In re SRIPSK Developers LLP (AAR West Bengal)
Service Apartments Ruled Commercial for GST: AAR West Bengal Addresses Classification Conflict
The Authority for Advance Ruling (AAR), West Bengal, in the matter of In re SRIPSK Developers LLP, ruled that the construction service for the applicant’s proposed B+G+31 storey ‘Service Apartment’ building, named ‘Palladina’, must be classified as a ‘Commercial Apartment’ for GST purposes. This decision resolves a conflict in project classification between the Kolkata Municipal Corporation (KMC) and the West Bengal Real Estate Regulatory Authority (WBRERA).
The Issue and Applicant’s Position
The applicant, SRIPSK Developers LLP, sought an advance ruling on the correct classification of its construction services: whether the project falls under the category of multi-storey residential buildings (taxed at 5% GST without Input Tax Credit (ITC)) or commercial buildings (taxed at 12% GST). The taxability of construction services is significantly different for residential versus commercial apartments under Notification No. 11/2017-Central Tax (Rate), read with Notification No. 03/2019-Central Tax (Rate).
The core of the dispute arose because two competent authorities had classified the project differently:
- Kolkata Municipal Corporation (KMC): Sanctioned the building plan specifically as a ‘Service Apartment Building’ (deemed commercial).
- WBRERA: Registered the project as a ‘Residential Project’ because the RERA portal lacked a specific category for ‘Service Apartments,’ and people would be residing in the units.
The applicant noted that the land itself had a restriction imposed by KMC and other authorities in a 2013 Deed of Conveyance, mandating that the land be used solely for a “Hotel Cum Convention Centre and other commercial venture/ enterprise excluding residential units.” Given this restriction and the commercial nature of service apartments (akin to hotel rooms for short or long-term rental), the applicant submitted that the project should logically be classified as commercial, even though it results in a higher GST rate (12%).
