Preferential Location charges taken by DLF along with Construction Service not naturally bundled: AAAR

M/s DLF Limited, Gurugram is a centrally administered taxpayer registered under GST. They are engaged in the construction of residential as well as commercial properties. While selling such properties or providing the construction service they are also engaged in the recovery of various charges including Preferential Location Charges (PLC) from the Buyers.

i) The applicant has paid GST at 18% on the sale of properties in the GST law. The GST law is in infancy and concepts there like the concepts of ‘composite supply‘ are in a nascent stage, there is a certain ambiguity about the taxability of PLS collected by the Applicant. Therefore the applicant has filed this advance ruling for obtaining clarity on the same.

ii) In case of sale/transfer of constructed property before the issuance of CC/OC, the applicant is paying GST @18% on PLS since the inception of the GST Law. As per the applicant’s opinion that such charges should qualify as composite supply and should be taxable at @12% or 5% or NIL as applicable. Therefore, the applicant should be allowed/refunded the excess GST paid on PLS so that the benefit can be provided to the customers.

iii) In some cases, the applicant recovers the lump sum price for the sale/transfer of properties/units. Such lump sum price can be different for various properties/units on account of various commercial factors such as the location of the property /unit. In such cases, the applicant’s opinion that GST should be applicable at a single rate on lump sum prices charged even if differential prices are charged for different properties/unit@ 12% or 5% or Nil as applicable on whole lump sum price.

In this matter, the Advance ruling Authority rejected the application of the Taxpayer, citing the Non-Appearance of the Taxpayer. Not the Ruling has been given by the Appellant Authority of Advance Ruling (AAAR).

Questions

QUESTION-1 “Whether PLS collected along with consideration for the sale of properties attracts GST rate of 12% or 18% where sale/transfer of constructed property has taken place before the issuance of completion/Occupation Certificate (CC/OC)?”

QUESTION-2 “Whether PLS collected along with consideration for the sale of properties attracts GST rate of 5% or 18% where sale/transfer of constructed property has taken place before the issuance of CC/OC under new projects which commence on or after 01.04.2019?”

QUESTION-3 “Whether PLS collected along with consideration for the sale of properties is outside the scope of supply where sale/transfer of constructed property is entered into by the Applicant after issuance CC/OC?”

QUESTION-4 “If as per the above question, PLS attracts a concessional rate of tax/exemption (whether 12% or 5% or nil as the case may be), whether, in facts and circumstances of the case, Applicant/or customers can claim adjustment/refund of the excess GST amount paid as (18% less 12%) or (18% less 5%) or (18% less Nil), as the case may be, on such charges?”

QUESTION-5 “In case differential prices are charged for sale/transfer of different properties/units in a real estate project due to various commercial factors such a location of apartment etc., whether GST can be charged on the whole price at a similar rate i.e.12% (in case of sale before issuance of CC/OC)/5% % (in case of sale before issuance of CC/OC under new projects which commence on or after 01.04.2019)/Nil % (in case of sale after issuance of CC/OC)?”

The Rulings are, however, as given under:

RULING 1:

PLS collected along with consideration for the sale of properties attracts a GST rate of 18% where sale/transfer of constructed property has taken place before the issuance of completion/Occupation Certificate (CC/OC).

RULING 2:

PLS collected along with consideration for the sale of properties attracts GST rate of 18% where sale/transfer of constructed property has taken place before the issuance of completion/Occupation Certificate (CC/OC) under new projects which commence on or after 01.04.2019.

RULING 3:

No. The PLS collected along with consideration for the sale of properties where sale/transfer of constructed property is entered into by the Applicant after issuance CC/OC is not outside the scope of supply.

RULING 4:

No. The Applicant/or customers cannot claim adjustment/refund of the GST amount paid as there cannot be any excess GST) paid in respect of the SAC 99799 which attracts the GST rate of 18% (CGST 9% + SGST 9%).

RULING 5:

No. The Preferential Location Service is a separate service from than Construction Service. Therefore for determining the value of the same, the Paragraph-2 ibid to the Notification 11/2017-CT(R) dated 28.06.2017 which is applicable exclusively to the Construction Service, shall not be applicable.