Facts: M/s. Gowra Ventures (“GV” / the “Company”), is a private limited company having its registered office at Hyderabad carrying on real estate development activity and owns a parcel of land (hereinafter referred to as “land 1”) in Hyderabad. The Company intends to develop the said land and construct a multi-storeyed building, and applied for approval of Building Plan and was permitted to construct 41,419.95 sq. mtrs. Further Mr. Lakshminarayana, and other 6 members were Partners and own parcels of land (hereinafter referred to as “land 2′) adjoining the “land 1” owned by the Company in Madhapur, Hyderabad. These Partners, who are also directors in the Company intend to develop the said land by constructing a multi-storeyed building and hence approached the Company for construction services. Both the Company and the Partners have agreed to amalgamate their land parcels and construct a multi-storeyed building (Project) on the amalgamated land parcels, i.e., land 1 & land 2 taken together, this is found beneficial to all parties in terms of enhanced floor space index and area in addition to several other benefits like common areas and facilities.
Issues Involved: Following are the issues raised by the applicant to the concerned advance ruling authority:
- Whether in the facts and circumstances the pooling of land by way of amalgamation of the separate parcels viz Land 1 and Land 2 as described in the “Statement of relevant facts” would constitute a supply under the Central Goods and Services TaxAct, 2017 and Telangana Goods and Services Tax Act, 2017?
- Whether in the facts and circumstances construction activity undertaken by the Company, with respect to the share belonging to the Partners would be treated a Supply of Service under the Central and State GST Act?
- Whether in the facts and circumstances construction activity undertaken by the Company, with respect to the share belonging to the Partners would be treated a Supply of Service under the Central and State GST Act?
- Whether in the facts and circumstances the vesting of the constructed portion upon the “Partners”, would independently constitute a supply besides the supply on account of recovery of construction cost as aforesaid by the Company?
Held: The Hon’ble AAR of Hyderabad vide Advance Ruling No. TSAAR Order No. 11/2018, A.R. Com/6 /2018 dated July 26, 2018 stated as follows:
- In regard to the application sought under first question, the MOU for construction of Commercial Complex at Madhapur, furnished by M/s Gowra Ventures Pvt Ltd with the land of the assessee (Owner 1). The activity of pooling of land needs to be examined in the light of the provisions of Section 7 of the CGST/TGST Act,2017 and the Schedules there under. Further the provisions of Section 7 which can be inferred that the said activity of amalgamation of the land do not fall under any of the sub-clauses (1) to (3) of Section 7 of the CGST Act, 2017 and in terms of clause 1(c) of Schedule II of the GST Act, 2017 any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods. Hence pooling of land by way of as described in the “Statement of relevant facts” of the subject Application would not constitute a supply under the Central Goods and Services Tax act, 2017 and Telangana Goods and Services Tax Act, 2017.
- In regards to the application sought under second question the MOU for construction of Commercial Complex at Madhapur, furnished by M/s Gowra Ventures Pvt Ltd stipulated the condition mentioned at Sl.No.3 to authorize M/s Gowra Ventures Pvt Ltd to take lead for construction of the subject commercial complex. But as per the terms of clause 5 (b) of Schedule II of the CGST, Act, 2017, ‘construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier shall be treated as supply of service’. In view of the above the activity undertaken by M/s Gowra Venture Pvt Ltd with respect to the share belonging to the said partners is a supply of service under the Central and State GST Act, 2017.
- In regard to the application sought under third question that M/s Gowra Ventures Pvt Ltd (owner 1) is providing the construction service to the Owners 2 to 8 on the amalgamated land belonging to both the parties .Further on going through the MOU, the nature of service provided by the assessee is as per section 15 of CGST Act,2017 recourse needs to be made to the provisions of Rule 28 and Rule 30 of the CGST Rules, 2017. However the applicant is providing service to owners 2 to 8 who are related persons, so the value of the construction service supplied by M/s Gowra Ventures Pvt. Ltd shall be 110% of the cost of provision of the said service.
- In regard to the application sought under fourth question, the MOU for construction of Commercial Complex at Madhapur, furnished by M/s Gowra Ventures Pvt Ltd with the land of the assessee (Owner 1) and the title of the property of the parcels of land remained with the respective owners at any point of time. Further M/s Gowra Ventures Pvt Ltd have provided construction service on the amalgamated land for a consideration to the Owners 2 to 8. Neither any service nor any consideration has been received by owner1 for vesting of constructed portion to the partners (owners 2 to 8) and hence the same cannot be treated as an independent supply.
Citation: http://insta.instavat.in/PDF/Telangana-Advance%20Ruling-TSAAR-11-2018.pdf