1. M/s. Vajra Infracorp India Private Limited, A.S.Raju Nagar, Kukatpally, Hyderabad- 500 072, (GSTIN No.36AADCV9356L1ZN) have filed an application in FORM GST ARA-01 under Section 97(1) of TGST Act,2017 read with Rule 104 of CGST/TGST Rules, seeking Advance Ruling seeking clarification.
2. At the outset, it is made clear that the provisions of both the CGST Act and the TGST Act are the sameexcept for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions,a reference to the CGST Act would also mean a reference to the same provision under the TGST Act.Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' wouldbe a common reference to both CGST Act and TGST Act.
3. It is observed that the applicant enclosed copies of challans as proof of payment of Rs. 5,000/- for SGSTand Rs. 5000/- for CGST towards the fee for Advance Ruling. The Applicant has declared that thequestions raised in the application have neither been decided by nor are pending before any authorityunder any provisions of the GST Act. The application is therefore, admitted.
4. Facts of the Case:
1. M/s. Vajra Infracorp India Private Limited are providers of taxable services of construction of residentialcomplexes.
2. They have averred that they have entered into a supplementary agreement with land owner on15.05.2017 duly fixing the total number of flats to be shared with the land owner. This was prior to theintroduction of GST.
3. They also averred that the construction was expected to be completed by October/November 2018 i.e.,after the introduction of GST.
4. The applicant has relied on CBE & C circular no. 151/2/2012-ST dated 10.02.2012, where in it isstipulated that the land owners share of flats are liable to service tax, but the date of possession or right inthe property of said flats are transferred to the land owner by entering into the conveyance deed or anyother instrument such as allotment letter. They also placed their reliance on Notification No.4/2018 -Central Tax (Rate) dated 25.01.2018 also but stated as 'Constructed complex', where in the abovestipulation of service tax was adopted in toto.
5. Clarification Sought:
5. At Para 14 the applicant sought advance ruling on the following questions:Time of supply and point of taxation with respect to flats allotted to land owner by the builder by way ofsupplementary agreement on 15.05.2017(i.e., before GST regime) where as the construction will becompleted during GST regime.
6. Further at Para 16(d) the applicant sought clarification on the following issues also:-
a. Is this date to be concluded as the date of allotment for payment of service tax in respect ofconstruction services provided to landlord ignoring the fact that the construction was continuedsubsequentlyfrom May, 2017 to November, 2018.
b. Will it be sufficient and adequate compliance, if the appellant complies law and remit entire servicetax on the entire area earmarked to landlord.
c. Once the time of supply is clarified and ruled, the appellant will plan for remittance of taxaccordingly on hearing from office.
d. In the event the service tax is remitted based on the date of above supplementary agreement, willthe appellant not required to comply with GST on the said value of service to land owner.
e. Will this view in transitional period have any impact on the future projects to be explored by theapplicant company.
f. What is the 'Constructed complex' referred to in the notification.
7. Personal Hearing:Accordingly, an opportunity of personal hearing was provided to the applicant on 29.06.2021. The applicantrepresented by his authorised representative Suresh, Cost Accountant (AR) appeared before the AAR.Authorised representative had reiterated the contentions raised in the application for the advance rulingand averred as follows-
:
g. Whether the supplementary agreement entered by the developer with a land owner amounts to theallotment letter mentioned in Notification No.4 of 2018 Dated: 25.01.2018.
h. If so whether the liability will be determined according to the existing law as on date of suchagreement i.e., May 2017 and therefore exempt under the present law i.e., GST.
8. Discussion & Findings:
We have considered the submissions made by the applicant in their application for advance ruling as wellas the additional submissions made by Sri. Suresh, Cost Accountant, during the personal hearing. We alsoconsidered the issues involved on which advance ruling is sought by the applicant and relevant facts. Atthe outset, we would like to state that the provisions of both the CGST Act and the TGST Act are the sameexcept for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions,a reference to the CGST Act would also mean a reference to the same provisions under the TGST Act.
We have considered the submissions made by the applicant in their application for advance ruling as wellas the additional submissions made by Sri. Suresh, Cost Accountant appeared during the personalhearing. We also considered the issues involved on which advance ruling is sought by the applicant andrelevant facts.
i. The applicant is engaged in construction of residential complexes as submitted by him at Para 15 of hisapplication. He has entered into an agreement for sharing of constructed flats with the land owner on 15.05.2017.
ii. According to the Notification No.4/2018 Dated:25.01.2018 the liability to pay central tax on supply ofdevelopment rights to a developer, builder, construction company shall arise at the time when the said builder, developer, construction company or any other person as the case may be, transfers possession orthe right in the constructed complex, building or civil structure to the person supplying development rights by entering into a conveyance deed or similar instrument ( for example allotment letter ).
iii. A plane reading of the Notification makes it clear that,-
a. There shall be a constructed complex or a building or a civil structure in existence,
b. The possession or right in the above shall be transferred,
c. Such transfer of possession or right shall be affected by way of a conveyance deed or a similarinstrument like an allotment letter.
iv. It is seen from the submissions made by the applicant that he requirea clarification regarding his liability under the CGST & SGST Acts, in a situation where he has entered intoan agreement with the land owner as a builder and later transferred the possession or right in the buildingsso constructed. At the outset, the clarification for his liability must start from the question raised in the end of the application regarding the meaning of the phrase 'Constructed complex'. This necessitates theapplication of principal of literal construction of statutes.
v. The Hon'ble Apex court in the case of Chandavarkar S R Rao Vs Ashalata S Gautam (1986) 4 SCC 477held that, when the grammatical construction is clear and manifest without doubt, that constructionmustprevail unless there are strong and obvious reasons to the contrary. This view was declared as law by the
Hon'ble Apex Court in a catena of cases while deciding on literal interpretation of taxation statutes.Further, after the phrase 'Constructed complex' the words building or civil structure is used to convey the intention in the notification i.e., a constructed complex. So this entails application of the principle of noscitura sociis.The Hon'ble Apex Court of India in the case of - Godfrey Philips India Vs State of UP AIR 2005 SC 1103 held that when two or more words are susceptible of analogous meaning are clubbed together, they areunderstood to be used in their cognate sense. They take, as it were, their colour from and are qualified beach other, the meaning of the general word being restricted to a sense analogous to that of the lessgeneral. In this case, it was held that even in case of inclusive definition, principle of noscitur a sociis can be applicable. Therefore in light of catena of case law declared by the Hon'ble Apex Court of India, thephrase 'Constructed complex' is understood in its natural, ordinary and popular sense to mean a building.
vi. From the above understanding of the phrase 'Constructed complex' it follows that such a complex,building or civil structure should first be in place so that its possession or the rights in it may be transferredby the developer to the person supplying development rights.
vii. And such transfer of possession or transfer of right in the building shall be accomplished by conveyance deed or similar instrument such as allotment letter.
viii. It follows from the above that as per Notification No.4/2018 the time of supply to determine liability topay tax on development rights by a land owner to a developer is the date on which the building or the rightsin an existing building are handed over to the land owner by way of a conveyance deed or an allotmentletter.
ix. If the applicant has handed over the building after inception of CGST & SGST, then the liability to paytax will arise under CGST & SGST.
ADVANCE RULING
9. In view of the observations stated above, the following rulings are issued:
Table:-
10. The application filed by M/s. Vajra Infracorp India Private Limited is disposed accordingly.
