Gujarat Authority of Advance Ruling in its ruling dated 19.05.2020 (Advance Ruling No. GUJ/GAAR/R/2020/14) in case of M/s. Amba Township Pvt. Ltd has adjudged that concessional rate for affordable houses will not be applicable on construction of houses upto 60 sq. meters in a part of township which is not standalone and shares common land, common facilities and common entrance with other Part of the township where houses above 60 sq meter are built and where 50% of FAR/FSI of the entire housing project comprising of both the parts has not been used for construction of dwelling units with carpet area of not more than 60 sq.meters
Facts of the case
The applicant are engaged in the construction of residential and commercial construction on works contract basis; that at present they are engaged in the construction and development of a township namely “AMBA TOWNSHIP” located at Adalaj, Gandhinagar, Gujarat; that they are developing a township which consists of many real estate projects within a township; that since the development of the town is a continuous process, the applicant is developing the township in a phased manner; that different schemes or projects are being undertaken by the applicant at different span of time; that at present, Sector-4 of the township is being constructed which is also divided into two parts namely Part-A and Part-B.
Part-A is further divided into two phases i.e. Phase-1 and Phase-2.
The projects under Phase-1 are (i) Sarvaswa-1 (ii) Sanatan-1 (iii) Sanatan-2 (iv) Stuti-1 (v) Stuti-2 (vi) Swaroop-1 (vii) Swaroop-2 (viii) Swaroop-3 and (ix) Swaroop-4. The projects under Phase-2 are : (i) Sanatan-3 (ii) Swaroop-5 and (iii) Swaroop-7
The projects under Part-B are: (i) Sarvasva-2 (ii) Stuti-3 and (iii) Swaroop-6 which are mainly for small and affordable houses; that it can be seen that 74.08% of the total Floor Space Index (FSI) is used for small houses having carpet area upto 60 sq. metres.
With effect from 25.01.2018, Notification No.01/2018-Central Tax(Rate), dated 25.01.2018 has inserted sub-clause(da) to clause(v) of entry number-3 of Notification No.11/2017-Central Tax(Rate) which reads as follows.
“(da) Low-cost houses upto a carpet area of 60 square metres per house in an affordable housing project which has been given infrastructure status vide notification of Government of India, in Ministry of Finance, Department of Economic Affairs vide F.No.13/6/2009-INF, dated 30th March, 2017.”
Due to above amendment, effective rate of GST has been reduced from 18% (9% CGST + 9% SGST and further deduction of 1/3rd of total amount charged towards value of land making effective total rate of 12% on total amount charged including cost of land) to 12% (6% CGST + 6% SGST and further deduction of 1/3rd of total amount charged towards value of land making effective total rate of 8% on total amount charged including cost of land) for low cost housing as stated in above entry.
The ‘affordable housing’ is given infrastructure status through notification from F.No.13/6/2009 INF dated 30.03.2017 wherein affordable housing is defined as a housing project using at least 50% of the Flow Area Ratio (FAR)/Floor Space Index (FSI) for dwelling units with carpet area of not more than 60 square meters and ‘Carpet Area’ is defined as – “Carpet Area shall have the same meaning as assigned to it in clause (k) of section 2 of the RERA Act, 2016.”
The applicant has submitted that Sector-4 is registered under RERA Act, 2016 as three independent projects/phases: (a) Amba Township-Sector 4 Part-A – Phase-1 (b) Amba Township-Sector 4 Part A – Phase-2 (c) Amba Township – Sector 4 Part-B and have submitted 3 registration certificates issued under RERA Act, 2016; that Part-B of Sector-4 is a separate project in itself and also separately registered under RERA Act, 2016 as a “Real Estate Project”;that ‘Part B’ is independent of other projects within its Phase and Township and has its separate facilities like parking, foyer, electricity connection, water supply etc.
Question of which ruling was sought
“Whether, under given facts and circumstances, is benefit of reduced rate as provided under Entry Number 3(v)(da) of the Notification No.11/2017-Central Tax (Rate) as amended by Notification No.01/2018-Central Tax (Rate) dated 25.01.2018, available to the applicant for houses constructed with a carpet area of 60 square metres per house?”
Highlights and Ruling of order of Gujarat AAR
- In order to be eligible for the benefit of the aforementioned notification, the work should be for construction of low-cost houses up to a carpet area of 60 square metres per house in an affordable housing project which has been given infrastructure status vide notification of Govt. of India, in MoF, Department of Economic Affairs vide F. No. 13/6/2009INF, dated the 30th March,2017.(Affordable housing has been defined as a housing project using at least 50% of FAR/FSI for dwelling units with carpet area of not more than 60 sq.meters).
- Part-B of Sector-4 of township cannot be considered as a standalone housing project since it shares common land, common facilities and common entrance with Part-A of Sector-4 of the township and since 50% of FAR/FSI of the entire housing project comprising of Part-A and Part-B has not been used for construction of dwelling units with carpet area of not more than 60 sq.meters, the said housing project cannot be considered as an ‘affordable housing project’. The applicant, therefore, does not fulfil the conditions as envisaged in Entry No.3(v)(da) of Notification No:11/2017-Central Tax(Rate) dated 28.06.2017 (as amended by Notification No.01/2018-Central Tax (Rate) dated 25.01.2018), hence the benefit of the said notification is not applicable to them.
In view of the above, it was adjudged by Gujarat AAR that the applicant has not fulfilled the requisite condition and therefore the benefit of reduced rate as provided under Entry No.3(v)(da) of Notification No:11/2017-Central Tax(Rate) dated 28.06.2017 (as amended by Notification No.01/2018-Central Tax (Rate) dated 25.01.2018) available for houses constructed with a carpet area of 60 square metres per house is not applicable to them.
For ready reference of readers the complete order of Gujarat AAR is given below:
***
A BIG THANKS to you for visiting our site and reading this article. Kindly provide your feedback on the above article in comment section below. Also please intimate about other GST issues on which you would require our team to pen down articles.
Doubts on GST may be lodged on ‘Ask GST query tab‘ under ‘Your GST queries’ tab on home page. National level GST experts will provide their reply on the matter raised at the earliest and same can be seen under ‘GST query resolved’ tab under ‘Your GST queries’ tab.
You can also subscribe to our free newsletter to always be updated on GST Law by filling the subscription form at home page.
TW Editorial Team comprises of team of experienced Chartered Accountants and Advocates devoted to spread the knowledge of GST amongst the various stakeholders.
