The Kerala Authority of Advance Ruling (AAR) has held that 1.5% GST on affordable residential apartments.
Whether the rate of 0.75% under Item No. (i) of Entry No. 3 of Notification No. 03/2019 Central Tax (Rate) can be availed in respect of the units which qualify as “Affordable Residential Apartment” in a Residential Real Estate Project” when the project consists of both “Affordable Residential Apartments” as well as apartments other than Affordable Residential Apartments?
The applicant namely Crescent Builders is a Partnership firm engaged in the development and construction of residential apartments. The applicant is planning to execute a Joint Development Agreement for the development of a plot of land into a Multi Storied Residential Apartment Project (Residential Real Estate Project).
The proposed residential project consists of 50 units out of which 14 apartments are to be given to the landowner towards the landowner’s area under the Joint Development Project. All the 50 units in the apartment complex have the carpet area of less than 60 square metres and the total sale consideration including all charges in respect of 30 residential apartments will be above 45 lakhs and in respect of 20 residential apartments, the total sa:e consideration will be below 45 lakhs.
Thus, the 20 residential units in the project would qualify as “Affordable Residential Apartments” as defined in Notification No. 11/2017 as amended by Notification No. 0.3/2019. The list of residential apartments showing the carpet area and the sale price of the units proposed to be sold is produced as Annexure -2. Thus, the project to be developed under the JDA comprises both affordable residential apartments and also other than affordable residential apartments.
The notification allows the concessional rate of tax for affordable residential units even when the project contains commercial units which do not exceed 15% of the totii units. Similarly, even the residential units in a Real Estate Project which is not Residential Real Estate Project is also given the concessional rate of GST. All these factors make it clear that for the purpose of applying tax rate, what is to be looked into is the individual residential apartment and not the project. If the residential apartment unit qualifies as an affordable residential unit, it should be qualified for the concessional rate of GST under the notification irrespective of whether the project consists of apartments which are not affordable residential apartments. In the absence of any express conditions restricting the benefit of concessional rate of tax under the notification to projects having exclusively affordable residential apartments the rate of 0.75% is applicable to all those residential apartments that qualifies as affordable residential apartments even if the project contains apartments that are not affordable residential apartments.
The bench of Sreeparvathi and Abraham Renn has held that the project to be undertaken by the applicant falls within the definition of a real estate project and the applicant falls within the definition of “promoter”.
The AAR ruled that the applicant is liable to pay GST at the rate of 1.5% [0.75% – CGST + 0.75% – SGST] in respect of the services of construction of affordable residential apartments as per entry at Item (i) and the rate of 7.5% [3.75% -CGST + 3.75% – SGST] in respect of the services of construction of residential apartments other than affordable residential apartments as per entry at Item No. (ia) of Sl No. 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 in the Residential Real Estate Project subject to the conditions prescribed under the respective entries.
Applicant Name: Crescent Builders
Citation: Advance ruling no. KER/142 /2021 Dtd 12.07.2022