In Advance Ruling sought by M/S Puranik Builders Pvt. Limited (reported in [2021] 133 taxmann.com 6 (AAR – MAHARASHTRA)), the applicant is engaged in the business of construction and sale of residential apartments and discharge GST in respect of supply of construction services of residential units. Apart from consideration for the main construction activity, the Applicant also collects various other charges such as electricity meter installation, development charges, water connection, formation of society, property tax, legal fees, infrastructure charges and club house maintenance from their customers under the Agreement itself with their respective amounts separately identified in the Agreement.
The Applicant has sought clarification on the issue of whether the charges other than that of consideration of main construction activity are to be treated as consideration for construction services of the Company and classified along with the main residential construction services of the Company or whether it would be treated as consideration for independent services of the respective head. Consequently, what will be the applicable effective rate of GST on services underlying the Other charges.
Held that stamp duty paid only on flat excluding charges of other supplies lead to two different supplies not treated as composite supply hence, GST rate to be charged as 18%
The Authority of Advance Ruling has observed that “Other Charges” are different from the service of construction of residential flats. It cannot be said to be naturally bundled and supplied in conjunction with each other. The amount and consideration is separately for different services. Therefore, the Other Charges are not covered under “Composite Supply of Services”.
It has been contended by the Authority of Advance Ruling that when the question arise in respect of payment of stamp duty, these Other Charges as not treated as part of main supply. However, when it comes to payment of GST, the Applicant contended those other charges to be a part and parcel of main construction service. The party cannot be permitted to shift stands as per their convenience.
Hence, the Authority of Advance Ruling held that Stamp duty is paid only on consideration charged for flat excluding charges for other services. More than two supplies involved as per agreement terms and such supplies are independent and therefore, taxable separately. Impugned supply not a bundled supply merely because agreement is common – Services supplied in respect of other charges are different from service of construction of residential flats. Other services cannot be said to be naturally bundled in ordinary course of business with main supply of construction service and therefore, not a composite supply. Other services have no connection with land and deduction towards one third towards land cost does not arise. Thus, Other services classifiable under respective SAC and liable to GST of 18 per cent. in terms of the respective and appropriate entries in Notification No.11/2017 CT (R) dated 28.6.2017 as they are covered under services, other than construction services.
