Facts of the Case:

In this case, the petitioner, a real estate developer, had approached the Advance Ruling Authority under Rule 98 of the CGST Rules seeking clarification on whether Preferential Location Charges (PLC) collected from buyers for choice of location of flats were liable to be taxed separately or together with the principal supply of construction/development services.

The Advance Ruling Authority, by order dated 28.08.2020, held that PLC constituted an independent supply liable to separate taxation from construction services. The appellate authority affirmed the ruling on 28.03.2022 under Section 101 of the CGST Act.

Subsequently, in its 54th meeting held on 09.09.2024, the GST Council recommended that preferential location charges collected by developers should not be taxed separately, as such charges form an integral part of construction services. Pursuant to the recommendation, the Government of India issued a clarification dated 11.10.2024 under Section 168(1) of the CGST Act clarifying that PLC forms part of a composite supply where construction service is the principal supply and therefore attracts GST at the same rate as applicable to construction services before issuance of completion certificate.

Issue:

Whether Preferential Location Charges (PLC) collected by a developer for allotment of flats at preferred locations constitute an independent taxable supply or form part of composite supply of construction services taxable at the same rate as the principal construction service.

Held That:

The High Court held that the clarification issued by the Government of India under Section 168(1) of the CGST Act, based on the recommendations of the GST Council, was binding upon the departmental authorities. The Court observed that the circular unequivocally clarified that choice of location is an integral part of construction service and PLC is naturally bundled with such supply. Accordingly, PLC could not be subjected to separate taxation independent of construction services.

The Court further held that the circular being clarificatory in nature would operate retrospectively. Consequently, the orders passed by the Advance Ruling Authority and the appellate authority holding PLC to be independently taxable were contrary to the subsequently issued clarification and therefore liable to be quashed.

Case Name: DLF Limited Versus The Commissioner of Central Goods and Service Tax and others. dated 13.05.2026