Summary:

The Applicant sought an advance ruling on the applicability of GST on construction and maintenance charges for residential flats to be developed on leased land. The key issues involved applicability of GST on lump sum and periodic payments for construction services, GST rates and corresponding HSN codes for construction and maintenance services, the entitlement to deduct one-third of the value attributable to land as per Notification No. 11/2017 – Central Tax (Rate), and the availability of exemption under the category of ‘Accommodation Services’ as per Notification No. 12/2017 – Central Tax (Rate). The Authority held that GST would be applicable at the rate of 18% on construction services (SAC 9954) and maintenance charges (SAC 9995), irrespective of the mode of payment. The Applicant would be entitled to deduct one-third of the total consideration as attributable to the land portion, in accordance with the said Notification. The exemption for ‘Accommodation Services’ would not be applicable.

Facts:

• The Applicant intended to obtain a land from West Bengal Housing Infrastructure Development Corporation Ltd. on lease for a period of 99 years to set up Hotel-cum Shopping and Multiplex under the principal use Assembly-Mercantile Retail.
• The Applicant produced a draft lease deed wherein they were permitted to construct certain area of the leased land as residential flats and sell the units to their prospective customers.
• According to the draft lease deed, the Applicant was not permitted to sub-lease land or part thereof. However, the Applicant was permitted to sub-lease/ assign right of constructed area.
• The Applicant proposed to sub-lease/ assign rights of constructed area to the prospective customers under the following two models:
  • One-time lump sum payment for the constructed units;
  • Periodic payments for the use of constructed area, during the term of agreement.
• In addition to the payment for construction services, the Appellant also intended to charge monthly/ annual maintenance charges from prospective customers.

Issues before the Authority:
 

• Whether GST would be applicable on construction services charged from prospective buyers when:
  • A lump sum payment is charged;
  • Periodic payment is charged for agreed term.
• If yes, what would be the HSN code and GST rate? Whether GST would be levied on the entire amount or after deducting 1/3rd of the value of land as per Notification No. 11/2017 dated 26.06.2017, as amended?
• Whether GST would be payable on monthly/ annual maintenance charges charged from the prospective customers? If yes, what would be the applicable HSN code and GST rate?
• Whether the Applicant would be eligible for exemption under Clause 12 of Notification No. 12/2017 dated 28.06.2017, under the category “Accommodation Services”?