In re Raymond Limited – Realty Division (GST AAR Maharashtra)
Maharashtra Authority for Advance Ruling (AAR) has determined that Raymond Limited – Realty Division, a business vertical of Raymond Limited, is restricted in its ability to apply the pre-April 1, 2019, Goods and Services Tax (GST) rate of 12% (with Input Tax Credit) to its “Ten X Habitat” residential project. The ruling, issued on April 30, 2024, states that only three out of the ten towers within the project meet the criteria for an “ongoing project,” thus limiting the favorable tax treatment to these initial phases.
Raymond Realty’s “Ten X Habitat” project comprises ten towers (A to H, J, and K), each intended to have 42 storeys of residential apartments and some commercial units. The company had obtained a single layout approval and a Commencement Certificate on May 22, 2018, for the entire development. By March 31, 2019, Raymond Realty had secured Real Estate (Regulation and Development) Act, 2016 (RERA) registrations for Towers A, B, and C. Bookings for these three towers commenced on January 15, 2019, with GST being discharged at 12% (net 8% after land deduction), and ITC was availed on inward supplies.
Shift in GST Regime and the “Ongoing Project” Definition
A new GST structure for residential projects came into effect on April 1, 2019, offering developers the option of paying GST at 1% (for affordable housing) or 5% (for other residential apartments) without ITC. For projects incomplete as of March 31, 2019, developers were given a one-time option to continue with the old rates (12% with ITC) if certain conditions for “ongoing projects” were met. This option was not available for projects commencing on or after April 1, 2019.
The central issue before the AAR was to determine whether all ten towers of “Ten X Habitat” constituted a single “ongoing project” for GST purposes. The AAR referred to Entry 3(ie) of Notification No. 11/2017 – Central Tax (Rate) dated June 28, 2017 (as amended by Notification No. 3/2019 – Central Tax (Rate) dated March 29, 2019), which defines “ongoing project” under paragraph 4(xx).
RERA and the Concept of Separate Phases
The AAR’s analysis heavily relied on the definition of “Real Estate Project” under the RERA, 2016. Specifically, the Explanation to Section 3(2) of RERA states that “where the real estate project is to be developed in phases, every such phase shall be considered a stand-alone real estate project, and the promoter shall obtain registration under this Act for each phase separately.”
Raymond Realty had obtained separate RERA registrations for its towers, as detailed below:
