12% GST to be charged only on Preferential Location – AAR

By Abhay Harish Shah , Realty Quarter

The “Authority for Advance Rulings” also known as AAR has developed as an imposing adjudicatory body on tax matters. The Responsibility of the AAR is to give the facility of ascertaining the income-tax liability of a non-resident as well as that of certain defined categories of residents. If an entity or organisation has any doubt about the tax liability of its business, they can go to the AAR.  West Bengal has held that the services such as preferential location and facilities like car parking in apartments shall be treated as composite construction service.

This charge attracts the same levy as construction, which will enable the builders to charge 5% GST on services for affordable housing and 8% on others. Previously, most of the builders were charging 18% GST on these services, but the government has now reduced the rate for under construction apartments. The government allows one-third discount or rebate on the value of land that results in the actual levy coming to 8% for non-affordable category residential units when the GST rate is 12%.

Authority for Advance Rulings had found that the developers of residential complexes offer this all services in a package. The buyer has an option for not to pay for the use of car parking space, but apart from this, he cannot buy another service from the bundle separately. This means the buyer has no option rather than buying these services as a package, where the construction service remains the power factor.

AAR said “A buyer usually pays the right to use car parking space and enjoyment of common areas and facilities like landscaped gardens, gym, conference hall, a club with a swimming pool etc. in a bundle. This all facilities are been charged and has to be decided whether to use or not at the time of booking a flat. Therefore, the entire value of the composite supply is to be treated for the purpose of taxation, as the supply of construction service”.