2026-VIL-162-AAR
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SGST Advance Ruling Authority

GST - Kerala AAR - Classification of Construction Services in respect of villa projects constructed and sold after 01.04.2019 - Residential Villa Projects other than “Ongoing Projects” - Applicant engaged in construction of residential villas in real estate projects commenced after 01.04.2019 - Classification and SAC of construction services supplied to buyers in other than ongoing projects in view of the amendment made in Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 vide Notification No.3/2019-Central Tax (Rate) dated 29/03/2019 - HELD - Construction of residential villas other than affordable residential apartments by promoter in Residential Real Estate Project which commences on or after 01.04.2019 is appropriately classified under SAC 995411 as general construction services of single dwelling or multi-dwelling or multi-storied residential buildings - Services are classifiable under Entry 3(ia) of Notification No. 11/2017-CT (Rate) dated 28.06.2017 as amended by Notification No. 3/2019-CT(Rate). Applicant qualifies as developer-promoter as defined in explanation to Entry 3 for constructing villas which fall within category of residential apartments other than affordable residential apartments in RREP. Additional modification works and ancillary services provided during project stage prior to completion certificate or first occupation and forming part of original construction agreement should be treated as integral part of construction service and classified under same SAC 995411. Where additional works constitute separate and independent supply not part of original construction, classification shall be determined based on specific nature of such service – Ordered accordingly - Applicable Rate of Tax for Villa Construction Services - Applicable rate of tax for villa construction services under Entry 3(ia) and valuation where supply involves transfer of land - HELD - Supply of construction services relating to residential villas other than affordable residential apartments in RREP taxable under Entry 3(ia) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended at rate of 3.75% CGST and 3.75% SGST subject to conditions prescribed - Where supply involves transfer of property in land or undivided share of land, value of land deemed to be one-third of total amount charged and GST payable on remaining two-thirds of consideration. This valuation provision results in effective GST rate of 5% on total value. Additional modification works and ancillary services forming part of construction of residential villas prior to issuance of completion certificate or first occupation treated as part of same supply and taxable at same rate applicable to principal supply under Entry 3(ia). Where such works constitute separate and independent supply not forming part of construction of residential apartments in RREP, applicable rate determined based on classification of service under notification - Eligibility for Input Tax Credit on Supplies for Villa Construction - Whether input tax credit available for goods and services used in construction under Entry 3(ia) - HELD - Applicant not eligible to avail or utilise ITC of tax paid on inputs and input services used for construction of residential villas in projects other than ongoing projects taxable under Entry 3(ia) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended - Entry 3(ia) prescribes concessional rate of tax subject to condition that credit of input tax charged on goods and services used in supplying construction service shall not be taken. Accordingly, in respect of residential villa projects commencing on or after 01.04.2019, applicant required to discharge tax at applicable rate under Entry 3(ia) without availment of input tax credit - Where additional modification works and ancillary services form part of construction of villas in RREP prior to completion, such services treated as part of same supply taxable under Entry 3(ia) and input tax credit not available. However, where such additional works constitute separate and independent supply not forming part of construction of villas in RREP, eligibility to avail input tax credit determined in accordance with provisions of CGST Act - Utilisation of ITC availed under Protest - Whether ITC retained in electronic credit ledger can be adjusted against tax liability or whether option exists to opt for higher rate with ITC availment - HELD - Applicant not entitled to avail or utilise ITC stated to have been availed under protest in respect of projects other than ongoing projects taxable under Entry 3(ia) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended - Entry 3(ia) prescribes applicable rate subject to condition that input tax credit on goods and services used shall not be taken and tax payable required to be discharged in cash through electronic cash ledger only. Applicant cannot utilise balance ITC lying in electronic credit ledger for discharging output tax liability at rate prescribed under Entry 3(ia) for residential villa projects commencing on or after 01.04.2019 - Applicant has no option to choose higher rate of tax for purpose of utilizing balance ITC available in electronic credit ledger. Option to continue under earlier rate structure with ITC was available only for eligible ongoing projects not for projects commencing after 01.04.2019. Any ITC wrongly availed in respect of projects commencing after 01.04.2019 even if not utilised shall be reversed or paid back in accordance with CGST Act provisions. Transitional mechanism under Notification 03/2019 relevant only for ongoing projects transitioning to revised rate structure.
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