2026-VIL-118-AAR
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SGST Advance Ruling Authority

GST – Maharashtra AAR - Works contract service - Taxability of construction and transfer of inclusive housing flats reserved under Statutory mandate - Under a statutory resolution mandating inclusive housing, the applicant-developer is obligated to reserve twenty percent of the net plot area for economically weaker sections and lower income group beneficiaries. In exchange for this obligation undertaken at the plan approval stage, the developer receives additional FSI from the local authority. The occupancy certificate for the project is obtained, following which the housing authority identifies allottees through a lottery system and sale agreements are executed at the prescribed rates post-occupancy certificate - Whether the supply of inclusive housing flats to housing authority-identified customers after issuance of the OC constitutes an exempt sale of immovable property or a taxable supply of Works Contract service – HELD - The consideration for the supply comprises two inter-linked limbs: the non-monetary consideration in the form of additional FSI received at the commencement certificate stage and the monetary consideration receivable from allottees post-occupancy certificate - The statutory exception to the classification of construction as a supply of service operates only where entire consideration is received after issuance of the OC. Since a component of consideration, namely the additional FSI, is received at the inception stage and not after the occupancy certificate, the exception is not satisfied – The obligation to construct the inclusive housing flats originates at the plan sanction stage as a statutory pre-condition for project approval and represents a bilateral exchange or quid pro quo arrangement. The execution of sale agreements post-occupancy certificate is merely the final documentation of a transaction whose legal character was fixed at inception. The substance of the transaction must prevail over its form, and a construction obligation undertaken at inception cannot shed its character merely because final documentation occurs later - The additional FSI constitutes valuable development rights flowing from the local authority in respect of and for inducement of the developer's undertaking to construct and transfer the designated flats. The identification of individual allottees through administrative lottery mechanisms does not affect the character of the supply as Works Contract service - The supply of inclusive housing flats to housing authority-identified allottees is a taxable supply of works contract service under Section 2(119) read with schedule II paragraph 5(b) of the CGST Act, 2017, and is not excluded by Schedule III paragraph 5 or by the exception to Schedule II paragraph 5(b) – Ordered accordinglyrnrn rnrnValuation of inclusive Housing Flats - Open market value versus administered price - Whether the value of supply should be determined with reference to the Government-prescribed administered price for inclusive housing flats or the open market value of comparable flats sold to non-inclusive housing customers – HELD – The Section 15(1) of the CGST Act which recognizes transaction value where price is the sole consideration, is not applicable because the consideration comprises two limbs. Consequently, valuation proceeds under Section 15(4) read with Rule 27 of the CGST Rules, 2017, which applies where consideration is not wholly in money - The subsidy exclusion under section 15(2)(e) does not apply because no disbursement or amount is paid to the developer in the nature of a subsidy, the additional FSI is granted by the local authority and not the State government as required by the statute. The floor space index constitutes consideration paid in exchange for the developer's obligation and not a subsidy - The value of supply is to be determined under Rule 27(a) as the open market value being the price at which comparable flats are sold by the developer to non-inclusive housing buyers in the same project on an arms-length basis and not the housing authority-prescribed administered price.
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