Fact: The Ideal Construction is a partnership firm duly registered under GST. The nature of business of the firm is that of builders and developers. The said firm is desirous to undertake an affordable housing project in Kolhapur. The land required for the project is already possessed by the Firm. The firm is currently in the process of designing and planning for the said project.
Issues Involved: The applicant, seeking an advance ruling in respect of the following questions:
- What is the rate of tax to be levied on the sale of Flats/Units to the prospective buyers? And whether registration of project under Pradhan Mantri Awas Yojana is required?
- What is the rate of tax to be levied by the supplier from whom they will receive Composite works contract service (Inward Supply of composite works contract)? Will it be 12% or 18%?
- Admissibility of Input tax credit. Whether full ITC is allowable, or it will be restricted to output GST liability?
Held: The Hon’ble AAR of Maharashtra Vide Advance Ruling No. GST-ARA-01/2018-19/B-109 dated September 5, 2018 held as follow:
1.What is the rate of tax to be levied on the sale of Flats/ Units to the prospective buyers? And whether registration of project under Pradhan Mantri Awas Yojana is required?
Answer: The rate of tax to be levied is 12% (8% GST after deducting value of land) in case of Affordable Housing Project. If the project qualifies as an Affordable Housing Project, then registration under Pradhan Mantri Awas Yojana is not required to avail this benefit. Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notfn No. 20/2017-Central Tax (Rate) dated 22.10.2017 Further Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018 has made amendments to Sr. No. 3, column no. 3, item no. iv & v the above Notfn No 11/2017, according to sub item (da) of item iv, “a civil structure or any other original works pertaining to the “Economically Weaker Section (EWS) houses” constructed under the Affordable Housing in partnership by State or Union territory or local authority or urban development authority under the Housing for All (Urban) Mission/ Pradlian Mantri Awas Yojana (Urban) would attract a tax rate of 12%.
2. What is the rate of tax to be levied by the supplier from whom they will receive Composite works contract service (Inward Supply of composite works contract)? Will it be 12% or 18%?
Answer: At the time of hearing it was communicated that this question can only be raised by the supplier and not by the Applicant and they agreed for the same, therefore the said question is not answered in this case.
3. Admissibility of Input tax credit. Whether full ITC is allowable, or it will be restricted to output GST liability?
Answer: The applicant will be eligible for ITC subject to fulfilment of conditions as prescribed in Section 16 to Section 20 of the GST Act deals with Input Tax Credit. The GST Council has also observed that “It may be recalled that all inputs used in and capital goods deployed for construction of flats, houses, etc attract GST of 18% or 28%. As against this, most of the housing projects in the affordable segment in the country would now attract GST of 8% (after deducting value of land). As a result, the builder or developer will not be required to pay GST on the construction service of flats etc. in cash but would have enough ITC (input tax credits) in his books to pay the output GST, in which case, he should not recover any GST payable on the flats from the buyers. He can recover GST from the buyers of flats only if he recalibrates the cost of the flat after factoring in the full ITC available in the GST regime and reduces the ex-GST price of flats.”