Fact– M/s. Eforce Infrastructure India Pvt Ltd. (“the applicant”) entered into an agreement with Mr. Patrick B D’sa with 5 others (“the land owners”), for construction and to handed over 8828 square feet of residential apartment area, 1630 square feet of commercial area and 8 car parkings on the land belonging to the land owners.
Issues Involved-The applicant sought advance ruling with respect to following issues:-
- Whether the applicant is liable to pay GST on the value of building constructed and handed over to the land owner in terms of the Joint Development Agreement?
- If there is liability to pay GST on what value is the GST to be paid since there is no monetary consideration involved?
- Is the applicant liable to pay Service Tax upto 30.06.2017 and GST thereafter?
Applicant’s Contention of Law – The applicant is of the View that they were liable to pay service tax on the taxable value of building constructed and handed over to the land owner, at the time of completion of the project, in terms of Circular No. 151 / 02/ 2012-81“dated 10.02.2012. The project is completed post 01.07.2017 i.e. in the GST regime. The applicant is also of the view that they are liable to pay GST @ 12% on the aggregate value of the building constructed and handed over to the land owner and the underlying value of the land.
Held–The Hon’ble AAR, Karnataka vide Advance Ruling No. KAR ADRG 30/2018 dated November 28, 2018 held that the applicant is supplying the construction service of building / civil structure to supplier of the development rights (the land owner) against consideration in the form of transfer of development rights. Notification No.4/2018-Central Tax (Rate) dated 25.01.2018, at para (b), stipulates that the supplier of construction service, to the supplier of development rights, is liable to pay GST for the service provided to the land owner in terms of the Joint Development Agreement. Therefore, the applicant needs to pay tax towards the construction service provided to the land owner, on the value to be determined in terms of para 2 of the Notification No.11/2017-Central Tax (Rate) dated 28.06.2017.
Further, service tax is liable to be paid, which is leviable under the Finance Act’ 1994, on the services provided up to 30.06.2017. Also, the GST is liable to be paid under the CGST Act’2017 /KGST Act 2017, on the services provided after 01.07.2017. Therefore, the applicant has to pay service tax/GST proportionate to the services provided before / after 30.06.2017 respectively.