AAR West Bengal has passed Ruling
in Bengal Peerless Housing Development Co. dt 02 May 2019 that service
provided for construction of a dwelling unit bundled with additional
facilities is a
composite supply and entire value of the composite
supply will be considered as supply of construction services for the
purpose of taxation.
The Applicant is a joint venture of The West Bengal Housing Board and
The Peerless General Finance and Investment Company Limited for
developing real estate projects in West Bengal.
The Applicant is providing service of construction of a dwelling unit
in a residential complex, bundled with services relating to the
preferential location of the unit and right to use car parking space and
common areas and facilities.
It is developing a residential housing project named ‘Avidipta II’
and supplying construction service to the recipients for possession of
dwelling units in the year 2023.
In addition to the construction service, the Applicant provides
services like preferential location service, which includes services of
floor rise and directional advantage.
It seeks a ruling on whether the supply of these services constitutes
a composite supply with construction service as the principal supply,
and if so, whether abatement is applicable on the entire value of the
composite supply. ( The Applicant is enjoying abatement, prescribed for
construction service under Sl No. 3(i) read with Paragraph 2 of
Notification No 11/2017 – CT (Rate) dated 28/06/2017), as amended time
to time .
Latest amendment - notification No. 03/2019-Central Tax (Rate) ,dt. 29-03-2019)
The Applicant draws attention to section 8(a) of the GST Act, which
provides that a composite supply, for the purpose of taxation, shall be
treated as supply of the principal one.
The question that needs to be examined is whether they are naturally
bundled and are supplied in conjunction with one another in the ordinary
course of business and whether the construction supply is the dominant
element and all other services in the bundle are ancillary or incidental
to the supply of the construction service.
Whether the services so bundled are provided in conjunction with one
another in the ordinary course of business would depend upon the normal
or frequent practices adopted in a business and can be ascertained from
several indicators.
Section 2(30) of the GST Act draws upon these concepts to define
composite supply as supply by a taxable person of a combination of
taxable goods or services or both, which are naturally bundled and
supplied in conjunction with one another in the ordinary course of
business, where one of the supplies can be identified as the principal
supply.
Section 2(90) of the GST Act defines principal supply as the
predominant element of such a composite supply where all other supplies
in the bundle are ancillary to the principal supply.
RULING by AAR West Bengal in Bengal Peerless Housing Development Co. Ltd.:-
The Applicant is providing construction service in respect of
dwelling unit in a residential complex, bundled with additional services
i.e. preferential location of the unit and right to use car parking
space and common areas and facilities etc.
It is a composite supply, construction service being the principal
supply. Entire value of the composite supply is, therefore, to be
treated, for the purpose of taxation, as supply of construction service,
taxable under Sl No. 3(i) read with Paragraph 2 of Notification No
11/2017 – CT (Rate) dated 28/06/2017 (amended from time to time)
Thus, builder cannot charge hire GST for additional services ie parking charges, preferential locations etc.