Value of supply in Construction Services is 2/3rd of Total Value charged for Construction Services: AAR Tamil Nadu

Categories: Advance Ruling
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Facts: M/s Kara Property Ventures LLP (“The Applicant”) is engaged in the business of construction activities. The Applicant undertook a residential project by the name of “One Crest” by entering into a separate agreement with the customers for the sale of undivided share in the land (“Land Agreement”) and construction of a super-structure (“Construction Agreement”) on the said land. Further the Applicant has approached the AAR to obtain clarity on valuation of supply of services.

Issue involved: What is the value of supply of services provided from July 1, 2017 in terms of the provisions of CGST Act 2017 read with Notification No.11/2017- Central Tax(Rate) dated June 28, 2017?

Applicant’s Interpretation of law: The Applicant stated that it entered into two separate agreements with the buyer, for sale of undivided share of land and another for construction though they are both intrinsically connected with each other. The Applicant further contended that the value of supply should be calculated in terms of Para 2 of Notification No. 11/2017- Central Tax (Rate) dated 28 June, 2017 i.e. two third value of total value for undivided land and construction put together.

Held: The Hon’ble AAR of Tamil Nadu vide its Advance Ruling No. TN/01/AAR/2019 dated January 21, 2019 held that the value of supply of services provided by the Applicant in the project “One Crest”, wherein the applicant has entered into two separate agreements, viz., one for ‘sale of undivided share of land’ and the other for ‘construction’ with the customers, the measure of levy of GST on the supply of service of ‘construction’ shall be 2/3rd of the total value charged for construction service as per entry No. 3(i) of Notification No. 11/2017-C.T.(Rate), dated June 28, 2017

Citation: [2019] 103 taxmann.com 279 (AAR – TAMILNADU)