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Image used for representational purpose onlyMumbai: West Bengal Bench Appellate Authority for Advance Rulings ,AAAR) has upheld an earlier ruling and said that the right to sell or use the car park does not naturally come with the construction services. Thus, it will not be treated as a composite supply and will be chargeable to Goods and Services Tax (GST) at a higher rate of 18%.
AAARThe decision came in an appeal by Eden Real Estate, which is engaged in the construction of residential apartments.
From 1st April, 2019, GST 5% is levied on non-affordable housing projects without Input Tax Credit (ITC). For ongoing projects (as in this case), the builder has the option to pay GST at the old rate of 12% along with ITC, which means taxes paid on inputs can be adjusted . Had the AAAR treated the transaction relating to the car park as a composite supply, the GST levy applicable would have been that of the primary supply of construction, which is lower.
According to Anita Rastogi, head (indirect taxation), Price Waterhouse-India, the effect of this decision is that buying a house with parking space will become costlier.
“While advance rulings are binding only on the parties concerned, in respect of the transaction for which the ruling was sought, often the tax authorities rely on favorable decisions of the department. If the taxpayer (say, the builder) has taken a different approach, So it results in litigation.Thus, some builders may take a cautious approach and charge 18% GST in respect of car parking space.
In this case, the real estate developer submitted that the car parking space is given only to the flat buyers and stamp duty is paid on the entire consideration (i.e. the price of the apartment and the car parking space) taken from them.
However, the AAAR bench observed that prospective flat buyers may or may not opt for car parking space while booking their flat. Thus, the contention that the facility of right to use open parking space is inherently linked with construction services and constitutes an aggregate supply, fails.
Further, the ‘right to use’ the open car parking space means that the ownership of the open space is not transferred to the flat buyer, hence it is a separate service altogether.
The argument mainly related to open car parking space and the bench also pointed out that the definition of garage under RERA does not include open parking space.
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