing and Urban Affairs (MoHUA), Government of India, by considering the applicant also as the supplier of service while selling such commercial built-up space as an agent on behalf of the Government of India in the colonies under redevelopment.
The applicant is covered in the definitions of “Agent” under Section 2(5), “Supplier” under Section 2(105) and “Taxable Person” under Section 2(107) of the CGST Act, 2017 in respect of the said project while providing services on behalf of the Ministry of Housing and Urban Affairs. Hence, they are liable to pay GST under Section 9(1) of the CGST Act, 2017.
(ii) Whether the MoHUA, Government of India, is liable to pay GST on sale of commercial built-up space, and whether it relates to any function entrusted to a municipality under Article 243W of the Constitution.
The MoHUA, Government of India, is not exempted from payment of GST on sale of commercial built-up space, as it does not relates to any function entrusted to a municipality under Article 243W of the Constitution. Hence, the exemption under S. No. 4 of Notification No. 12/2017 — Central Tax (Rate) and parallel notifications under SGST and IGST are not admissible. After amendment of S. No. 4 of the said Notification by Notification No. 14/2018 — Central Tax (Rate) dated 26.07.2018, only services provided by “governmental authority” are exempted which does not cover the MoHUA. Further, MoHUA, Government of India is not a Municipality under Articles 243P and 243Q of the Constitution. Also, since, such services are being provided to business entities, exemption under S. No. 6 of the said Notification is also not admissible.
(iii) Whether the applicant is liable to pay GST on sale of built-up space for which part of the consideration was received prior to 01.07.2017, and partly on or after 01.07.2017.
The applicant is liable to pay GST on the services supplied under GST regime i.e. w.e.f 01.07.2017, even if part of the consideration had been received prior to 01.07.2017.
(iv) Whether the applicant is liable to pay GST on consideration received under an agreement to sale of constructed units in a building which is under construction.
The applicant is liable to pay GST on the sale of commercial built-up area which is under construction, as the same is a ‘supply of service’ under clause 5(b) of Schedule II of the CGST Act, 2017.
AAAR Order: MoHUA liable to pay GST on sale of commercial built-up space: AAAR
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, DELHI
Statement of Facts:
The applicant is a Government of India enterprise and engaged in project management consultancy, real estate development and EPC contracts. It has signed a memorandum of understanding on 25.10.2016 with Ministry of Housing and Urban Affairs (MoHUA), Government of India, wherein MoHUA has appointed the applicant as the executing agency for redevelopment of colonies having “General Pool Residential Accommodation” (in short GPRA) and “Government Pool Office Accommodation” (in short GPOA) at Nauroji Nagar, Sarojini Nagar and Netaji Nagar in Delhi. Under this arrangement, the applicant is required to organise construction of GPRA (i.e. dwelling units), GPOA (i.e. office spaces), commercial space and supporting infrastructure, such as local convenience shopping centre, banquet hall/ community centre, creche, schools, hospital/dispensary, ATM/Banks, parking facilities, parks and play grounds etc. at the specified locations in place of old existing buildings. The applicant is also required to maintain the constructed buildings for thirty years after construction. The transaction between the applicant and MoHUA under the said MOU is not a subject matter before this authority.
2. As per the MOU dated 25.10.2016, the estimated cost of abovementioned redevelopment work and maintenance thereof for thirty years is Rs. 24,682 crores which shall be met from free-hold sale of specified commercial built-up area. The sale proceeds of commercial built-up area shall be deposited in an escrow account which shall be managed by Capital Management Committee constituted by MoHUA. Capital Management Committee shall review the status of the escrow account on yearly basis, determine the amount, accrued in excess of 20% of the total cost of the said redevelopment work which is required to be deposited in Consolidated Fund of India. MoHUA will be responsible for allotment/handing over of commercial space to the allottees/shopkeepers/schools after completion of the project. L&DO shall be responsible for relocation and rehabilitation of 11 clusters, if any.
3. In terms of the MOU dated 25.10.2016, the applicant has announced sale of commercial super built-up area on behalf of MoHUA through e-auction on MSTC website on 30.05.2017 and 05.12.2017. In the e-auction details given on MSTC website, inviting bid for sale of proposed built-up area in the buildings to be constructed by the applicant as part of re-development work, it is mentioned that the applicant is selling the proposed built-up area on behalf of MoHUA. The terms and conditions of such sale provide that Government of India through nominated officer will sign the agreement to sell and sale deed with the successful bidder.
4. The applicant had applied to Real Estate Regulatory Authority (RERA) on behalf of MoHUA, Government of India, for registration under the Act, but the Regulator had refused to give such registration in its letter dated 11.08,2017. In this letter, it has been stated that application by the present applicant (i.e. NBCC) for registration of the project considering MoHUA as the promotor cannot be accepted. In these circumstances, the applicant has applied for registration under RERA as per the instructions of MoHUA.
5. In the abovementioned factual background, the applicant is seeking advance ruling in respect of any GST liability on sale of built-up area on behalf of MoHUA in the colonies redeveloped by it for MoHUA.
Details of Question on which Advance Ruling is requested:
6. Whether the applicant is liable to pay GST on sale of commercial super built-up area on behalf of Ministry of Housing and Urban Affairs, Government of India, in the colonies being re-developed at Nauroji Nagar, Netaji Nagar and Sarojini Nagar at Delhi?
Views of the Applicant:
7. The applicant is of the view that it is not liable to pay GST on sale of commercial super built-up area being developed by it at Nauroji Nagar and Sarojini Nagar in Delhi for the following reasons:
The applicant is not liable to pay GST on sale of commercial super built-up area on behalf of MoHUA, Government of India, because it cannot be construed as supplier of service while selling built-up space on behalf of the Government in the colonies under redevelopment.
8. A person is liable to pay GST on its transactions which are falling within the “scope of supply” as prescribed in section 7 of CGST Act as reproduced below:
(1) Far the purposes of this Act, the expression “supply” includes—
(a) all farms of supply of goods ar services ar bath such as sale, transfer, barter, exchange, licence, rental, lease or disposal made ar agreed ta be made far a consideration by a person in the course ar furtherance of business;
(b) impart of services far a cansideratian whether ar not in the course ar furtherance of business;
(c) the activities specified in Schedule I, made or agreed to be made without a cansideratian; and
(d) the activities ta be treated as supply of goads ar supply of services as referred to in Schedule II.
(2) Notwithstanding anything contained in sub-section (1), —
(a) activities or transactions specified in Schedule III; ar
(b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council,
shall be treated neither as a supply of goods nor a supply of services.
(3) Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as—
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.
9. In case of supply of goods and services within a State, it would be a dual GST, the Union/Centre and the State/Union Territory would simultaneously levy CGST and SGST/ UTGST on a common base. Provisions of CGST and SGST are in pari materia, levying tax on the same transactions in unified manner.
10. Under section 9 of the CGST Act, tax is payable by the taxable person on the transaction value of supply of goods or services, except in the situations carved out in section 9(3) and 9(4) of the Act where the receiver of the supply of goods or services is liable to pay tax.
9. Levy and collection.
(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.
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(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
(4) The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
11. From a combined reading of section 2(107), which defines “taxable person”, and sections 2(105), 22 and 24 of the CGST Act, it can be appreciated that a supplier of goods or services is a taxable person. Hence, ordinarily, supplier of goods or services is liable to pay tax on the consideration received by him. Therefore, it is necessary to examine the documents describing the transaction to understand who are the supplier and the receiver. The applicant has to perform its activities as per the MOU signed on 25.10.2016 with MoHUA. In terms of the MOU, the applicant is responsible for development of the area for MoHUA by constructing of dwelling units, commercial space and supporting infrastructure and maintaining thereof for thirty years. The applicant has no interest in the area constructed by it except receiving its remuneration prescribed in MOU. For the work assigned to the applicant, the applicant is entitled to receive cost plus 8% of such cost from MoHUA. The total cost of the development has been estimated Rs. 24,682 crores and, MoHUA has decided to recover such cost by selling built-up area in commercial building. The MOU states that applicant shall invest up to Rs. 1500 crore into the project from own funds and, for this, it would get interest @ 12% p.a. till it is returned. In addition, the applicant would receive 1% of the sale proceeds on account of sale related expenses. From these terms, it is clear that it is MoHUA which is selling such built-up area, not the applicant. In the developed area, the applicant is not acquiring any interest or right and, therefore, there is no question of it selling any built-up commercial area, being constructed by it, on its own account.
12. The fact that the applicant is not selling proposed built-up area in the buildings under construction on its own account but acting on behalf of the Government is also reflected from the fact that it has no control or right on the sale proceeds except for recovering the cost of development undertaken by it. The MOU specifically provides that the sale proceeds of the commercial built-up area shall be deposited in an escrow account which shall be managed by Capital Management Committee constituted by the Government. Capital Management Committee shall review the status of the escrow account on yearly basis and determine the amount which is accrued in excess of 20% of the total cost of the said redevelopment work to be deposited in Consolidated Fund of India.
13. Further, in the e-auction details given on MSTC website, inviting bids for sale of proposed built-up area in the buildings to be constructed by the applicant as part of re-development work, it is mentioned that the applicant has announced sale of commercial super built-up area on behalf of MoHUA. The terms and conditions of the sale further provide that Government of India through its nominated officer will sign the agreement to sell and sale deed with successful bidders. Hence, the applicant is merely constructing the buildings for MoHUA. It is not like a promotor or developer who is selling the units in the building constructed by it. Therefore, the applicant cannot be held responsible for payment of GST on sale of commercial space as it cannot be construed as taxable person making any taxable supply to the persons who had booked the space/units in the buildings. The . applicant is not liable to pay GST on the amount received from sale of built-up area, irrespective of taxability of the transactions with the bidders. If at all, the Government is the taxable person.
14. The applicant submits that it cannot be held responsible for payment of GST merely because it is registered under Real Estate Regulation Act (RERA), 2016, as promotor of the said project. The applicant has received a letter dated 14.09.2017 from MoHUA, in which the Ministry has asked it to apply for registration under RERA as promotor. It has taken registration under RERA being a representative of MoHUA. In fact, the applicant cannot be construed as promotor under RERA. The provision of section 2(zk) of the Act is reproduced below:
(zk) “promoter” means,—
(i) a person who constructs or causes to be constructed an independent building or a building consisting of apartments, or converts an existing building or a part thereof into apartments, for the purpose of selling all or some of the apartments to other persons and includes his assignees; or
(ii) a person who develops land into a project, whether or not the person also constructs structures on any of the plots, for the purpose of selling to other persons all or some of the plots in the said project, whether with or without structures thereon; or
(iii) any development authority or any other public body in respect of allottees of—
(a) buildings or apartments, as the case may be, constructed by such authority or body on lands owned by them or placed at their disposal by the Government; or
(b) plots owned by such authority or body or placed at their disposal by the Government, for the purpose of selling all or some of the apartments or plots; or
(iv) an apex State level co-operative housing finance society and a primary co-operative housing society which constructs apartments or buildings for its Members or in respect of the allottees of such apartments or buildings; or
(v) any other person who acts himself as a builder, coloniser, contractor, developer, estate developer or by any other name or claims to be acting as the holder of a power of attorney from the owner of the land on which the building or apartment is constructed or plot is developed for sale; or
(vi) such other person who constructs any building or apartment for sale to the general public.
Explanation:- For the purposes of this clause, where the person who constructs or converts a building into apartments or develops a plot for sale and the persons who sells apartments or plots are different persons, both of them shall be deemed to be the promoters and shall be jointly liable as such for the functions and responsibilities specified, under this Act or the rules and regulations made there under;
15. From the above, it seems that a person who is not selling planned unit in a complex under development and merely constructing the building for the land owner cannot be construed as promotor and, therefore, such person cannot be saddled with the responsibility of a promotor under the Act. Therefore, registration under RERA, which is not warranted under the law would not have any implication on the tax liability under GST laws on the revenue generated from the sale of the proposed units in the planned buildings.
MoHUA, Government of India, is not liable to pay GST on sale of commercial built-up space, as this relates to function entrusted to a municipality under Article 243W of the Constitution.
16. GST is payable on supply of goods and services if such goods and services are not exempted from tax. Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 provides for exemption from tax in respect of certain supplies. An extract of this Notification relevant for the applicant case, is given below:
Notification No. 12/2017- Central Tax (Rate) New Delhi, the 28th June, 2017
In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts the intra-State supply of services of description as specified in column (3) of the Table below from so much of the central tax leviable thereon under sub-section (1) of section 9 of the said Act, as is in excess of the said tax calculated at the rate as specified in the corresponding entry in column (4) of the said Table, unless specified otherwise, subject to the relevant conditions as specified in the corresponding entry in column (5) of the said Table, namely:-
