2026-VIL-21-AAR
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SGST Advance Ruling Authority

GST – Tamil Nadu AAR - Taxability of supply of construction services, Value of supply - Applicant self-acquires a piece of land, develops it into a layout, and enters into a MOU with prospective buyers for purchase of land and construction of residential houses. Two separate agreements are entered - one for sale of plot (sale deed) and the other for construction of residential house (construction agreement). The applicant charges a single amount in the MOU which includes considerations attributable towards both sale of land and construction of residential house - Whether GST can be charged at 18% on the amount charged in the construction agreement instead of 1.5%/7.5% on the total amount charged as per the MOU – HELD - The activity rendered by the applicant is in the nature of ‘original works since the applicant is constructing a new building. The applicant enters into a MOU with the prospective buyers for sale of land and construction of residential house. Therefore, it fits into the definition of ‘single residential unit’ - The applicant is eligible to charge GST at 1.5% for construction of affordable residential apartments and at 7.5% for construction of other than affordable residential apartments as per Entry 3(i) and 3(ia) of Notification No. 11/2017-CT(Rate) read with Notification No. 03/2019-CT(Rate), subject to conditions. The activity of construction by the applicant involves both supply of goods and supply of services, and is classified as 'supply of service' as per Schedule II of the CGST Act. The entire consideration, including the value of land, is liable to GST at the applicable rates - The applicant is liable to charge GST at 1.5%/7.5% on the total amount charged, including the value of land, as per the applicable provisions. The value of land shall be deemed to be one-third of the total amount charged, and the applicant cannot claim the actual value of land as per the sale deed – Ordered accordingly - If GST is to be charged at 1.5%/7.5%, can the value of land as per the sale deed be considered instead of the deemed value of one-third of the total amount charged – HELD - The taxable value for the construction services supplied by the applicant is governed by the provisions of Para 2 of Notification No. 11/2017-CT(Rate) as amended by Notification No. 03/2019-CT(Rate). Accordingly, the applicant is eligible to avail only the deduction of one-third of the total amount charged for the supply for arriving at the taxable value of supply, and cannot claim the actual value of land as per the sale deed.
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