In re Puranik Builders Limited (GST AAAR Maharashtra)
Insofar as the challenge to the levy of service tax on taxable services as defined under section 65(105) (zzzzu) is concerned, we do not find any merit in the contention that there is no element of service involved in the preferential location charges levied by a builder. We are unable to accept that such charges relate solely to the location of land. Thus, preferential location charges are charged by the builder based on the preferences of its customers. They are in one sense a measure of additional value that a customer derives from acquiring a particular unit. Such charges may be attributable to the preferences of the customer in relation to the directions in which a flat is constructed; the floor on which it is located; the views from the unit; accessibility to other facilities provided in the complex etc. As stated earlier, service tax is a tax on value addition and charges for preferential location in one sense embody the value of the satisfaction derived by a customer from certain additional attributes of the property developed. Such charges cannot be traced directly to the value of any goods or value of land but are as a result of the development of the complex as a whole and the position of a particular unit in the context of the complex. Thus, it is an attempt on part of the appellant to subsume various other charges collected on the guise of Construction Services provided by him. The other charges collected by the appellant is clearly distinguishable from the main services provided.
Hence, in view of the above facts and discussion, it is clear that charges in respect of some services are inextricably linked while other services are independently provided to the customer. The dominant intention test and principles for determination of naturally bundled services point out the independent nature of some of the services. Therefore, following services are clearly identifiable as bundled services:
(i) Water connection charges;
(ii) Electric meter installation and deposit for meter;
(iii) Development charges;
(iv) Legal fees.
These aforesaid services are considered as naturally bundled services and taxable as per the rate of construction services. On the other hand, services of:
(i) Club House Maintenance;
(ii) Advance Maintenance;
(iii) Share of Municipal Taxes (pertaining to period after occupancy)
(iv) Formation and registration of the organization and legal charges in connection there with;
(v) Share money, Application & entrance fee of the organization;
(vi) Infrastructure charges
are determinable as independent supplies. The rate of tax thereon would be as per the respective service codes as mentioned in rate notification. The rate of tax on the inextricably linked services would be 12%
AAAR, hereby, partly set aside the MAAR Order No. GST-ARA-68/2019-20/B-52 dated 27.08.2021 by holding that, in the facts and circumstances of the case, the other charges which are inextricably linked to services by way of construction of residential apartment /dwelling are part of a bundled service with principle service of construction of residential apartment /dwelling. The rate of tax applicable on such services would be 12% as applicable to the construction service. The other charges that don’t pass the muster of indicators of a bundled service are held as supply of independent services. They are to be taxed as per the respective SAC codes and rate of tax thereon. As per the submission of the appellant, he has collected 18% of GST on the supply of such services. In respect of services which are allowed as bundled services, the present decision implies an excess collection of tax. It is hereby directed that the Appellant to refund the excess tax collected to the customers. Thus, the appeal filed by the Appellant is, hereby, partly allowed.
Read AAR order : ‘Other Services’ not part of Composite supply with Main Construction Service, chargeable to GST @ 18%
